<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1999
REGISTRATION NO. 333-76899
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 7
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEALTHGATE DATA CORP.
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7379 04-3220927
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
25 CORPORATE DRIVE, SUITE 310
BURLINGTON, MASSACHUSETTS 01803
(781) 685-4000
</TABLE>
(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
WILLIAM S. REECE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
HEALTHGATE DATA CORP.
25 CORPORATE DRIVE, SUITE 310
BURLINGTON, MASSACHUSETTS 01803
(781) 685-4000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STEPHEN M. KANE, ESQ. DANIELLE CARBONE, ESQ.
RICH, MAY, BILODEAU & FLAHERTY, P.C. SHEARMAN & STERLING
176 FEDERAL STREET 599 LEXINGTON AVENUE
BOSTON, MASSACHUSETTS 02110 NEW YORK, NEW YORK 10022
(617) 482-1360 (212) 848-4000
</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 of
1933, 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 statement 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, check the following box and list the Securities Act
registration statement 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, check the following box and list the Securities Act
registration statement 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,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.................... 4,312,500 $11.00 $47,437,500 $13,188 (3)
</TABLE>
(1) Includes 562,500 shares which the underwriters have an option to purchase
from HealthGate Data Corp. to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(3) A filing fee of $17,648 has been paid previously.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
<TABLE>
<S> <C> <C>
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1999
PROSPECTUS
</TABLE>
3,750,000 Shares
[LOGO]
Common Stock
This is an initial public offering of shares of common stock of HealthGate
Data Corp. HealthGate expects that the public offering price will be between
$9.00 and $11.00 per share.
Our common stock has been approved for trading and quotation on the Nasdaq
National Market under the symbol "HGAT."
Our business involves significant risks. These risks are described under the
caption "Risk Factors" beginning on page 10.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------
<TABLE>
<S> <C> <C>
Per Share Total
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to HealthGate.................... $ $
</TABLE>
The underwriters may also purchase up to an additional 562,500 shares of
common stock at the public offering price, less the underwriting discounts and
commissions, to cover over-allotments.
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
---------------------
SG COWEN
VOLPE BROWN WHELAN & COMPANY
WARBURG DILLON READ LLC
, 1999
<PAGE>
[The inside cover contains pictures of our www.healthgate.com Web site and
co-branded CHOICE Web sites and other pages displaying our content, technology
and advertising and sponsorship opportunities.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Prospectus Summary..................... 5 Management............................. 70
Risk Factors........................... 10 Certain Transactions................... 77
Use of Proceeds........................ 27 Principal Stockholders................. 79
Dividend Policy........................ 27 Description of Capital Stock........... 81
Capitalization......................... 28 Shares Eligible for Future Sale........ 84
Dilution............................... 29 Underwriting........................... 88
Selected Consolidated Financial Data... 30 Legal Matters.......................... 90
Management's Discussion and Analysis of Experts................................ 90
Financial Condition and Results of Where You Can Find More Information.... 90
Operations........................... 33 Consolidated Financial Statements...... F-1
Business............................... 46
</TABLE>
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR
COMMON STOCK.
---------------------
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
WE HAVE REGISTERED THE TRADEMARKS "HEALTHGATE," "HEALTHGATE DATA," "CHOICE,"
"MEDGATE" AND "READER" IN THE UNITED STATES AND HAVE FILED TRADEMARK
REGISTRATION APPLICATIONS FOR "ACTIVEPRESS" AND THE HEALTHGATE LOGO IN THE
UNITED STATES. ALL OTHER TRADEMARKS, SERVICE MARKS OR TRADE NAMES REFERRED TO IN
THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS ONLY A SUMMARY. YOU SHOULD CAREFULLY READ THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES. OUR BUSINESS INVOLVES SIGNIFICANT RISKS. YOU
SHOULD CAREFULLY CONSIDER THE INFORMATION UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 10. UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES: (1) THE CONVERSION OF ALL OUTSTANDING SHARES OF OUR PREFERRED STOCK
INTO 7,530,556 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING; (2) A
3.966 -FOR-1 STOCK SPLIT EFFECTIVE PRIOR TO THE DATE OF THIS PROSPECTUS; AND (3)
NO EXERCISE BY THE UNDERWRITERS OF THE OVER-ALLOTMENT OPTION.
THE COMPANY
HealthGate is an Internet provider of reliable, objective, comprehensive and
up-to-date healthcare information helping physicians and other healthcare
professionals, patients and health-conscious consumers make better informed
healthcare decisions. We have aggregated and developed what we believe are the
most extensive health and medical libraries of any online provider, currently
totaling approximately 27 million different pages of health and medical
information from approximately 300 sources representing 27 independent content
providers. In September 1999, our users viewed approximately 3.82 million
content pages on our own Web sites.
Given the depth and breadth of our content, we provide healthcare
information to a wide range of online users. We facilitate user-friendly access
to our content libraries by segmenting them into collections for professionals,
patients and consumers. Content from any collection is available to any type of
user under a variety of pricing structures, including free access, per
transaction fee access and subscription. Our online library targeted to
physicians and other healthcare professionals includes internationally
recognized journals such as the NEW ENGLAND JOURNAL OF MEDICINE, bibliographic
databases such as MEDLINE, handbooks such as the Drug Information Handbook,
decision support materials such as the Poisoning and Toxicology Compendium and
Continuing Medical Education programs from the Boston University School of
Medicine and Professional Postgraduate Services. Our patient focused online
library includes patient education materials such as a series of over 3,000
patient education brochures published by the Clinical Reference Systems division
of Access Health. We have also created "Healthy Living" Webzines, a proprietary
series of consumer health magazines distributed exclusively through the Web, and
have produced Wellness Centers, which are compilations of selected information
from our online libraries for consumers, on 100 of the most prevalent illnesses,
diseases and medical conditions.
We adapt and integrate this diverse content through our internally developed
software programs, which include our proprietary ReADER-Registered Trademark-
natural language searching software, designed to facilitate the search and
retrieval of relevant information in response to each user's searching needs. In
addition, our activePress-TM- service uses our technology to provide text
conversion and Web site development and hosting services for traditional print
publishers.
We distribute our content through a network of proprietary and affiliated
Web sites that comprise the HealthGate Network. The HealthGate Network includes:
- our own Web sites, www.healthgate.com and www.bewell.com in the United
States and www.healthgate.co.uk in the United Kingdom;
- customized, co-branded CHOICE-Registered Trademark- Web sites for
institutions, principally hospitals, and businesses, which carry both
HealthGate's and the entity's name, are designed as a seamless component
of the entity's own Web site and, for certain institutions and businesses,
complement the healthcare information, products and services they already
offer or sell through their own Web sites; and
- other co-branded third party Web sites to which we provide our proprietary
and licensed content, including the Health Channel of www.snap.com for
which we will be designated as an anchor tenant provider of health content
following the completion of this offering.
5
<PAGE>
We have established marketing and distribution affiliations with Columbia
Information Systems, a subsidiary of Columbia/HCA Healthcare Corporation, GE
Medical Systems, the medical diagnostic equipment and services division of
General Electric Company and Data General Corporation, an information technology
and services company recently acquired by EMC Corporation. Columbia Information
Systems may provide up to 280 customized co-branded CHOICE Web sites to
hospitals and other health affiliates of Columbia/HCA Healthcare. GE Medical
Systems and Data General Corporation serve as value added resellers of versions
of our CHOICE Web product to their target hospital and health institution
customers.
Subject specific Web sites dedicated to healthcare are one of the most
popular segments of the Internet. A July 1999 research report published by Cyber
Dialogue, Inc., an industry research firm, estimates that approximately
25 million adults in the United States search online for health and medical
information, a number which Cyber Dialogue projects will grow to approximately
30 million in 2000. We believe that with our extensive content libraries and
distribution network we are positioned to capture a leading share of the online
health audience as this industry continues to grow.
Our strategy includes the following key elements:
- providing leading healthcare content and technology;
- expanding the HealthGate Network;
- continuing to build the HealthGate brand;
- broadening the range of offered products and services;
- pursuing acquisitions and additional strategic affiliations; and
- continuing to grow internationally.
We currently generate revenue from the following activities:
- syndicating content to third party Web sites;
- providing our activePress Web publishing services to traditional print
publishers;
- offering banner advertising and sponsorship of discrete portions of our
content libraries to pharmaceutical companies, other healthcare
advertisers and other businesses and organizations;
- participating in electronic commerce opportunities, also known as
e-commerce, including selling articles from full-text journals, monthly
online subscriptions and medical text books; and
- developing co-branded CHOICE Web sites for hospitals and other
institutions, and distributing content through these CHOICE Web sites.
For the nine months ended September 30, 1999, the above activities generated
approximately 33%, 32%, 20%, 10% and 5%, respectively, of our total revenue.
We are incorporated under the laws of the State of Delaware and our
executive offices are located at 25 Corporate Drive, Suite 310, Burlington,
Massachusetts 01803. Our telephone number is (781) 685-4000.
6
<PAGE>
RISK FACTORS
An investment in our business involves significant risks. We urge you to
carefully read the section entitled "Risk Factors" beginning on page 10 of this
prospectus, which more fully describes the risks listed below and other risks
facing us, before making an investment decision.
- Our business model is unproven, and we operate in the highly competitive
and rapidly evolving Internet industry.
- We have a history of significant losses. For the nine months ended
September 30, 1999, we lost approximately $10.5 million and as of
September 30, 1999, we had an accumulated deficit of approximately $29.3
million. We also anticipate incurring losses, which may be substantial,
for the foreseeable future.
- We have received a report from our independent accountants containing an
explanatory paragraph stating that our historical losses and negative cash
flows from operations raise substantial doubt about our ability to
continue as a going concern.
- We must effectively manage the rapid growth of our business to be
successful.
- In June 1999 we received a letter from our independent accountants, which
discussed a material weakness in our internal controls related to revenue
recognition. This issue resulted in the restatement of our unaudited
financial statements for the three months ended March 31, 1999. We have
implemented additional financial and management controls and procedures to
address this issue.
7
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock we are offering...................... 3,750,000 shares
Common stock to be outstanding after this
offering.......................................... 16,445,472 shares
Underwriters' over-allotment option............... 562,500 shares
Use of proceeds................................... To pay $10,250,000 in first year fees to
Snap in connection with our strategic
alliance agreement with Snap, to repay
$2,000,000 of outstanding indebtedness,
and for general corporate purposes,
including working capital. See "Use of
Proceeds."
Nasdaq National Market symbol..................... HGAT
</TABLE>
The number of shares of our common stock to be outstanding immediately after
the offering is based on the number of shares outstanding on November 19, 1999.
This number does not take into account 2,610,684 shares of our common stock
subject to options outstanding under our stock option plans or other option
agreements at November 19, 1999 with a weighted average exercise price of $4.31
per share. This number also does not take into account outstanding warrants to
purchase 477,546 shares of our common stock at November 19, 1999, with a
weighted average exercise price of $.13 per share, a warrant to purchase
1,189,800 shares of our common stock with an exercise price of $9.49 per share
(subject to adjustment), which we issued on June 17, 1999, and a warrant to
purchase 1,941,035 shares of our common stock with an exercise price per share
equal to the initial public offering price (subject to adjustment), which we
issued on November 2, 1999. See "Business--Strategic Affiliations and
Relationships--Marketing and Distribution."
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1996 1997 1998 1998 1999
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue.............................. $ 408 $ 1,285 $ 2,434 $ 1,845 $ 1,736
Total costs and expenses................... 3,120 3,820 4,975 3,424 11,884
Loss from operations....................... (2,712) (2,535) (2,541) (1,579) (10,148)
Net loss................................... (2,726) (2,541) (2,878) (1,761) (10,466)
Preferred stock dividends and accretion of
preferred stock to redemption value...... (264) (540) (594) (446) (8,393)
Net loss attributable to common
stockholders............................. (2,990) (3,081) (3,472) (2,207) (18,859)
Basic and diluted net loss per share
attributable to common stockholders...... $ (.66) $ (.68) $ (.76) $ (.49) $ (4.14)
Shares used in computing basic and diluted
net loss per share attributable to common
stockholders............................. 4,543 4,543 4,548 4,547 4,559
Unaudited pro forma basic and diluted net
loss per share........................... $ (.31) $ (.95)
Shares used in computing unaudited pro
forma basic and diluted net loss per
share.................................... 9,220 10,968
</TABLE>
The following table contains a summary of our balance sheet at
September 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect the issuance of 500,000 shares of common
stock to Snap in November 1999; and
- on a pro forma as adjusted basis to additionally reflect (a) the sale of
3,750,000 shares of common stock offered hereby at an assumed initial
public offering price per share of $10.00, (b) the conversion of all
outstanding shares of redeemable convertible preferred stock into
7,530,556 shares of common stock, and (c) the repayment of a long-term
note payable of $2,000,000 with proceeds from the offering.
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1999
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 808 $ 808 $31,296
Working capital (deficit)................................. (3,088) (3,088) 27,400
Total assets.............................................. 12,093 16,593 47,081
Long-term debt and capital lease obligations.............. 1,855 1,855 362
Redeemable convertible preferred stock.................... 15,283 15,283 --
Common stock and other stockholders' equity (deficit)..... (9,937) (5,437) 41,826
</TABLE>
9
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION IN THIS
PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND THE RELATED NOTES. THE RISKS
AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE MAY
MATERIALLY AFFECT OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE
UNAWARE OF OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY BECOME IMPORTANT
FACTORS THAT AFFECT OUR COMPANY.
THIS PROSPECTUS ALSO CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THE RISKS FACED BY US DESCRIBED BELOW AND ELSEWHERE IN THIS
PROSPECTUS.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND HAVE RECENTLY INTRODUCED NEW SERVICES
WHICH MAKES AN EVALUATION OF OUR BUSINESS BASED ON PAST OPERATING RESULTS
DIFFICULT.
We have been in business since February 1994, but we did not generate
revenue until January 1996. Through December 31, 1996, the majority of our
activities were related to development of products and services, exploration of
different sales and marketing channels, the build-up of hardware and software
infrastructure to support our www.healthgate.com Web site and the establishment
of the business, operations and financing of our company. Since 1997, we have
introduced new services and experienced significant growth in our operating
revenue relative to prior periods. Therefore, our historical financial
information is of limited value in evaluating our future operating results. An
investor in our common stock must consider the risks, expenses and difficulties
frequently encountered by companies in the early stages of development,
especially companies in a rapidly changing market like the market for Internet
services.
WE HAVE A HISTORY OF LOSSES, WE EXPECT THAT LOSSES WILL CONTINUE FOR THE
FORESEEABLE FUTURE AND OUR INDEPENDENT ACCOUNTANTS HAVE EXPRESSED SUBSTANTIAL
DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
We have lost money in every period since we started our business and we had
an accumulated deficit of approximately $10.5 million as of December 31, 1998
and $29.3 million as of September 30, 1999. We plan to invest heavily to
continue to develop and expand our content libraries, to market our CHOICE Web
sites, to attract traffic to our Web sites at www.healthgate.com and
www.healthgate.co.uk, to increase our customer base, to upgrade our technology,
to expand internationally and to continue to build the HealthGate brand. As a
result, we expect to continue to lose money for the foreseeable future. We can
not assure you that we will ever achieve or sustain profitability or that our
operating losses will not increase in the future. We have received a report from
our independent accountants containing an explanatory paragraph stating that our
historical losses and negative cash flows from operations raise substantial
doubt about our ability to continue as a going concern. We will need to
successfully complete this offering or successfully execute our alternative
financing and operational plans to eliminate this uncertainty.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY WHICH MAY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK IN A MANNER UNRELATED TO OUR LONG-TERM
PERFORMANCE.
We expect our quarterly revenue, expenses and operating results to fluctuate
significantly in the future, which could affect the market price of our common
stock in a manner unrelated to our long-term operating performance. Quarterly
fluctuations could result from a number of factors, including:
- the amount and timing of costs to expand our operations;
10
<PAGE>
- addition of new content providers or changes in our relationships with our
most important content providers, which may require more expenditures in
the early stages of these relationships;
- the level of usage of the HealthGate Network which could impact, among
other things, recognition of revenue in connection with advertising and
sponsorship sales that are tied to the number of times advertisement or
sponsorship banners are displayed to users;
- seasonality of spending by the advertising industry, which is generally
lower in the first and third calendar quarters; and
- the amount and timing of expenses required to integrate operations and
technologies from acquisitions, joint ventures or other business
combinations or investments.
We expect to increase the level of activity and spending in our operations,
particularly in sales and marketing and research and development. We base our
expense levels in part upon our expectations concerning future revenue and these
expense levels are predominantly fixed in the short-term. If we have lower
revenue than expected, we may not be able to reduce our spending in the
short-term in response. Any shortfall in revenue would have a direct impact on
our results of operations. In this event, the price of our common stock may
fall. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
NON-CASH EXPENSES RELATED TO RECENTLY ISSUED WARRANTS AND STOCK WILL ADVERSELY
AFFECT FUTURE OPERATING RESULTS.
Beginning in the fiscal quarter ending June 30, 1999, we are amortizing as
an expense over a 12 month period the $10.3 million value of a warrant we issued
to General Electric Company in June 1999 in connection with our development and
distribution agreement with GE Medical Systems, a division of General Electric.
The value of this warrant was determined using the Black-Scholes option pricing
model. The value of this warrant may be adjusted on the effective dates of
certain events defined in this warrant should any of these events occur. In the
event the exercise price of this warrant is adjusted, its fair value will
increase. In addition, beginning in the fiscal quarter ending December 31, 1999,
we expect to begin amortizing as an expense over a three-year period the fair
value of a warrant that we issued to CIS Holdings Inc. in connection with our
marketing and reseller agreement with Columbia Information Systems. Based on the
currently anticipated range of the offering price for this offering, we expect
the fair value of this warrant to range from $10.7 million to $13.1 million,
calculated using the Black-Scholes option pricing model. In addition, beginning
in the fiscal quarter ending March 31, 2000, we expect to begin recognizing as
an expense over a one-year period the fair value of the common stock that we
issued to Snap in connection with our strategic alliance. The value of these
shares was $4.5 million at the time of issuance. Assuming the co-branded
Snap/HealthGate Web site is launched on March 1, 2000 and no adjustment is made
to the fair value of the GE Medical Systems warrant, we expect the total
non-cash expense associated with these recently issued warrants and the common
stock issued to Snap to range from $12.1 million to $12.9 million for fiscal
2000. The non-cash expenses associated with these warrants and the common stock
issued to Snap will have an adverse effect on our operating results and may
cause the market price of our common stock to fall. See "Business--Strategic
Affiliations and Relationships--Marketing and Distribution."
OUR BUSINESS PROSPECTS WILL SUFFER IF WE ARE NOT ABLE TO SUCCESSFULLY BUILD
RECOGNITION FOR THE HEALTHGATE BRAND.
We believe that increasing awareness of the HealthGate brand is important to
our ability to attract additional users, customers, advertisers, sponsors and
strategic partners. We believe the importance of brand recognition will increase
in the future as the number of Web sites providing healthcare information
products and services increases. We plan to allocate significant resources to
develop and build brand recognition by expanding the reach of the HealthGate
Network, primarily through
11
<PAGE>
increasing the number of CHOICE Web sites, promoting these CHOICE Web sites and
our own Web sites and through our alliance with Snap and Xoom. However, we can
not assure you that our efforts to build brand awareness will be successful.
OUR AGREEMENT WITH SNAP REQUIRES A SIGNIFICANT OUTLAY OF CASH AND THE SUCCESS OF
OUR BUSINESS WILL DEPEND IN PART ON THE SUCCESS OF OUR STRATEGIC ALLIANCE WITH
SNAP.
We have agreed to pay Snap a minimum of $10.3 million for the first twelve
months of our strategic alliance and a minimum of $15.0 million in each of the
following two years to promote our name, our www.healthgate.com Web site, our
co-branded CHOICE Web sites and our other products and services. We have also
agreed to pay Snap up to an additional $5.0 million in the first year,
$10.0 million in the second year and $15.0 million in the third year of the
agreement if Snap delivers more than a minimum number of click-throughs to the
co-branded Snap/HealthGate Web site in the respective years. If our strategic
alliance with Snap does not lead to a significant increase in our sales of
advertising and sponsorship and in sales of products and services offered
through the co-branded Snap/HealthGate Web site and throughout the HealthGate
Network, our business, results of operations and financial condition may be
materially, adversely affected. In addition, if our strategic alliance with Snap
is terminated by Snap for a material breach by us, we have agreed to pay Snap
55% of the fees due to Snap under the agreement for the remaining term of the
agreement, which could also have a material adverse effect on our business,
results of operations and financial condition.
WE FACE INTENSE COMPETITION IN PROVIDING OUR INTERNET-BASED HEALTHCARE
INFORMATION PRODUCTS AND SERVICES AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. Since the Internet's commercialization in the
early 1990s, the number of Web sites on the Internet competing for users'
attention has proliferated with no substantial barriers to entry. There are more
than 15,000 Web sites offering users healthcare content, products and services,
and we expect that competition will continue to grow. With low barriers to entry
in a relatively new and rapidly evolving industry, the types of entities against
which we compete, directly and indirectly, for subscribers, consumers, content
and service providers, advertisers, sponsors and acquisition candidates is
broad. Presently, our competitors include the following types of companies:
- publishers and distributors of traditional print media targeted to
healthcare professionals, patients and health-conscious consumers, many of
which have established or may establish their own Web sites;
- large healthcare information systems companies, such as McKesson HBOC and
Shared Medical Systems;
- online services or Web sites targeted to the healthcare industry
generally, such as Healtheon/ WebMD, Medscape, Inteli-health, OnHealth and
drkoop.com;
- public sector and non-profit Web sites that provide healthcare information
without advertising or commercial sponsorships, such as the National
Library of Medicine and the American Medical Association;
- Web sites, such as Yahoo!, America Online and Lycos, which provide access
to healthcare related information and services; and
- vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging.
Many of our competitors enjoy significant competitive advantages including:
greater resources that can be devoted to the development, promotion and sale of
their products and services; longer operating histories; greater brand
recognition; and larger customer bases.
12
<PAGE>
We also compete with other Web sites, traditional print media and other
sources of healthcare information for a share of total advertising budgets. If
advertisers perceive the Internet or the HealthGate Network to be limited or
ineffective advertising media, they may be reluctant to devote a portion of
their advertising budget to Internet advertising or to advertising on the
HealthGate Network. See "Business--Competition."
OUR BUSINESS IS EXPANDING RAPIDLY AND OUR BUSINESS PROSPECTS MAY SUFFER IF WE
ARE NOT ABLE TO EFFECTIVELY MANAGE THE GROWTH OF OUR OPERATIONS AND SUCCESSFULLY
INTEGRATE RECENT ADDITIONS TO OUR SENIOR MANAGEMENT TEAM.
Since we began our business in 1994, we have significantly expanded our
operations over a short period of time. We have grown from three employees at
the end of 1994 to 88 full-time employees as of October 31, 1999, and we expect
to add a significant number of additional personnel in the near future. Several
members of our senior management joined us in 1999, including Mary B. Miller,
our Chief Financial Officer, and Richard J. Fecher, our Vice President of Sales.
We believe the successful integration of our senior management will be critical
to our ability to effectively manage our growth. Our rapid growth has placed a
substantial strain on our management, operational and financial resources and
systems. Our future success will depend in large part on our ability to
implement, improve and effectively utilize our operational, management,
marketing and financial resources and systems and train and manage our
employees. We can not guarantee that our management team will be able to
effectively manage the growth of our operations or that our systems, procedures
and controls will be adequate to support our expanding operations.
WE HAVE HAD TO RESTATE OUR FINANCIAL STATEMENTS FOR THE FIRST QUARTER OF 1999
AND IF WE ARE NOT ABLE TO MONITOR AND FOLLOW OUR NEWLY IMPLEMENTED INTERNAL
CONTROLS, OUR BUSINESS PROSPECTS AND THE PRICE OF OUR COMMON STOCK MAY SUFFER.
On June 30, 1999, we received a letter from our independent accountants
which discussed a material weakness in our internal controls related to revenue
recognition. This material weakness resulted in the restatement of our unaudited
financial statements for the three months ended March 31, 1999 to reverse
$82,000 of revenue, as discussed in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section. The letter emphasized
the need for a clearly defined, formal revenue accounting model for the
contracts underlying each type of transaction that generates revenue for us. In
addition, the letter emphasized the need for ongoing and proper communication
among our financial, operational and sales personnel and between us and our
independent accountants regarding key terms and conditions relating to our
contractual relationships. We have implemented additional financial and
management policies and procedures which we believe will address these concerns.
These controls and procedures will require continued monitoring and updating as
our business continues to evolve. If we are unsuccessful in following or
monitoring these internal controls and procedures, we may not be able to
accurately report our financial condition or our results of operations. If we
are unable to accurately report financial information, we could be subject to,
among other things, fines, securities litigation and a general loss of investor
confidence, any one of which could adversely affect our business prospects and
the price of our common stock.
WE MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR GROWTH AND ACQUISITION
STRATEGY.
Key elements of our growth strategy include making acquisitions of, or
significant investments in, complementary companies, products or technologies to
increase our content libraries, technological capabilities and customer base and
entering into other strategic affiliations. To date, we have not made any major
acquisitions or investments. For our acquisition strategy to be successful, we
will need to identify content sources, technologies and businesses that are
complementary to ours, integrate disparate technologies and corporate cultures
and possibly manage a geographically dispersed company. We may also lose key
employees while integrating any new companies. For these reasons, we may not
13
<PAGE>
be successful in integrating any acquired businesses or technologies and may not
achieve anticipated revenue and cost benefits. Simultaneously pursuing
acquisitions, strategic affiliations and other elements of our growth strategy
could be expensive, time consuming and may strain our resources. If we are not
successful in implementing our growth and acquisition strategy, our business,
results of operations and the market price of our common stock could be
adversely affected.
In addition, we may be required to amortize significant amounts of goodwill
and other intangible assets in connection with future acquisitions, which could
adversely affect our results of operations and the market price of our common
stock.
COMPETITION FOR HIGHLY-SKILLED PERSONNEL IS INTENSE AND THE SUCCESS OF OUR
BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL.
Our performance depends on the continued services and performance of our
executive officers and key employees, including William S. Reece, our President,
Chief Executive Officer and Chairman of the Board, Mary B. Miller, our Chief
Financial Officer and Treasurer, Mark A. Israel, our Chief Technology Officer,
Richard J. Fecher, our Vice President of Sales, and Rick Lawson, our Vice
President of Content and Secretary. We maintain key person life insurance
payable to us on Mr. Reece in the amount of $1 million. We do not maintain key
person life insurance policies on any other officers or employees. Our future
success also depends on our ability to identify, attract, hire, train, retain
and motivate highly skilled technical, managerial, editorial, marketing and
customer service personnel. Competition for highly-skilled personnel is intense.
In particular, skilled technical employees are highly sought after in the Boston
area, and we can not guarantee that we will be able to attract or retain these
employees.
THE SUCCESS OF OUR BUSINESS WILL DEPEND ON OUR ABILITY TO SELL ADVERTISING ON
THE HEALTHGATE NETWORK.
We derived approximately 20% of our revenue in the nine months ended
September 30, 1999 from the sale of general and targeted banner advertising,
including barter revenue, and sponsorships of discrete topic areas on the
HealthGate Network, compared to 28% of our revenue in the nine months ended
September 30, 1998 and 27% of our revenue in the year ended December 31, 1998.
In general, barter revenue has been decreasing as a percentage of revenue.
Barter advertising revenue was $73,000 or 4% of total revenue for the nine
months ended September 30, 1999 compared to $350,000 or 19% of total revenue for
the nine months ended September 30, 1998 and $436,000 or 18% of total revenue
for the year ended December 31, 1998. We anticipate that barter revenue will
continue to decrease as a percentage of total revenue in the future. Barter
revenue is not a source of cash available to fund our operations. Under our
sponsorship arrangements, a sponsor's name or a message selected by the sponsor
is included on each page of the topic area together with a click-through link to
the sponsor's Web site.
Our future success depends on our ability to generate and increase revenue
from advertising and sponsorship which will depend on a number of factors,
including:
- the development of the Internet as an advertising medium;
- the amount of traffic on the HealthGate Network and the number of
registered and unique users of our content; and
- our ability to achieve and demonstrate registered and unique user
demographic characteristics that are attractive to sponsors and
advertisers.
Most of our advertisements to date have been displayed on our own Web sites
and have been sold on the basis of the number of impressions, or times that an
advertisement appears in page views downloaded by users, rather than on the
number of click-throughs, or user requests for additional information made by
clicking on the advertisement. We can not guarantee that our advertising
customers will accept our internal and third party measurements of these
impressions received by advertisements on the HealthGate Network, or that these
measurements will be free from errors. If we
14
<PAGE>
are unable to accurately measure these impressions or have our advertising
customers accept these measurements, advertisers may not be willing to buy
advertising space from us. In addition, there are currently a variety of pricing
models for selling advertising on the Internet. It is difficult to predict which
model, if any, will emerge as the industry standard. This uncertainty makes it
difficult to project our future advertising rates and revenue that we may
generate from advertising.
THE SUCCESS OF OUR BUSINESS WILL DEPEND ON OUR ABILITY TO SELL A SUBSTANTIAL
NUMBER OF CO-BRANDED CHOICE WEB SITES.
A key element of our strategy is to expand the HealthGate Network by
establishing co-branded CHOICE Web sites. We commercially introduced our CHOICE
Web site product in early 1999 and as of September 30, 1999 had delivered 39
CHOICE Web sites to enterprise clients.
Under our CHOICE Web site arrangements, we are paid a fee for developing,
implementing and hosting a CHOICE Web site for our customer. In addition, the
arrangements typically provide the opportunity for us to place third party
advertising and sponsorship on the customer's CHOICE Web site. We collect the
fees for this advertising and sponsorship from the third party and pay a
commission to the customer. However, as part of our agreements with 14 of our
initial CHOICE customers, we have guaranteed that we will pay minimum
advertising and sponsorship commissions to these customers in amounts
approximately equal to the fees paid to us by the customer for the initial term
of their CHOICE agreements and, in a few cases, in amounts that exceed those
fees. We are obligated to pay these guaranteed commissions to the customer,
generally on a quarterly basis, regardless of whether or not we have actually
sold any advertising or sponsorship on the CHOICE Web site. The initial terms of
these agreements generally range from one to three years. We have entered into
these types of arrangements for promotional purposes to establish our CHOICE Web
site product but have discontinued the use of these arrangements as a standard
practice. However, we can not assure you that we will not use this or a similar
type of promotion in the future.
For those CHOICE Web sites for which we have guaranteed advertising and
sponsorship commissions, we do not recognize revenue unless the guaranteed
commissions are less than the fee for developing, implementing and hosting paid
to us. Any excess of fees paid to us over guaranteed commissions is recognized
as revenue ratably over the term of the agreement. If the advertising and
sponsorship commissions that we guarantee to the customer exceed the fees paid
to us, we recognize the excess as expense upon signing the agreement. As we sell
advertising or sponsorship on these CHOICE Web sites to third parties, we will
recognize advertising revenue from these CHOICE Web sites. For those CHOICE Web
sites for which we do not guarantee advertising and sponsorship commissions, we
recognize as revenue the fee paid to us by the customer ratably over the term of
the agreement. To date, we have sold advertising or sponsorship on only five
CHOICE Web sites, four of which are part of the initial 14 CHOICE Web sites for
which we have guaranteed to pay minimum advertising and sponsorship commissions.
We cannot guarantee that we will be successful in selling advertising or
sponsorship on these or additional sites in the future.
Our CHOICE product is new and unproven and we can not assure you that we
will be able to sell additional CHOICE products without advertising and
sponsorship guarantees or without lowering the price of the product. Our CHOICE
product is an important part of our business model and if we are unable to sell
a substantial number of CHOICE Web sites, our business prospects, results of
operations and the market price of our common stock could be materially
adversely affected.
THE PERFORMANCE OF OUR WEB SITES AND COMPUTER SYSTEMS IS CRITICAL TO OUR
BUSINESS AND OUR BUSINESS WILL SUFFER IF WE EXPERIENCE SYSTEM FAILURES.
The performance of our Web sites and computer systems is critical to our
reputation and ability to attract and retain users, customers, advertisers and
subscribers. We provide products and services based on sophisticated computer
and telecommunications software and systems, which often experience development
delays and may contain undetected errors or failures when introduced into our
existing
15
<PAGE>
systems. Although we have only experienced one minor unscheduled service
interruption of approximately four hours since the beginning of 1998, we can not
guarantee that we will not experience more significant service interruptions in
the future. We are also dependent upon Web browsers and Internet service
providers to provide Internet users access to our Web sites. Many of them have
experienced significant outages in the past and could experience outages, delays
and other difficulties in the future due to system failures. For example, on
August 7, 1996, a major Internet service provider experienced a service outage
of over 20 hours. We also depend on certain information providers to deliver
information and data feeds to us on a timely basis. Our Web sites could
experience disruptions or interruptions in service due to the failure or delay
in the transmission or receipt of this information. System errors or failures
that cause a significant interruption, for example, 24 hours or more, in the
availability of our content or an increase in response time on our Web sites
could cause us to lose potential or existing users, customers, advertisers or
subscribers and could result in damage to our reputation and brand name or a
decline in our stock price.
Given our reliance on our own and third party computer and
telecommunications software and systems, any of the following occurrences could
cause response time delays or system failures on our Web sites:
- a sudden and significant increase in the number of users of our Web sites;
- any failure or delay in the transmission or receipt of downloads from our
content providers;
- any disruption in our Internet access through our third party Internet
service providers;
- any failure of our third party Internet service providers to handle higher
volumes of users; and
- fire, hurricanes, power loss, break-ins, computer viruses and other events
beyond our control.
In March 1999, we entered into a one year Internet Data Center Services
Agreement with Exodus Communications, Inc. to house all of our central computer
facility servers at Exodus's Internet Data Center in Waltham, Massachusetts. We
do not presently maintain fully redundant systems at separate locations, so our
operations depend on Exodus's ability to protect the systems in its data center
against damage from fire, power loss, water damage, telecommunications failure,
vandalism and similar events. Although Exodus provides comprehensive facilities
management services, including human and technical monitoring of all production
servers, Exodus does not guarantee that our Internet access will be
uninterrupted, error-free or secure. We have also developed a disaster recovery
plan to respond to system failures. We can not guarantee that our disaster
recovery plan is capable of being implemented successfully, if at all. Finally,
we maintain property insurance for our equipment, but do not maintain business
interruption insurance. We can not guarantee that our insurance will be adequate
to compensate us for all losses that may occur as a result of any system
failure.
WE RETAIN CONFIDENTIAL CUSTOMER INFORMATION IN OUR DATABASE AND IF WE FAIL TO
PROTECT THIS INFORMATION AGAINST SECURITY BREACHES WE MAY LOSE CUSTOMERS.
We retain confidential customer information in our database. Therefore, it
is critical that our facilities and infrastructure remain secure and that they
are perceived by consumers to be secure. Despite the implementation of security
measures, our infrastructure may be vulnerable to physical break-ins, computer
viruses, programming errors or similar disruptive problems. A material security
breach could damage our reputation or result in liability to us. We believe that
maintaining the trust of our customers is important for us to be able to grow
our business and, therefore, we believe that any damage to our reputation or
liability arising from one or more security breaches could adversely affect our
business, results of operations and the market price of our common stock.
16
<PAGE>
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE TO SUPPORT OUR GROWTH AND SUCH
ADDITIONAL FINANCING MAY NOT BE AVAILABLE TO US.
We expect that the net proceeds from this offering, combined with our
current cash resources, will be sufficient to meet our requirements for at least
the next 12 months. However, as we continue our efforts to grow our business in
the rapidly changing and highly competitive market for Internet-based healthcare
products and services, we may need to raise additional financing to support
expansion, develop new or enhanced products and services, respond to competitive
pressures, acquire complementary businesses or technologies or take advantage of
unanticipated business opportunities. In addition, as a result of our recent
strategic alliance with Snap, we have substantial financial commitments to Snap
over the next three years. If this strategic alliance does not lead to a
significant increase in our sales of advertising and sponsorship and in sales of
products and services offered through the co-branded Snap/HealthGate Web site
and throughout the HealthGate Network, we may need to raise more capital sooner
than we had originally anticipated. We may need to raise additional funds by
selling debt or equity securities, by entering into strategic relationships or
through other arrangements. We may be unable to raise any additional amounts on
reasonable terms when they are needed. Any additional equity financing may cause
investors to experience dilution, and any additional debt financing may result
in restrictions on our operations or our ability to pay dividends in the future.
OUR BUSINESS PROSPECTS MAY SUFFER IF WE ARE NOT ABLE TO KEEP UP WITH THE RAPID
TECHNOLOGICAL DEVELOPMENTS IN THE INTERNET INDUSTRY.
The Internet industry is characterized by rapid technological developments,
evolving industry standards, changes in user and customer requirements and
frequent new service and product introductions and enhancements. The
introduction of new technology or the emergence of new industry standards and
practices could render our systems and, in turn, our products and services,
obsolete and unmarketable or require us to make significant unanticipated
investments in research and development to upgrade our systems in order to
maintain the marketability of our products. To be successful, we must continue
to license or develop leading technology, enhance our existing products and
services and respond to emerging industry standards and practices on a timely
and cost-effective basis. If we are unable to successfully respond to these
developments, particularly in light of the rapid technological changes in the
Internet industry generally and the highly competitive market in which we
operate, our business, results of operations and the market price of our common
stock could be adversely affected.
THE YEAR 2000 PROBLEM COULD SIGNIFICANTLY DISRUPT OUR OPERATIONS, CAUSING A
DECLINE IN CASH FLOW AND REVENUE AND OTHER DIFFICULTIES.
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates.
As a result, many companies' software and computer systems may need to be
upgraded or replaced to comply with these Year 2000 requirements. Our business
is dependent on the operation of numerous systems that could potentially be
impacted by Year 2000 related problems.
As of June 30, 1999, we have completed internal assessments of our Year 2000
readiness, with an emphasis on our operating and administrative systems and the
proprietary software systems and third party software and hardware we use to
deliver services to our customers, and are not aware of any Year 2000 problems
that could reasonably be expected to have a material adverse effect on our
business. Many of our vendors of material software, hardware and services have
indicated that the products we use are currently Year 2000 compliant. However,
we can not guarantee that we have identified or will identify all Year 2000
compliance problems in our infrastructure that may require substantial revisions
and fixes. Also, despite our testing and reviews, we may experience Year 2000
problems related to the third party software, hardware or other systems on which
we are reliant, and any of these problems may be time consuming or expensive to
fix.
17
<PAGE>
We believe that the most reasonably likely worst case scenario would result
in a prolonged Internet, telecommunications or electrical failure which would
affect our ability to meet our commitments to our customers or decrease the use
of the Internet, thus preventing our users from accessing our services. We have
given a warranty in our activePress agreements with Blackwell Science and our
CHOICE Web site agreement with Columbia Information Systems that our
applications and services are Year 2000 compliant. If our applications and
services fail to be Year 2000 compliant, these agreements could be terminated or
we could be liable for damages, either of which could have a material adverse
effect on our business. In addition, the purchasing patterns of customers or
potential customers may be affected by Year 2000 questions, and any significant
delays in purchasing decisions could also affect us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Compliance Readiness Disclosure."
WE MAY BE SUBJECT TO LIABILITY FOR INFORMATION RETRIEVED FROM OUR WEB SITE.
As a publisher and distributor of online information, we may be subject to
third party claims for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of information
supplied on our Web sites. We could also become liable if confidential
information is disclosed inappropriately. These types of claims have been
brought, sometimes successfully, against online service providers in the past.
We could be subject to liability with respect to content that may be accessible
through our Web sites or third party Web sites linked from our Web sites. For
example, claims could be made against us if material deemed inappropriate for
viewing by children could be accessed through our Web sites or if a
professional, patient or consumer relies on healthcare information accessed
through our Web sites to their detriment. Even if any of the kinds of claims
described above do not result in liability to us, we could incur significant
costs in investigating and defending against them and in implementing measures
to reduce our exposure to this kind of liability. Our insurance may not cover
potential claims of this type or may not be adequate to cover all costs incurred
in defense of potential claims or to indemnify us for all liability that may be
imposed.
WE DEPEND ON OUR CONTENT PROVIDERS, AS THE SUCCESS OF OUR BUSINESS DEPENDS ON
OUR ABILITY TO PROVIDE A COMPREHENSIVE LIBRARY OF HEALTHCARE INFORMATION.
With the exception of our Healthy Living series of Webzines, we license all
of our content from third parties. With a few exceptions, these licenses are
generally non-exclusive, have an initial term of one year and are renewable. In
addition, a significant number of these licenses permit cancellation by the
content provider upon 30 to 90 days notice. We can not guarantee that we will be
able to continue
to license our present content or sufficient additional content to provide a
diverse and comprehensive library. In the future, we may not be able to license
content at reasonable cost. In addition, one or more of our publishers or other
content providers may grant one of our competitors an exclusive arrangement with
respect to a significant database or periodical, or elect to compete directly
against us by making its content exclusively available through its own Web site.
Presently, we believe it would be difficult to replace the NEW ENGLAND JOURNAL
OF MEDICINE and the journals made available by Blackwell Science with other
journals of the same reputation. These sources are committed to us through April
2001 and December 2001, respectively, but if either of them chooses not to renew
the agreements they have with us, our business could be adversely affected
because the quality of our content is important in attracting online users,
advertisers and CHOICE customers.
WE RELY ON OUR WEB-BASED MAGAZINES TO INCREASE TRAFFIC ON OUR WEB SITES.
A key element of our strategy involves our continued development of our
Healthy Living series of consumer oriented Webzines. Articles for our Webzines
are written by freelance medical writers who we engage to write specific
articles. If these medical writers and our editorial board are not successful in
producing articles for our Webzines that are topical, informative and timely, we
may fail to attract a significant number of users to our Web sites. Without
substantial traffic on our Web sites, we will be severely hindered in selling
advertising on our Web pages and in building the brand name recognition we
believe is necessary to be competitive.
18
<PAGE>
THE MAJORITY OF OUR REVENUE HAS HISTORICALLY BEEN DERIVED FROM A FEW CUSTOMERS
AND THE LOSS OF ANY OF THESE CUSTOMERS COULD ADVERSELY AFFECT OUR BUSINESS.
Historically, we have generated a substantial portion of our revenue from a
few customers. For the nine months ended September 30, 1999, two customers,
Blackwell Science, one of our largest stockholders, and WebMD, accounted for
33%, and 12%, respectively, of our total revenue. For the year ended
December 31, 1998, Blackwell Science and WebMD accounted for 44% and 18%,
respectively of our total revenue. We expect to continue to generate a
substantial portion of our revenue in the near future from these customers and
the loss of any of them could adversely affect our business. Our agreements with
Blackwell Science run through December 2001. We are presently negotiating with
WebMD concerning the terms of the annual renewal of the agreement which was
contemplated for October 30, 1999. During our negotiations, we are continuing to
provide content to WebMD under the same terms as provided under our earlier
agreement. We can not assure you that we will be able to reach mutually
agreeable terms of renewal with WebMD, and, if we do not, we may lose WebMD as a
customer. Because WebMD represented 12% of our total revenue for the nine months
ended September 30, 1999, the loss of WebMD as a customer may have a material
adverse effect on our business and results of operations.
OUR RELATIONSHIP WITH BLACKWELL SCIENCE, GENERAL ELECTRIC AND COLUMBIA
INFORMATION SYSTEMS MAY GIVE RISE TO CONFLICTS OF INTEREST AND, ON A COMBINED
BASIS, THESE ENTITIES WILL BE ABLE TO EXERCISE SIGNIFICANT CONTROL OVER
HEALTHGATE.
Blackwell Science and one of its affiliates will beneficially own
approximately 12.5% of our outstanding common stock after this offering and
Blackwell and another of its affiliates are our largest customer, accounting for
approximately 33% of our revenue for the nine months ended September 30, 1999
and 44% of our revenue for the year ended December 31, 1998. Because Blackwell
and its affiliates are significant customers and stockholders, our relationship
with them could give rise to conflicts of interest. In the event we attempt to
expand into Europe or Asia, we have agreed to negotiate in good faith with
Blackwell Science to determine in what manner Blackwell Science may serve as our
primary strategic alliance partner in connection with such expansion.
Based on its current holdings, General Electric is expected to beneficially
own approximately 21.9% of our outstanding common stock after this offering,
including 1,189,800 shares issuable under a warrant. If the initial public
offering price is $10.00 and Snap purchases $5,000,000 (500,000 shares) of our
common stock for which it has expressed a non-binding interest, General Electric
is expected to beneficially own approximately 24.7% of our outstanding common
stock after this offering. Additionally, we have entered into a development and
distribution agreement with GE Medical Systems, an operating division of General
Electric, pursuant to which GE Medical Systems has an exclusive worldwide right
to sell GE Medical Systems branded enhanced CHOICE Web sites to hospitals and
other patient care facilities and the exclusive right to sell our standard
CHOICE Web site product to a select group of hospitals and other patient care
facilities. We have also entered into a strategic alliance with Snap, in which
NBC, a subsidiary of General Electric, owns a majority interest. Because General
Electric is both a strategic affiliate and stockholder, our relationship with
them could give rise to conflicts of interest.
After this offering, Columbia/HCA Healthcare Corporation, through its
indirect, wholly-owned subsidiary CIS Holdings, Inc., will beneficially own
approximately 10.6% of our outstanding common stock, based on the 1,941,035
shares issuable under the warrant we issued to CIS Holdings. We have also
entered into a development agreement and a marketing and reseller agreement with
Columbia Information Systems, which is also an indirect wholly-owned subsidiary
of Columbia/HCA. Because Columbia/HCA is both a strategic affiliate and the
beneficial owner of a significant percentage of our stock, our relationship with
them could give rise to conflicts of interest.
19
<PAGE>
Blackwell Science, General Electric and Columbia/HCA may influence the terms
on which we do business with them in the future or the terms on which we do
business with other providers of healthcare products and services who compete
with them.
Furthermore, after this offering Blackwell Science, General Electric and
Columbia/HCA, together with their respective affiliates, will beneficially own
approximately 42.6% of our common stock, including shares issuable under
warrants and assuming Snap purchases $5,000,000 (500,000 shares) of our common
stock at the estimated initial public offering price of $10.00, for which it has
expressed a non-binding interest. If these unaffiliated entities act together,
they will be able to significantly influence the management and affairs of
HealthGate and will have the ability to control most matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying, deferring or preventing an acquisition of HealthGate and may
adversely affect the market price of our common stock. See "Principal
Stockholders."
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE ARE NOT ABLE TO EFFECTIVELY PROTECT
OUR INTELLECTUAL PROPERTY RIGHTS.
We regard our trademarks, service marks, copyrights, trade secrets and
similar intellectual property as important to our business, and we rely upon
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, customers, strategic partners and others
to protect our rights in this property. We have registered our "HealthGate,"
"HealthGate Data," "CHOICE," "MedGate" and "ReADER" trademarks in the U.S. and
we have pending U.S. applications for our HealthGate logo and "activePress"
trademarks. Effective trademark, copyright and trade secret protection may not
be available in every country in which our products and services are distributed
or made available through the Internet. Therefore, we can not guarantee that the
steps we have taken to protect our proprietary rights will be adequate to
prevent infringement or misappropriation by third parties or will be adequate
under the laws of some foreign countries which may not protect HealthGate's
proprietary rights to the same extent as do the laws of the United States.
It is possible that other businesses will adopt product or service names
similar to ours. This may hinder our ability to build brand identity and
possibly lead to customer confusion. In the future, we may have to litigate
against these businesses and others to enforce and protect our trademarks,
service marks, trade secrets, copyrights and other intellectual property rights.
Any enforcement litigation would divert management resources and be expensive
and may not effectively protect our intellectual property.
Although we believe that our proprietary rights do not infringe on the
intellectual property rights of others, other parties may assert infringement
claims against us or claim that we have violated a patent or infringed a
copyright, trademark or other proprietary rights belonging to them. These
claims, even if they are without merit, could result in our spending a
significant amount of time and money to dispose of them. We received a letter
dated July 27, 1999 from TechSearch L.L.C. claiming ownership of a patent that
claims exclusive rights to all electronic methods of on-demand remote retrieval
of graphic and audiovisual information. The letter asserted that the use of our
Web site, www.healthgate.com, infringes the patent. In the letter, TechSearch
offered to license the patent perpetually and retroactively to us for a one-time
fee of between $50,000 and $150,000 depending upon the number of "hits" per day
on our web site. We are currently investigating this matter. At this time,
however we are unable to predict its outcome.
We license almost all of our content from third parties. Under most of our
license agreements, the licensor has agreed to defend and indemnify us for
losses with respect to third-party claims that the licensed content infringes
third-party proprietary rights. However, we can not assure you that these
provisions will be adequate to protect us from infringement claims.
20
<PAGE>
OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO CONTINUE TO LICENSE
SOFTWARE THAT IS NECESSARY FOR THE DEVELOPMENT OF PRODUCT AND SERVICE
ENHANCEMENTS.
We rely on a variety of technologies that are licensed from third parties,
including our database software and Internet server software, which is used in
our Web sites to perform key functions. These third party licenses may not be
available to us on commercially reasonable terms in the future. The loss of or
inability to maintain any of these licenses could delay the introduction of
software enhancements, interactive tools and other features until equivalent
technology could be licensed or developed.
RISKS RELATED TO OUR INDUSTRY
OUR BUSINESS PROSPECTS DEPEND ON THE CONTINUED GROWTH IN USE OF THE INTERNET.
We believe that our future success will require the continued development
and widespread acceptance of the Internet and online services as a medium for
obtaining and distributing healthcare and medical information. Internet use is
at an early stage of development and may be inhibited by a number of factors,
such as:
- Internet infrastructure which is not able to support the demands placed on
it, or its performance and reliability declining as usage increases;
- security concerns with respect to transmission over the Internet of
confidential information, such as credit card numbers;
- privacy concerns; and
- governmental regulation.
OUR BUSINESS PROSPECTS ARE UNCERTAIN, AS THE MARKET FOR ONLINE HEALTHCARE
INFORMATION AND SERVICES IS STILL DEVELOPING.
The online healthcare information market is in the early stages of
development, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced competing products and services. As is
typical in the case of a new and rapidly evolving industry, demand and market
acceptance for recently introduced products and services are subject to a high
level of uncertainty and risk. Therefore, it is difficult to predict with any
assurance the size of the market for online healthcare information or its growth
rate. We can not guarantee that physicians, hospitals and other healthcare
providers and consumers will view obtaining healthcare information through the
Internet as an acceptable way to address their healthcare information needs.
OUR BUSINESS PROSPECTS DEPEND ON THE USE OF THE INTERNET AS AN ADVERTISING
MEDIUM.
Most potential advertisers and their advertising agencies have only limited
experience with the Internet as an advertising medium and have not devoted a
significant portion of their advertising expenditures to Internet-based
advertising. Therefore, it is too early to know whether advertisers or
advertising agencies will be persuaded to allocate portions of their budgets to
Internet-based advertising or, if so persuaded, whether they will find
Internet-based advertising to be an effective means of promoting their products
and services relative to traditional print and broadcast media. Acceptance of
the Internet among advertisers and advertising agencies will depend, to a large
extent, on the level of use of the Internet by consumers and upon growth in the
commercial use of the Internet, neither of which has yet been proven.
There is intense competition for advertising revenue on high-traffic Web
sites which has resulted in significant price competition. Currently, there are
a variety of pricing models for selling advertising on the Internet. Several of
the most popular pricing models are based on the number of impressions or
21
<PAGE>
click-throughs, the duration over which an advertisement is displayed or the
number of keywords to which the advertisement will be linked. It is difficult to
predict which, if any, will emerge as the industry standard. This uncertainty
makes it difficult to project our future advertising rates and revenue that we
may generate from advertising. In addition, filter software programs that limit
or prevent advertising from being delivered to a Web users' computers are
available. It is unclear whether this type of software will become widely
accepted. However, if it does, it would negatively affect Internet-based
advertising, as advertisers will be less likely to advertise on the Internet if
they have no assurance they will reach their desired audience.
GOVERNMENT REGULATION OF THE INTERNET MAY RESULT IN INCREASED COSTS OF USING THE
INTERNET WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
Currently, there are a number of laws that regulate communications or
commerce on the Internet. Several telecommunications carriers have petitioned
the Federal Communications Commission to regulate Internet service providers and
online service providers in a manner similar to long distance telephone carriers
and to impose access fees on these providers. Regulation of this type, if
imposed, could substantially increase the cost of communicating on the Internet
and adversely affect our business, results of operations and the market price of
our common stock.
PRIVACY-RELATED REGULATION OF THE INTERNET COULD ADVERSELY AFFECT OUR BUSINESS.
Internet user privacy has become an issue both in the United States and
abroad. The Federal Trade Commission and government agencies in some states and
countries have been investigating certain Internet companies regarding their use
of personal information. Any regulations imposed to protect the privacy of
Internet users may affect the way in which we currently collect and use personal
information.
The European Union (EU) has adopted a directive that imposes restrictions on
the collection and use of personal data, guaranteeing citizens of EU member
states certain rights, including the right of access to their data, the right to
know where the data originated and the right to recourse in the event of
unlawful processing. We can not assure you that this directive will not
adversely affect our activities in EU member states.
As is typical with most Web sites, our Web sites place certain information
(cookies) on a user's hard drive without the user's knowledge or consent. This
technology enables Web site operators to target specific users with a particular
advertisement and to limit the frequency with which a user is shown a particular
advertisement. Some currently available Internet browsers allow users to modify
their browser settings to remove cookies at any time or to prevent cookies from
being stored on their hard drives. In addition, some Internet commentators,
privacy advocates and governmental bodies have suggested limiting or eliminating
the use of cookies. If this technology is reduced or limited, the Internet may
become less attractive to advertisers and sponsors.
A feature of our own Web sites includes the retention of personal
information about our users. We have a stringent privacy policy covering this
information. However, if third parties were able to penetrate our network
security and gain access to, or otherwise misappropriate, our users' personal
information, we could be subject to liability. Such liability could include
claims for misuses of personal information, such as for unauthorized marketing
purposes or unauthorized use of credit cards. These claims could result in
litigation, our involvement in which, regardless of the outcome, could require
us to expend significant financial resources. We could incur additional expenses
if new regulations regarding the use of personal information are introduced or
if any regulator chooses to investigate our privacy practices.
22
<PAGE>
TAX TREATMENT OF COMPANIES ENGAGED IN INTERNET COMMERCE MAY ADVERSELY AFFECT THE
INTERNET INDUSTRY AND OUR COMPANY.
Tax authorities on the federal, state, and local levels are currently
reviewing the appropriate tax treatment of companies engaged in Internet
commerce. New state tax regulations may subject us to additional state sales,
income and other taxes. A recently passed federal law places a temporary
moratorium on certain types of taxation on Internet commerce. We can not predict
the effect of current attempts at taxing or regulating commerce over the
Internet. It is also possible that the governments of other states and foreign
countries also might attempt to regulate our transmission of content on our Web
sites and throughout the rest of the HealthGate Network. Any new legislation,
regulation or application or interpretation of existing laws would likely
increase our cost of doing business and may adversely affect our results of
operations and the market price of our common stock.
WE MAY BE SUBJECT TO LIABILITY FOR CLAIMS THAT THE DISTRIBUTION OF MEDICAL
INFORMATION TO CONSUMERS CONSTITUTES PRACTICING MEDICINE OVER THE INTERNET.
States and other licensing and accrediting authorities prohibit the
unlicensed practice of medicine. We do not believe that our publication and
distribution of healthcare information online constitutes practicing medicine.
However, we can not guarantee that one or more states or other governmental
bodies will not assert claims contrary to our belief. Any claims of this nature
could result in our spending a significant amount of time and money to defend
and dispose of them.
RISKS RELATED TO THIS OFFERING
BECAUSE WE ARE AN INTERNET BASED COMPANY, OUR COMMON STOCK PRICE MAY BE VOLATILE
AND YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC
OFFERING PRICE.
The stock market in general, and the market for technology and Internet
related companies in particular, has experienced extreme price and volume
fluctuations, in particular over the last 12 months. These broad market and
industry fluctuations may adversely affect the market price of our common stock,
regardless of our actual operating performance. The initial public offering
price for the shares of our common stock will be determined by negotiations
between us and the representatives of the underwriters and may not be indicative
of prices that will prevail in the market. You may not be able to resell your
shares at or above the initial public offering price due to a number of factors,
including:
- changes in the market valuations of other Internet or online service
companies;
- actual or anticipated quarterly fluctuations in our operating results;
- changes in expectations of future financial performance or changes in
estimates of securities analysts;
- announcements of technological innovations;
- announcements relating to strategic relationships, acquisitions or
industry consolidation;
- customer relationship developments; and
- conditions affecting the Internet or healthcare industries.
VOLATILITY OF OUR COMMON STOCK PRICE MAY EXPOSE US TO SECURITIES LITIGATION.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. Due to the extreme price and volume fluctuations historically
experienced by Internet related stocks, particularly over the last 12 months, we
may be particularly susceptible to this kind of litigation. If this were to
happen to us, litigation would be
23
<PAGE>
expensive and would divert management's attention from then-existing business
operations. In addition, any litigation that resulted in liability against us
could adversely affect our business, financial condition and the market price of
our common stock.
OUR MANAGEMENT HAS BROAD DISCRETION IN SPENDING THE PROCEEDS OF THIS OFFERING
AND MAY DO SO IN WAYS WITH WHICH OUR STOCKHOLDERS DISAGREE.
Other than the repayment of approximately $2.0 million of outstanding
indebtedness under a subordinated term loan and the payment of $10.3 million to
Snap due in the first year of our strategic alliance agreement, we have no
specific plans for the net proceeds of this offering. We intend to use the
remainder of the net proceeds for general corporate purposes, including working
capital, expansion of our sales and marketing efforts, content development and
licensing, and advertising and brand promotion. We may also use a portion of the
proceeds for the acquisition of or investment in companies, technologies or
assets that complement our business. However, we have not determined the amounts
we plan to expend in any of these areas or the timing of these expenditures.
Consequently, our board of directors and management will have significant
flexibility in using the net proceeds of this offering. Because of the number
and variability of factors that determine our use of the net proceeds of this
offering, we cannot assure you that such uses will not vary from our current
intentions or that stockholders will agree with the uses we have chosen. See
"Use of Proceeds."
INVESTORS WILL INCUR IMMEDIATE DILUTION.
The initial offering price of our common stock will be substantially higher
than the pro forma net tangible book value per share of the outstanding common
stock immediately after the offering. If you purchase common stock in this
offering, you will incur immediate and substantial dilution in the pro forma net
tangible book value per share of the common stock from the price you pay for
common stock. Assuming an initial public offering price of $10.00 per share, you
will experience a net tangible book value dilution per share of $8.17. We also
have a large number of outstanding stock options and warrants to purchase the
common stock with exercise prices significantly below the estimated initial
public offering price of the common stock. To the extent that these options and
warrants are exercised, there will be further dilution. See "Dilution."
OUR OFFICERS, DIRECTORS AND THEIR AFFILIATED ENTITIES WILL HAVE SIGNIFICANT
CONTROL OF HEALTHGATE AFTER THIS OFFERING.
After this offering, our officers and directors will own approximately 22%
of our outstanding common stock. In addition, entities with which our outside
directors are affiliated will own approximately 23.4% of our outstanding common
stock. If our officers, directors and their affiliated entities act together,
they will be able to significantly influence the management and affairs of
HealthGate and will have the ability to control most matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying, deferring or preventing an acquisition of HealthGate and may
adversely affect the market price of our common stock. See "Principal
Stockholders."
OUR CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE ANTI-TAKEOVER PROVISIONS
WHICH MAY DETER OR PREVENT A TAKEOVER ATTEMPT.
Some provisions of our certificate of incorporation and bylaws and
provisions of Delaware law may deter or prevent a takeover attempt, including an
attempt that might result in a premium over the
24
<PAGE>
market price for our common stock. See "Description of Capital
Stock--Anti-takeover Effects of Provisions of the Restated Charter and Restated
Bylaws." These provisions include:
STAGGERED BOARD OF DIRECTORS. Our board of directors is divided into three
classes serving terms currently expiring in 2000, 2001 and 2002 and directors
may only be removed for cause. These provisions may limit the ability of holders
of common stock to remove our board of directors through a proxy contest.
STOCKHOLDER PROPOSALS. Our stockholders must give advance notice, generally
60 days prior to the relevant meeting, for stockholder nominations of candidates
for our board of directors and for certain other business to be conducted at any
stockholders' meeting. This limitation on stockholder proposals could inhibit a
change of control by delaying action on any proposed change in control until the
annual meeting of stockholders.
PREFERRED STOCK. Our certificate of incorporation authorizes our board of
directors to issue up to 10 million shares of preferred stock having such rights
as may be designated by our board of directors, without shareholder approval.
This issuance of preferred stock could inhibit a change in control by making it
more difficult to acquire the majority of our voting stock.
DELAWARE ANTITAKEOVER STATUTE. The Delaware corporation law restricts
certain business combinations with interested stockholders upon their acquiring
15% or more of our common stock. This statute may have the effect of inhibiting
a non-negotiated merger or other business combination.
FUTURE SALES OF LARGE AMOUNTS OF OUR COMMON STOCK HELD BY EXISTING STOCKHOLDERS
COULD ADVERSELY AFFECT OUR STOCK PRICE.
The market price for our common stock could fall substantially if our
stockholders sell large amounts of our common stock in the public market
following this offering. These sales, or the possibility that these sales may
occur, could also make it more difficult for us to sell equity or equity related
securities if we need to do so in the future to address then-existing financing
needs. The number of shares of common stock available for sale in the public
market is limited by restrictions under federal securities law requiring the
registration or exemption from registration in connection with the sale of
securities. In addition, sales of our common stock are restricted by lock-up
agreements that we, our directors and officers and most of our existing
stockholders have entered into with the underwriters. The lock-up agreements
restrict us, our directors and officers and substantially all of our existing
stockholders, from selling or otherwise disposing of any shares for a period of
180 days after the date of this prospectus without the prior written consent of
SG Cowen Securities Corporation. SG Cowen Securities Corporation may, however,
in its sole discretion and without notice, release all or any portion of the
shares from the restrictions in the lock-up agreements.
After this offering, we will have 16,445,472 outstanding shares of common
stock. These shares will become eligible for sale in the public market as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE ELIGIBLE FOR PUBLIC RESALE
- ---------------- -------------------------------
<S> <C>
4,031,936 Date of this prospectus (includes the 3,750,000
shares sold in this offering)
9,978,141 180 days after the date of this prospectus
2,435,395 At various times thereafter, subject to applicable
holding period requirements
</TABLE>
We intend to file one or more registration statements to register shares of
common stock subject to outstanding stock options and common stock reserved for
issuance under our stock option plan after the expiration of the 180-day lockup.
We expect the additional registration statement to become effective immediately
upon filing. In addition, upon completion of this offering and the conversion of
our outstanding preferred stock into common stock, which will happen upon the
completion of this
25
<PAGE>
offering, the holders of approximately 8,030,556 shares of our common stock will
have the right to require us to register their shares for sale to the public.
Substantially all of these shares are subject to the 180-day lock-up, described
above. If these holders cause a large number of shares to be registered and sold
in the public market, our stock price could fall. See "Shares Eligible for
Future Sale."
WE HAVE NO INTENTION TO PAY DIVIDENDS ON OUR COMMON STOCK.
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain all future earnings to finance the expansion of our
business.
26
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the 3,750,000
shares of common stock in this offering will be approximately $32.5 million
($37.7 million if the underwriters' over-allotment is exercised in full),
assuming an initial public offering price of $10.00 per share and after
deducting estimated underwriting discounts and commissions and offering expenses
payable by us. The principal reasons for this offering are to provide working
capital, to create a public market for our common stock and to facilitate our
future access to public capital markets.
We expect to use $10,250,000 of the net proceeds of this offering to pay the
first year fees due to Snap under our strategic alliance agreement with Snap. We
have also agreed to pay Snap up to an additional $5.0 million in the first year
if Snap delivers more than a minimum number of click-throughs to the co-branded
Snap/HealthGate Web site and would expect to use a portion of the net proceeds
to pay this additional fee.
We expect to use $2,000,000 of the net proceeds of this offering to repay
all of the indebtedness outstanding under a subordinated note. This note bears
interest at the fixed rate of 13% per year and is scheduled to mature on
March 26, 2003.
We expect to use the remainder of the net proceeds of this offering for
general corporate purposes, including working capital, but we have no current
plan for the amounts we may spend on any specific aspect of our business or the
timing of these expenditures. We may also use a portion of the proceeds for the
acquisition of or investment in companies, technologies or assets that
complement our business. However, we have no present understandings, commitments
or agreements with respect to any potential acquisitions or investments. As a
result, our management will have broad discretion to allocate the net proceeds
from this offering. Pending these uses, we intend to invest the net proceeds of
this offering in short term, investment grade, interest bearing instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain all future earnings to finance the expansion of our
business and, therefore, do not anticipate declaring or paying any cash
dividends on our common stock in the foreseeable future.
27
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of HealthGate (1) on an
actual basis at September 30, 1999, (2) on a pro forma basis at September 30,
1999 to reflect the issuance of 500,000 shares of common stock to Snap in
November 1999, and (3) on a pro forma as adjusted basis at September 30, 1999 to
additionally reflect (a) the sale of 3,750,000 shares of common stock offered
hereby at an assumed initial public offering price per share of $10.00, (b) the
conversion of all outstanding shares of redeemable convertible preferred stock
into 7,530,556 shares of common stock, and (c) the repayment of a long-term note
payable of $2,000,000 with proceeds from this offering. This information should
be read in conjunction with HealthGate's financial statements and related notes
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Long-term portion of capital lease obligations...... $ 362,145 $ 362,145 $ 362,145
Long-term note payable.............................. 1,493,264 1,493,264 --
------------ ------------ ------------
Total note payable and long-term capital lease
obligations................................... 1,855,409 1,855,409 362,145
------------ ------------ ------------
Redeemable convertible preferred stock, $.01 par
value:
Series A--1,000 shares authorized, issued and
outstanding actual and pro forma; none issued
or outstanding pro forma as adjusted.......... 717,800 717,800 --
Series B--1,000 shares authorized, issued and
outstanding actual and pro forma; none issued
or outstanding pro forma as adjusted.......... 2,177,876 2,177,876 --
Series C--1,000 shares authorized, issued and
outstanding actual and pro forma; none issued
or outstanding pro forma as adjusted.......... 1,308,596 1,308,596 --
Series D--1,667 shares authorized, issued and
outstanding actual and pro forma; none issued
or outstanding pro forma as adjusted.......... 3,131,283 3,131,283 --
Series E--720,757 shares authorized, issued and
outstanding actual and pro forma; none issued
or outstanding pro forma as adjusted.......... 7,947,137 7,947,137 --
------------ ------------ ------------
Total redeemable convertible preferred
stock....................................... 15,282,692 15,282,692 --
------------ ------------ ------------
Common stock and other stockholders' equity
(deficit):
Common stock, $.01 par value: 20,000,000 shares
authorized actual and pro forma, 100,000,000
shares authorized pro forma as adjusted;
4,568,412 shares issued and outstanding
actual, 5,068,412 shares issued and
outstanding pro forma, and 16,348,968 shares
issued and outstanding pro forma as
adjusted...................................... 45,684 50,684 163,490
Additional paid-in capital.......................... 21,135,729 25,630,729 73,288,615
Accumulated deficit................................. (29,320,470) (29,320,470) (29,827,206)
Deferred compensation............................... (1,798,415) (1,798,415) (1,798,415)
------------ ------------ ------------
Total common stock and other stockholders'
equity (deficit)............................ (9,937,472) (5,437,472) 41,826,484
------------ ------------ ------------
Total capitalization.......................... $ 7,200,629 $ 11,700,629 $ 42,188,629
============ ============ ============
</TABLE>
28
<PAGE>
DILUTION
The pro forma net tangible book value of HealthGate as of September 30, 1999
was $(2,014,000), or $(.16) per share of common stock. Pro forma net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding after
giving effect to the issuance of 500,000 shares of common stock to Snap in
November 1999 and to the conversion of all outstanding preferred stock into
7,530,556 shares of common stock upon the closing of the offering.
After giving effect to the sale of 3,750,000 shares of common stock we are
offering at an assumed initial public offering price of $10.00 per share and
after deducting estimated underwriting discounts and commissions and offering
expenses, HealthGate's pro forma net tangible book value as of September 30,
1999 would have been approximately $30.0 million, or $1.83 per share. This
represents an immediate increase in pro forma net tangible book value of $1.99
per share to existing stockholders and an immediate dilution of $8.17 per share
to new investors purchasing shares of common stock in the offering. The
following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma net tangible book value per share at
September 30, 1999...................................... $(.16)
Increase attributable to the offering..................... 1.99
-----
Pro forma net tangible book value per share after the
offering................................................... 1.83
------
Net tangible book value dilution per share to new investors
in the offering............................................ $ 8.17
======
</TABLE>
The following table summarizes, as of September 30, 1999, on the pro forma
basis described above, the total number of shares and consideration paid to
HealthGate and the average price per share paid by the existing stockholders and
by new investors purchasing shares of common stock in this offering at an
assumed initial public offering price of $10.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders...................... 12,598,968 77.1% $17,219,351 31.5% $ 1.37
New Investors.............................. 3,750,000 22.9% 37,500,000 68.5% 10.00
---------- ----- ----------- ----- ------
Totals............................... 16,348,968 100.0% $54,719,351 100.0% $ 3.35
========== ===== =========== ===== ======
</TABLE>
This discussion and table assumes no exercise of options outstanding under
HealthGate's stock option plans. As of November 19, 1999, there were options
outstanding to purchase a total of 2,610,684 shares of common stock at a
weighted average exercise price of $4.31 per share. As of November 19, 1999,
there were outstanding warrants to purchase 477,546 shares of our common stock
with a weighted average exercise price of $.13 per share, a warrant to purchase
1,189,800 shares of our common stock with an exercise price of $9.49 per share
(subject to adjustment), and a warrant to purchase 1,941,035 shares of our
common stock with an exercise price per share equal to the initial public
offering price (subject to adjustment). To the extent that any of these options
or warrants are exercised, there will be further dilution to new investors.
29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with our financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this prospectus. The consolidated statement
of operations data for the years ended December 31, 1996, 1997 and 1998 and the
consolidated balance sheet data as of December 31, 1997 and 1998, are derived
from, and qualified by reference to, our audited financial statements included
elsewhere in this prospectus. The consolidated statement of operations data for
the period from inception (February 8, 1994) through December 31, 1994 and for
year ended December 31, 1995, and the consolidated balance sheet data as of
December 31, 1994, 1995 and 1996 are derived from our audited financial
statements that do not appear in this prospectus. The selected financial data as
of September 30, 1999, and for the nine months ended September 30, 1998 and
1999, are derived from unaudited financial statements included elsewhere in this
prospectus. In the opinion of management, the unaudited financial statements
have been prepared on a basis consistent with the audited financial statements
which appear elsewhere in this prospectus. The historical results are not
necessarily indicative of the operating results to be expected in the future.
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.
30
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 8, 1994) (UNAUDITED)
THROUGH NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------ ----------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
------------------ -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenue................. $ -- $ 1 $ 408 $ 1,285 $ 2,434 $ 1,845 $ 1,736
------ ------ ------- ------- ------- ------- --------
Cost and expenses:
Cost of revenue............ -- 15 492 912 1,181 822 1,446
Research and development... 12 447 980 891 1,450 897 3,053
Sales and marketing........ -- 98 1,080 1,496 1,414 1,033 5,718
General and
administrative........... 27 252 568 521 930 672 1,667
------ ------ ------- ------- ------- ------- --------
Total costs and
expenses............... 39 812 3,120 3,820 4,975 3,424 11,884
------ ------ ------- ------- ------- ------- --------
Loss from operations.......... (39) (811) (2,712) (2,535) (2,541) (1,579) (10,148)
------ ------ ------- ------- ------- ------- --------
Interest and other expense.... (--) (4) (14) (6) (337) (182) (318)
------ ------ ------- ------- ------- ------- --------
Net loss...................... (39) (815) (2,726) (2,541) (2,878) (1,761) (10,466)
Preferred stock dividends and
accretion of preferred stock
to redemption value......... (--) (65) (264) (540) (594) (446) (8,393)
------ ------ ------- ------- ------- ------- --------
Net loss attributable to
common stockholders......... $ (39) $ (880) $(2,990) $(3,081) $(3,472) $(2,207) $(18,859)
====== ====== ======= ======= ======= ======= ========
Basic and diluted net loss per
share attributable to common
stockholders................ $ (.01) $ (.20) $ (.66) $ (.68) $ (.76) $ (.49) $ (4.14)
Shares used in computing basic
and diluted net loss per
share attributable to common
stockholders................ 4,011 4,300 4,543 4,543 4,548 4,547 4,559
Unaudited pro forma basic and
diluted net loss per
share....................... $ (.31) $ (.95)
Shares used in computing
unaudited pro forma basic
and diluted net loss per
share....................... 9,220 10,968
</TABLE>
31
<PAGE>
The following table contains a summary of our balance sheet:
- on an actual basis at December 31, 1994, 1995, 1996, 1997 and 1998 and
September 30, 1999;
- on a pro forma basis at September 30, 1999 to reflect the issuance of
500,000 shares of common stock to Snap in November 1999; and
- on a pro forma as adjusted basis at September 30, 1999 to additionally
reflect (a) the sale of 3,750,000 shares of common stock offered hereby at
an assumed initial public offering price per share of $10.00, (b) the
conversion of all outstanding shares of redeemable convertible preferred
stock into 7,530,556 shares of common stock, and (c) the repayment of a
long-term note payable of $2,000,000 with proceeds from this offering.
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30, 1999
---------------------------------------------------- ----------------------------------
PRO FORMA
1994 1995 1996 1997 1998 ACTUAL PRO FORMA AS ADJUSTED
-------- -------- -------- -------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents.... $ 4 $ 105 $ 1,156 $ 29 $ 961 $ 808 $ 808 $31,296
Working capital (deficit).... (2) (216) 585 (867) -- (3,088) (3,088) 27,400
Total assets................. 4 612 1,791 781 2,371 12,093 16,593 47,081
Long-term debt and capital
lease obligations.......... -- 172 79 17 3,655 1,855 1,855 362
Redeemable convertible
preferred stock............ -- 845 4,763 6,295 6,889 15,283 15,283 --
Common stock and other
stockholders' equity
(deficit).................. (2) (757) (3,740) (6,821) (9,735) (9,937) (5,437) 41,826
</TABLE>
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES WHICH APPEAR ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS,
PARTICULARLY UNDER THE HEADING "RISK FACTORS."
OVERVIEW
HealthGate is an Internet provider of reliable, objective, comprehensive and
up-to-date healthcare information helping physicians and other healthcare
professionals, patients and health-conscious consumers make better informed
healthcare decisions. We have aggregated and developed what we believe are the
most extensive health and medical libraries of any online provider, currently
totaling approximately 27 million different pages of health and medical
information from approximately 300 sources. This content includes
internationally recognized journals, authoritative government sources and
extensive bibliographic databases representing 27 independent content providers.
We adapt and integrate this diverse content through our internally developed
software programs, which include our proprietary ReADER-Registered Trademark-
natural language searching software, in order to facilitate search and retrieval
of relevant information. In addition, we use our technology to provide text
conversion and Web site hosting services for traditional print publishers,
thereby increasing the online healthcare resources accessible through our
content libraries.
We distribute our content through a network of proprietary and affiliated
Web sites that comprise the HealthGate Network. The HealthGate Network includes
(1) our own Web sites, www.healthgate.com and www.bewell.com in the United
States and www.healthgate.co.uk in the United Kingdom; (2) customized,
co-branded CHOICE Web sites for institutions, principally hospitals and
businesses, which carry both HealthGate's and the entity's name, are designed as
a seamless component of the entity's own Web site and, for certain institutions
and businesses, complement the healthcare information, products and services
they already offer or sell through their own Web sites; and (3) other co-branded
third party Web sites to which we syndicate our proprietary and licensed
content, including the Health Channel of www.snap.com for which we will be
designated as an anchor tenant provider of health content following the
completion of this offering.
REVENUE
We derive revenue primarily from (1) services and (2) online advertising,
sponsorship and e-commerce.
SERVICES REVENUE
To date, services revenue has been derived principally from development,
implementation and hosting fees associated with our activePress service and, to
a lesser extent, from syndicating our content to third party Web sites. Revenue
from activePress services and content syndication is recognized ratably over the
terms of the agreements which generally range from one to two years.
We commercially introduced our CHOICE Web site product in early 1999 and as
of September 30, 1999 had delivered 39 CHOICE Web sites to enterprise clients.
Under our CHOICE Web site arrangements, we are generally paid an upfront fee
for developing, implementing and hosting a CHOICE Web site for our customer. In
addition, the arrangements typically provide the opportunity for us to place
third party advertising and sponsorship on the customer's CHOICE Web site. We
collect the fees for this advertising and sponsorship from the third
33
<PAGE>
party and pay a commission to the customer. However, as part of our agreements
with 14 of our initial CHOICE customers, we guaranteed that we will pay minimum
advertising and sponsorship commissions to these customers in amounts
approximately equal to the fees paid to us by the customer for the initial term
of their CHOICE agreements and, in a few cases, in amounts that exceed those
fees. Once these customers have paid the upfront fee to us or, if applicable,
our authorized reseller, we are obligated to pay these guaranteed commissions to
the customer, generally on a quarterly basis, regardless of whether or not we
have actually sold any advertising or sponsorship on the CHOICE Web site. We
have entered into these types of arrangements for promotional purposes to
establish our CHOICE Web site product but beginning in July 1999 have
discontinued the use of these arrangements as a standard practice.
Revenue from fees received for CHOICE Web site development, implementation
and hosting is recognized ratably over the term of the underlying agreement
between us, our CHOICE customer and, if applicable, our authorized reseller,
which generally ranges from one to three years. For those arrangements in which
we have guaranteed advertising and sponsorship commissions, we do not recognize
revenue unless the guaranteed commissions are less than the fees paid to us.
Rather, we recognize payments made to us as a customer deposit. Any excess of
fees paid to us over guaranteed commissions is recognized as revenue ratably
over the term of the agreement. If the advertising and sponsorship commissions
that we guarantee to the customer exceed the fees paid to us, we recognize the
excess as expense upon signing the agreement. For arrangements in which we sell
through a reseller, we do not recognize any revenue until an agreement between
us, our CHOICE customer and our authorized reseller has been finalized and the
CHOICE Web site has been delivered. As we sell advertising or sponsorship on
these CHOICE Web sites to third parties, we will recognize advertising revenue
from these CHOICE Web sites. As of September 30, 1999, we have sold advertising
or sponsorship on only five CHOICE Web sites. Payments made to customers under
advertising and sponsorship commission guarantees are recorded as reductions of
the related customer deposit.
Of the 39 CHOICE Web sites that we had delivered as of September 30, 1999,
we have arrangements with 14 of these CHOICE customers under which we guarantee
to them advertising and sponsorship commissions.
ONLINE ADVERTISING, SPONSORSHIP AND E-COMMERCE REVENUE
Advertising and sponsorship revenue includes revenue from banner advertising
and sponsorship of discrete portions of our content libraries. Advertising
revenue is derived principally from short-term advertising contracts in which we
typically guarantee a minimum number of impressions to be delivered to users
over a specified period of time for a fixed fee. Advertising revenue is
recognized in the period in which the advertisement is displayed at the lesser
of the ratio of impressions delivered over total guaranteed impressions or on a
straight line basis over the term of the contract, provided that we do not have
any significant obligations remaining. To the extent that minimum guaranteed
impressions are not met, we defer recognition of the corresponding revenue until
the guaranteed impressions are delivered. We use NetGravity's AdServer software
to track banner advertising impressions and issue a NetGravity Traffic Report
weekly to our advertisers. Our advertising statistics are audited to assure
accuracy by the Audit Bureau of Circulation Interactive, an independent audit
bureau in the advertising industry. Sponsorship revenue is derived principally
from contracts ranging from one to six months. Sponsorships are designed to
support broad marketing objectives, including brand promotion, awareness,
product introductions, online research and the integration of advertising with
editorial content. Sponsorship revenue is generally recognized ratably over the
terms of the applicable agreements.
Advertising and sponsorship revenue also includes barter revenue, which
represents an exchange by us of advertising space on our own Web sites for
reciprocal advertising space on other Web sites.
34
<PAGE>
Revenue from barter transactions is recognized during the period in which we
display the advertisements. Barter transactions are recorded at the estimated
fair value of the advertisements provided, unless the fair value of the
advertising services received is more evident. Barter expenses are recognized
when our advertisements are run on the reciprocal Web sites, which is typically
in the same period during which the advertisements are run on our own Web sites.
Barter expenses are included in sales and marketing expenses. These barter
transactions have no impact on our cash flows and, typically, no significant
impact on our results of operations. We anticipate that barter revenue will
continue to decrease as a percentage of total revenue in the future as we
continue to focus on selling advertising for cash.
E-commerce revenue has been derived principally from individual user online
subscriptions and from transaction fees for fee-based access to portions of our
own Web sites. Revenue from user subscriptions is recognized ratably over the
subscription period, and revenue from transaction-based fees is recognized when
the related service is provided. E-commerce revenue declined during 1998 and in
the first six months of 1999 as we elected to provide more content for free
through our own Web sites in order to attract additional users to our own Web
sites. However, we expect that transactional fees associated with our providing
full-text journal articles from our activePress clients, including additional
Blackwell Science journals and the NEW ENGLAND JOURNAL OF MEDICINE, which is
expected to be fully operational by the end of 1999, will result in an increase
in e-commerce revenue beginning at the end of 1999. Additionally, we are
exploring other e-commerce opportunities to offer products and services to our
users.
Our business model is still in an emerging stage, and revenue and income
potential from our business is unproven. Our limited operating history makes an
evaluation of our business and our prospects difficult. Investors should not use
our past results as a basis to predict future performance. We have incurred net
losses since inception and had an accumulated deficit of approximately
$10.5 million as of December 31, 1998 and $29.3 million as of September 30,
1999. We intend to significantly increase our sales and marketing efforts and
expenditures. We also intend to continue to invest in content development and
licensing and advertising and brand promotion. As a result, we expect to incur
additional losses for the foreseeable future, and we can not assure investors
that we will ever achieve significant revenue or profitability or, if either
significant revenue or profitability is achieved, that we will be able to
sustain them. See "Risk Factors--We have a limited operating history and have
recently introduced new services which makes an evaluation of our business based
on past operating results difficult." Also, see "Risk Factors--We have a history
of losses, we expect that losses will continue for the foreseeable future and
our independent accountants have expressed substantial doubt about our ability
to continue as a going concern."
NON-CASH EXPENSES
We recorded deferred compensation of $2,307,000 in the nine months ended
September 30, 1999, representing the difference between the exercise price of
stock options granted and the fair market value of the underlying common stock
at the date of grant. The difference is recorded as a reduction of stockholders'
equity and is being amortized over the vesting period of the applicable options,
typically three years. Of the total deferred compensation amount, $509,000 had
been amortized as of September 30, 1999. The amortization of deferred
compensation is recorded as an operating expense. We currently expect to
amortize the following remaining amounts of deferred compensation as of
September 30, 1999 in the periods indicated:
<TABLE>
<S> <C>
October 1, 1999--December 31, 1999.......................... $193,000
January 1, 2000--December 31, 2000.......................... 769,000
January 1, 2001--December 31, 2001.......................... 769,000
January 1, 2002--June 30, 2002.............................. 67,000
</TABLE>
35
<PAGE>
In June 1999, we entered into a development and distribution agreement with
GE Medical Systems. Under the terms of this agreement, GE Medical Systems may
sell our standard CHOICE Web site product and GE Medical Systems branded
enhanced versions of our CHOICE Web site product through its worldwide sales
force into its worldwide customer base of hospitals and other patient care
facilities. We believe that this agreement will benefit us through the
association of the GE Medical Systems name with HealthGate in general, and our
CHOICE product in particular, and through the efforts of GE Medical Systems to
distribute both our standard CHOICE product and the GE Medical Systems enhanced
versions of our CHOICE product. Therefore, in connection with this agreement, in
June 1999, we issued a warrant to General Electric Company for the purchase of
up to 1,189,800 shares of our common stock. The warrant has a term of five years
and an exercise price of $9.49 per share (subject to potential adjustments for
certain equity offerings subsequent to the warrant's issuance and other events)
and is immediately exercisable. The fair value of this warrant was determined to
be $10.3 million using the Black-Scholes option pricing model. This amount has
been recorded as marketing and distribution rights, and will be amortized as
sales and marketing expense on a straight-line basis over the one year
contractual term of the related development and distribution agreement. During
the nine months ended September 30, 1999, we recorded amortization expense of
$2,941,000. In the event the exercise price of this warrant is adjusted, its
fair value will increase. See "Business--Strategic Affiliations and
Relationships--Marketing and Distribution."
In November 1999, we entered into a three-year marketing and reseller
agreement with Columbia Information Systems under which Columbia Information
Systems agreed to endorse us as the preferred provider of patient and consumer
oriented health content for Web sites owned or operated by Columbia/HCA
hospitals and affiliates. We believe that this agreement will benefit us,
generally, through the association of the Columbia Information Systems and
Columbia/HCA names with HealthGate and through their performance of the specific
terms described in the Business section under the heading "Strategic
Affiliations and Relationships--Marketing and Distribution--Columbia Information
Systems, Inc." Therefore, in connection with this agreement, we issued a warrant
to CIS Holdings, Inc. for the purchase of up to 1,941,035 shares of our common
stock. The warrant has a term of three years, an exercise price per share equal
to the initial public offering price (subject to adjustment in certain
circumstances) and is exercisable on the earlier of the consummation of this
offering, certain private placements of securities, a sale of HealthGate or
March 31, 2000. We expect to record the fair value of this warrant as marketing
and distribution rights, and amortize the value as a sales and marketing expense
on a straight-line basis over the three-year contractual term of the related
agreement. Based on the currently anticipated offering price range, we expect
the value of this warrant to range from approximately $10.7 million to $13.1
million. If the initial public offering price is above the currently anticipated
offering price range, this value will be higher. See "Business--Strategic
Affiliations and Relationships--Marketing and Distribution."
In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. Under this agreement, following HealthGate's
payments of fees to Snap, as described below, Snap will provide various services
to us to promote our name, our www.healthgate.com Web site, our co-branded
CHOICE Web sites and the products and services we offer. In exchange for the
services provided to us by Snap during the first year of the agreement, we have
agreed to pay Snap a minimum fee of $10.0 million and 500,000 shares of our
common stock, plus a $250,000 production and content integration fee. We have
agreed to pay Snap minimum fees of $15.0 million in each of the second and third
years of the agreement for the services provided to us by Snap in those years.
We have also agreed to pay Snap up to an additional $5.0 million in the first
year, $10.0 million in the second year and $15.0 million in the third year of
the agreement if Snap delivers more than a minimum number of click-throughs to
the co-branded Snap/HealthGate Web site in the respective years. We expect to
amortize the fair value of 250,000 shares of our common stock as a sales and
marketing expense on a straight-line basis over the first year of the related
agreement and to recognize the fair value of the other 250,000 shares based on
the delivery of advertising impressions in the first year of
36
<PAGE>
the agreement. The value of these shares was $4.5 million at the time of
issuance. However, the final value of these shares will be determined when Snap
and Xoom have combined with certain assets of NBC to form NBC Internet, which
combination is presently expected to occur prior to December 31, 1999. See
"Business--Strategic Affiliations and Relationships--Marketing and
Distribution."
RESTATEMENT OF 1999 FIRST QUARTER REVENUE
During the three months ended March 31, 1999, we recognized services revenue
of $82,000 related to two CHOICE Web site agreements. During the second quarter
of 1999, it was learned that certain material terms related to advertising and
sponsorship commissions guaranteed to the customers of these sites had not been
finalized at March 31, 1999. Accordingly, we have restated our results of
operations for the three months ended March 31, 1999 to reverse the $82,000 of
services revenue related to these sites. These amounts were recorded as customer
deposits. In the opinion of management, all adjustments necessary to revise the
quarterly financial statements have been recorded. Below is a summary of our
results of operations for the three months ended March 31, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
-------------------
(UNAUDITED)
<S> <C>
AS PREVIOUSLY REPORTED:
Revenue..................................................... $ 614,805
Loss from operations........................................ (1,462,147)
Net loss.................................................... (1,620,193)
Net loss attributable to common stockholders................ (1,768,900)
Basic and diluted net loss per share attributable to common
stockholders............................................... $ (.39)
Pro forma basic and diluted net loss per share.............. $ (.18)
AS RESTATED:
Revenue..................................................... $ 532,805
Loss from operations........................................ (1,544,147)
Net loss.................................................... (1,702,193)
Net loss attributable to common stockholders................ (1,850,900)
Basic and diluted net loss per share attributable to common
stockholders............................................... $ (.41)
Pro forma basic and diluted net loss per share.............. $ (.18)
</TABLE>
We have implemented additional financial and management controls and
procedures which we believe will improve the controls surrounding the
recognition of revenues. See "Risk Factors--We have had to restate our financial
statements for the first quarter of 1999 and if we are not able to monitor and
follow our newly implemented internal controls, our business prospects and the
price of our common stock may suffer."
RESULTS OF OPERATIONS
Through December 31, 1996, we were a development stage company, and the
majority of our activities were related to development of products and services,
exploration of different sales and marketing channels, the build-up of hardware
and software infrastructure to support our www.healthgate.com Web site and the
establishment of the business, operations and financing of our company. In 1997,
1998 and the nine months ended September 30, 1999, we experienced growth in our
business and introduced new services. Therefore, while comparisons are drawn
below, in many instances meaningful conclusions cannot be drawn from them.
37
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1999 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1998
REVENUE
Total revenue was $1,736,000 for the nine months ended September 30, 1999
compared to $1,845,000 for the nine months ended September 30, 1998, a decrease
of $109,000 or 6%. Services revenue for the nine months ended September 30, 1999
increased to $1,214,000 from $1,110,000 for the nine months ended September 30,
1998, due primarily to an increase in the revenue derived from content
syndication fees. Advertising and sponsorship revenue decreased by $171,000 to
$350,000 in the nine months ended September 30, 1999 from $521,000 in the nine
months ended September 30, 1998, due primarily to a $277,000 decrease in barter
advertising arrangements for the nine months ended September 30, 1999 to $73,000
from $350,000 for the nine months ended September 30, 1998. This decrease is due
to our continued reduction in emphasis on barter arrangements and increased
focus on selling advertising for cash. Advertising paid for with cash increased
by $106,000 to $277,000 in the nine months ended September 30, 1999 from
$171,000 in the nine months ended September 30, 1998. E-commerce revenue
decreased to $172,000 in the nine months ended September 30, 1999 from $214,000
in the nine months ended September 30, 1998. This net decrease in e-commerce
revenue was due primarily to a decrease in subscription revenue resulting from a
decrease in the number of monthly subscriptions purchased by individuals. This
decrease in monthly subscriptions resulted in large part from our continued
implementation of our plan to provide more content for free through our own Web
sites in order to attract additional users to our own Web sites and generate
additional advertising revenue. In the nine months ended September 30, 1999, two
customers represented 45% of total revenue, Blackwell Science (33%) and WebMD
(12%). In the nine months ended September 30, 1998, two customers represented
62% of total revenue, Blackwell Science (44%) and WebMD (18%).
Of the 39 CHOICE Websites that we have delivered as of September 30, 1999,
we have arrangements with 14 of these CHOICE customers under which we have
guaranteed advertising and sponsorship commissions in an amount approximately
equal to the fees paid by the customer, regardless of whether we sell any
advertising or sponsorship on the customer's CHOICE Web site. For any agreements
with guarantees, we have not recognized fees paid by the customer as revenue but
as a customer deposit, up to the amount of the applicable guarantee. We entered
into this type of arrangement for promotional purposes, but have discontinued
the use of this arrangement as a standard practice. For these CHOICE customers,
we recognize as revenue the excess of the fee paid over the guarantee owed
ratably over the terms of these customers' agreements.
COSTS AND EXPENSES
COST OF REVENUE. Cost of revenue consists primarily of salaries and related
costs for personnel directly involved with providing our Web services, royalties
associated with licensed content, and related equipment and software costs. Cost
of revenue increased 76% to $1,445,000 in the nine months ended September 30,
1999 from $822,000 in the nine months ended September 30, 1998, due primarily to
higher royalty expense for more licensed content and higher depreciation costs
related to additional equipment purchases.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and related costs associated with the development and
support of our Web-based service offerings. Research and development expenses
increased 240% to $3,053,000 in the nine months ended September 30, 1999 from
$897,000 in the nine months ended September 30, 1998, due primarily to
additional salaries and related costs from the hiring of technical and
development personnel.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and related costs for sales and marketing personnel, as
well as the cost of advertising, marketing and promotional activities. Sales and
marketing expenses increased to $5,718,000 in the nine months ended
September 30, 1999 from $1,033,000 in the nine months ended September 30, 1998.
During the nine
38
<PAGE>
months ended September 30, 1999, a non-cash expense of $2,941,000 was recorded
for the amortization of a warrant to purchase 1,189,800 shares of our common
stock issued to General Electric Company in connection with a development and
distribution arrangement. The fair value of this warrant was determined using
the Black-Scholes option pricing model and is being amortized on a straight-line
basis over 12 months of the contractual arrangement. The remaining increase of
$1,744,000 in sales and marketing expenses was primarily due to additional
salaries and related costs associated with the newly hired sales and marketing
personnel, and increased advertising and brand promotion activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and related costs for executive and administrative
personnel, as well as legal, accounting and insurance costs. General and
administrative expenses increased 148% to $1,667,000 in the nine months ended
September 30, 1999 from $672,000 in the nine months ended September 30, 1998.
This increase was due primarily to salaries and related costs for newly hired
administrative personnel, higher salaries and related costs for existing
personnel and increased professional services fees. In addition, we amortized
$509,000 of the total deferred compensation relating to stock options as an
expense in the nine months ended September 30, 1999. The remaining total
deferred compensation is being amortized over the vesting period of the
individual options.
INTEREST EXPENSE, NET
Interest expense, net of interest income, increased to $323,000 in the nine
months ended September 30, 1999 from $182,000 in the nine months ended
September 30, 1998. The increase was due primarily to interest incurred on a
$2,000,000 subordinated note and an increase in interest expense associated with
capital leases. Interest expense for the nine months ended September 30, 1999
also included debt discount and issuance cost amortization totaling $64,000
related to the subordinated note.
INCOME TAXES
We have incurred significant losses for all periods from inception through
September 30, 1999. A valuation allowance has been recorded for the entire
deferred tax asset as a result of uncertainties regarding the utilization of the
asset due to HealthGate's lack of earnings history.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 WITH YEAR ENDED DECEMBER 31, 1997
REVENUE
Total revenue was $2,434,000 in 1998 compared to $1,285,000 in 1997, an
increase of $1,149,000 or 89%. Services revenue in 1998 was $1,486,000, which
was comprised primarily of revenue from our activePress arrangement with
Blackwell Science, one of our stockholders, and revenue from content syndication
arrangements. Services revenue in 1997 was not significant. Advertising and
sponsorship revenue decreased to $665,000 in 1998 from $863,000 in 1997, due
primarily to a decrease in revenue under barter advertising arrangements to
$436,000 in 1998 from $607,000 in 1997. In addition, advertising and sponsorship
revenue derived from cash sales decreased to $229,000 in 1998 from $256,000 in
1997, due to our editorial decision to eliminate sponsor-provided content areas.
During 1998, we began to place less emphasis on barter arrangements and focus
more on selling advertising for cash. We anticipate that barter revenue will
continue to decrease as a percentage of total revenue in the future. E-commerce
revenue decreased to $283,000 in 1998 from $333,000 in 1997. This decrease in
e-commerce revenue was due primarily to a decrease of $24,000 in transaction
based fees resulting from a decrease in the number of full text journal
transactions and due to a decrease of $26,000 in subscription revenue
attributable to a decrease in the number of subscriptions. During this time, we
elected to provide more content for free through our own Web sites in order to
generate additional advertising revenue by attracting additional users to our
own Web sites. In 1998, two customers
39
<PAGE>
represented 62% of total revenue, Blackwell Science (44%) and WebMD (18%). In
1997, two customers represented 37% of total revenue, Lycos (19%) and Blackwell
Science (18%).
COSTS AND EXPENSES
COST OF REVENUE. Cost of revenue consists primarily of salaries and related
costs for personnel directly involved with providing our Web services, royalties
associated with licensed content, and related equipment and software costs. Cost
of revenue increased 29% to $1,181,000 in 1998 from $912,000 in 1997. The
increase was primarily attributable to higher royalty expenses for licensed
content.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and related costs associated with the development and
support of our Web-based service offerings. Research and development expenses
increased 63% to $1,450,000 in 1998 from $891,000 in 1997, due primarily to
salaries associated with newly hired development personnel and related
recruiting costs. We anticipate that research and development expenses will
continue to increase as HealthGate develops and enhances its Web-based service
offerings, and hires additional technical and development personnel.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
employee salaries, commissions and related costs, as well as the cost of
advertising, marketing and promotional activities. Sales and marketing expenses
decreased 5% to $1,414,000 in 1998 from $1,496,000 in 1997, due primarily to a
corresponding decrease in expenses under barter advertising arrangements to
$418,000 in 1998 from $617,000 in 1997. The decrease in barter advertising
expenses was the result of our entering fewer barter advertising arrangements in
1998. The decrease in barter advertising expenses was partially offset by
increased salaries and related costs associated with newly hired sales and
marketing staff. We expect that sales and marketing expenses will increase as we
continue to expand our sales, marketing and advertising activities and hire
additional personnel for our sales and marketing force.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and related costs for executive and administrative
personnel, as well as legal, accounting and insurance costs. General and
administrative expenses increased 78% to $929,000 in 1998 from $521,000 in 1997.
The increase was due primarily to salaries and related costs associated with
newly hired administrative personnel, higher salaries and related costs
attributable to existing personnel and increased fees for professional services.
We expect that general and administrative expenses will continue to grow as we
increase our staffing to support expanded operations and facilities, and incur
expenses related to being a public company.
INTEREST EXPENSE, NET
Interest expense, net of interest income, increased to $327,000 in 1998 from
$6,000 in 1997. The increase was due primarily to interest incurred on a
$2,000,000 convertible note payable to Blackwell Science and a $2,000,000
subordinated note, both issued in 1998, and to an increase in interest expense
associated with capital leases. Interest expense in 1998 includes debt discount
and debt issuance cost amortization totaling $54,000 related to the subordinated
note.
INCOME TAXES
As of December 31, 1998, HealthGate generated a net operating loss
carryforward of $8,492,000. HealthGate's net operating loss carryforwards expire
beginning in 2010. Certain future changes in the share ownership of HealthGate,
as defined in the Tax Reform Act of 1996, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the utilization of the asset
due to HealthGate's lack of earnings history.
40
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 WITH YEAR ENDED DECEMBER 31, 1996
REVENUE
Total revenue was $1,285,000 in 1997 compared to $408,000 in 1996, an
increase of $877,000 or 215%. The increase in total revenue was due primarily to
growth in advertising and sponsorship revenue, and to a lesser extent, an
increase in e-commerce revenue resulting from a higher volume of fee-based
transactions on our Web sites. Included in total revenue is revenue from barter
advertising transactions, which increased to $607,000 in 1997 from $125,000 in
1996. In 1997, two customers represented 37% of total revenue, Lycos (19%) and
Blackwell Science (18%). In 1996, two customers represented 26% of total
revenue, Infoseek (15%) and Lycos (11%); additionally, a single research and
development arrangement represented 21% of total revenue.
COSTS AND EXPENSES
COST OF REVENUE. Cost of revenue increased 85% to $912,000 in 1997 from
$492,000 in 1996. The increase in cost of revenue resulted primarily from
expanding our infrastructure to support increased activity on our Web sites, and
included higher salary and related costs, increased royalty costs associated
with licensed content and increased costs related to equipment and software.
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 9% to
$891,000 in 1997 from $980,000 in 1996. The decrease was due primarily to a
reduction in costs associated with outside engineers and consultants, as we
realized cost savings by transitioning most development work to our own
employees. This decrease was partially offset by salaries associated with newly
hired development personnel and related costs.
SALES AND MARKETING. Sales and marketing expenses increased 39% to
$1,496,000 in 1997 from $1,080,000 in 1996. The increase was due primarily to
higher advertising costs, and to salaries and related costs associated with new
staff hired to support our expanded sales and marketing efforts. Barter
advertising expenses included in total sales and marketing expenses increased to
$617,000 in 1997 from $115,000 in 1996, as a result of increased barter
advertising arrangements in 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
8% to $521,000 in 1997 from $568,000 in 1996. This decrease was due primarily to
reduced professional services costs, partially offset by increased salaries and
related costs associated with administrative personnel.
INTEREST EXPENSE, NET
Interest expense, net of interest income, decreased to $6,000 in 1997 from
$14,000 in 1996, due primarily to increased interest income earned on higher
average cash balances invested.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily by the private
placement of debt and equity securities. In the period 1994 through 1997, we
received net proceeds of $4,434,000 from the issuance of several series of
redeemable convertible preferred stock. During 1998, we received net proceeds of
$3,929,000 through the issuance of a $2,000,000 convertible note payable to
Blackwell Science and a $2,000,000 subordinated note with detachable warrants.
The $2,000,000 subordinated note, which we plan to repay with a portion of the
proceeds of this offering, is secured by substantially all of our tangible and
intangible assets. We have generally financed computer and related hardware
needs through equipment lease financing arrangements. In August 1999, we entered
into an equipment leasing arrangement for up to $500,000 in financing for
computer equipment and furniture and fixtures and as of September 30, 1999, we
had entered into leases for $388,000 under this arrangement. As of
September 30, 1999, we had approximately $808,000 of cash and cash equivalents.
41
<PAGE>
In April 1999, we issued 546,028 shares of newly authorized Series E
redeemable convertible preferred stock for gross proceeds of $6,250,000. In
connection with the issuance of the Series E preferred stock, we paid $300,000
of fees and expenses to a placement agent, paid $111,000 of other issuance costs
and issued to the placement agent warrants to purchase 21,654 shares of our
common stock at an exercise price of $2.89 per share with an ascribed value of
$200,000. The placement fee, other issuance costs and warrant value was
reflected as a reduction of the proceeds from the Series E preferred stock
issuance. An additional 174,729 shares of Series E preferred stock were issued
upon conversion of the $2,000,000 convertible note payable to Blackwell Science.
The Series E preferred stock ranks senior in liquidation to the other classes of
preferred stock, and has certain veto rights. The Series E preferred stock
accrues cumulative annual dividends at 7% of its liquidation value (initially
$8,250,000). The dividends are compounded annually and, unless paid, are added
to the Series E preferred stock liquidation value. Concurrently with the closing
of this offering, we plan to pay in cash all accrued dividends on the Series E
preferred stock. At September 30, 1999, accrued dividends on the Series E
preferred stock totaled approximately $269,000. The Series E preferred stock is
convertible into a number of shares of common stock determined by dividing the
liquidation value by a conversion price per share of $2.89. The conversion price
is to be adjusted for certain dilutive events.
At the time of issuance, each share of Series E preferred stock was
convertible into one share of common stock, which represents a discount from the
fair value of common stock on the date of the Series E issuance. The value
attributable to this conversion right represents an incremental yield, or a
beneficial conversion feature, which was recognized as a return to the preferred
stockholders. This amount, equal to the proceeds from the Series E offering, was
reported as accretion of preferred stock to redemption value of $7,639,000 in
the consolidated statement of operations in the period ended September 30, 1999
and represents a non-cash charge in the determination of net loss attributable
to common stockholders.
For the nine months ended September 30, 1999, the cash used in operations
was $5,361,000. Cash used during this period was primarily due to the net loss
of $10,466,000, offset partially by depreciation and amortization of $3,408,000
(which includes a non-cash warrant expense of $2,941,000), non-cash compensation
expense of $509,000, an increase of $376,000 in accounts receivable and unbilled
accounts receivable, an increase of $21,000 in prepaid expenses and other
current assets, an increase of $1,462,000 in deferred offering costs related to
this offering, an increase of $128,000 in other assets, an increase of
$1,401,000 in accounts payable, an increase of $229,000 in accrued payroll, an
increase of $555,000 in customer deposits for CHOICE Web sites, an increase of
$403,000 in other accrued expenses (which consists primarily of $187,000 for
advertising and sponsorship commitments, $138,000 in professional fees, and
$78,000 in real property lease obligations) and an increase of $587,000 in
deferred revenue. For the nine months ended September 30, 1998, the cash used in
operations was $1,813,000. Cash used during this period was primarily due to the
net loss of $1,761,000, offset partially by depreciation and amortization of
$289,000, a net increase of $77,000 in accounts receivable and unbilled accounts
receivable, an increase of $56,000 in prepaid expenses and other current assets,
a decrease in other assets of $17,000, a decrease of $240,000 in accounts
payable, an increase of $170,000 in accrued payroll, and a decrease of $151,000
in deferred revenue. Increases in operating assets and liabilities were
primarily due to the growth of our business and operations during these periods.
Cash used for investing activities consisted primarily of purchases of
property and equipment of $410,000 and $235,000, respectively, during the nine
months ended September 30, 1999 and 1998. We also entered into capital leases
for computer equipment totaling $523,000 and $503,000 during the nine months
ended September 30, 1999 and 1998, respectively.
Cash provided by financing activities during the nine months ended
September 30, 1999 consisted primarily of net proceeds received from the
issuance of the Series E redeemable convertible preferred stock and common stock
of $5,848,000 partially offset by payments for capital lease obligations of
$230,000. During the nine months ended September 30, 1998, we received net
proceeds from the
42
<PAGE>
issuance of a subordinated note payable and warrants of $3,929,000 which was
partially offset by payments for capital lease obligations of $177,000. At
September 30, 1999, we had outstanding commitments under capital leases of
$890,000 and under operating leases for equipment and office space of $568,000.
In addition, future minimum payments under content license agreements totaled
$1,609,000 at September 30, 1999. We expect our commitments under content
licensing to increase as we expand our content libraries.
In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. In exchange for the services provided to us by
Snap during the first year of the agreement, we have agreed to pay Snap a
minimum fee of $10.0 million and 500,000 shares of our common stock, plus a
$250,000 production and content integration fee. The $10.3 million cash
component of the first year minimum fee due to Snap is payable within thirty
days after the registration statement filed with the SEC in connection with this
offering is declared effective by the SEC. We have agreed to pay Snap minimum
fees of $15.0 million in each of the second and third years of the agreement for
the services provided to us by Snap in those years. We have also agreed to pay
Snap up to an additional $5.0 million in the first year, $10.0 million in the
second year and $15.0 million in the third year of the agreement if Snap
delivers more than certain minimum click-throughs to the co-branded
Snap/HealthGate Web site in the respective years. If Snap terminates the
agreement based on certain material breaches caused by us, we have agreed to
continue to pay Snap 55% of all fees payable by us under the agreement for the
remaining term of the agreement. If Snap and Xoom have not combined with certain
assets of NBC to form NBC Internet on or before March 31, 2000, we may terminate
the agreement and Snap must return to us all payments, including the common
stock we have issued to them as partial payment for the first year minimum fee,
made prior to the termination.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least twelve months
after the date of this prospectus. However, we may need to raise additional
funds within the next twelve months to further expand sales and marketing,
develop new or enhanced products and services, respond to competitive pressures,
acquire or invest in complementary businesses or take advantage of unanticipated
opportunities. We can not guarantee that additional funding, if needed, will be
available on terms acceptable to us, or at all.
We have received a report from our independent accountants containing an
explanatory paragraph stating that our historical losses and negative cash flows
from operations raise substantial doubt about our ability to continue as a going
concern because, as of the date they rendered their opinion, we did not have
access to sufficient committed capital to meet our projected operating needs
through at least September 30, 2000. The proceeds of this offering would
materially exceed the cash required for us to continue operations through at
least September 30, 2000. If this offering is not successful, we intend to
obtain alternative financing through the private placement of debt or equity and
reduce expenditures to minimize our requirements for additional financial
resources. We believe that, if this offering is not completed, we will be able
to successfully execute our alternative plans.
YEAR 2000 COMPLIANCE READINESS DISCLOSURE
IMPACT OF THE YEAR 2000
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates.
As a result, many companies' software and computer systems may need to be
upgraded or replaced to comply with these Year 2000 requirements. Our business
is dependent on the operation of numerous systems that could potentially be
impacted by Year 2000 related problems. Those systems include, among others:
hardware and software systems used by us to deliver services to our customers,
including our proprietary software systems as well as hardware and software
supplied by third parties; communications networks, such as
43
<PAGE>
the Internet and private intranets, which we depend on to provide content to our
customers; internal systems of our customers and suppliers; hardware and
software we use internally to manage our business; and non-information
technology systems and services we use in our business such as the
telecommunications and building systems.
STATE OF READINESS
COSTS. To date, we have not incurred material costs in identifying or
evaluating Year 2000 compliance issues, although consideration of the Year 2000
question is an integral part of all our on-going developmental and operational
reviews. Most of our expenses to date have related to and are expected to
continue to relate to the operating costs associated with time spent by
employees in the evaluation process and Year 2000 compliance testing generally.
We presently anticipate that future expenditures will be less than $200,000. As
a young company, we purchased or developed new hardware and software at a time
when our suppliers and developers were sensitive to issues surrounding the
Year 2000 problem.
RISKS. We have completed internal assessments of our Year 2000 readiness,
with emphasis on our operating and administrative systems and the proprietary
software systems and third party software and hardware we use to deliver
services to our customers and users, and are not aware of any Year 2000 problems
that could reasonably be expected to have a material adverse effect on our
business. Our assessment plans have consisted of internal testing of our
systems, contacting third party vendors of hardware, software and services to us
and to our users, assessing and implementing repairs or replacements as required
and developing contingency plans in the event of Year 2000 problems arising as
the year ends. HealthGate has contacted its major vendors for software, hardware
and related services. These vendors have indicated that they are Year 2000
compliant. However, we can not guarantee that we have identified or will
identify all Year 2000 compliance problems in our infrastructure that may
require substantial revisions and fixes. Also, despite our testing and reviews,
we may experience Year 2000 problems related to the third party software,
hardware or other systems on which we are reliant, and any of these problems may
be time consuming or expensive to fix. We have given a warranty in our
activePress agreements with Blackwell Science and our CHOICE Web site agreement
with Columbia Information Systems that our applications and services are Year
2000 compliant. If our applications and services fail to be Year 2000 compliant,
these agreements could be terminated or we could be liable for damages, either
of which could have a material adverse effect on our business. In addition, the
purchasing patterns of customers or potential customers may be affected by Year
2000 questions, and any significant delays in making purchasing decisions could
either directly or indirectly affect us.
In addition, we cannot be assured that the governmental agencies, utility
companies, Internet access companies, third party providers and others outside
our control will be Year 2000 compliant. The failure by these entities to be
Year 2000 compliant could result in a systemic failure beyond our control. We
believe that the most reasonably likely worst case scenario would result in a
prolonged Internet, telecommunications or electrical failure which would affect
our ability to meet our commitments to our customers or prevent our users from
accessing our Web sites or services, either of which, in turn, could have a
material adverse effect on our business, results of operations and financial
condition.
CONTINGENCY PLAN
We have been engaged in an ongoing assessment of our readiness and have
developed contingency plans to address Year 2000 problems that may arise. The
results of our analyses and the responses received from third party vendors and
service providers were taken into account in developing these plans.
44
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
We adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," effective January 1, 1998. This statement
requires a full set of general purpose financial statements to be expanded to
include the reporting of "comprehensive income." Comprehensive income is
comprised of two components, net income and other comprehensive income. During
the years ended December 31, 1996, 1997 and 1998, we had no items qualifying as
other comprehensive income; accordingly, the adoption of SFAS No. 130 had no
impact on our financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise." This statement changes the way public business enterprises report
segment information, including financial and descriptive information about their
selected segment information in interim and annual financial statements. Under
SFAS No. 131, operating segments are defined as revenue-producing components of
the enterprise which are generally used internally for evaluating segment
performance. SFAS No. 131 is effective for our fiscal year ended December 31,
1998 and had no effect on our financial position or results of operations. We
operate in one segment, which is providing healthcare and related information to
institutions and individuals through the Internet.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. HealthGate does
not expect SFAS No. 133 to have a material effect on its financial position or
results of operations.
45
<PAGE>
BUSINESS
OVERVIEW
HealthGate is an Internet provider of reliable, objective, comprehensive and
up-to-date healthcare information helping physicians and other healthcare
professionals, patients and health-conscious consumers make better informed
healthcare decisions. We have aggregated and developed what we believe are the
most extensive health and medical libraries of any online provider, currently
totaling approximately 27 million different pages of health and medical
information from approximately 300 sources. This content includes
internationally recognized journals, authoritative government sources and
extensive bibliographic databases representing 27 independent content providers.
We adapt and integrate this diverse content through our internally developed
software programs, which include our proprietary ReADER-Registered Trademark-
natural language searching software, designed to facilitate the search and
retrieval of relevant information in response to each user's searching needs.
Given the depth and breadth of our content, we provide healthcare
information to a wide range of online users, including physicians and other
healthcare professionals, patients and health-conscious consumers. We facilitate
user-friendly access to our content libraries by segmenting them into
collections for these three principal user groups. Content from any collection
is available to any type of user under a variety of pricing structures,
including free access, per transaction fee access and subscription. Our online
library targeted to physicians and other healthcare professionals includes
internationally recognized journals such as the NEW ENGLAND JOURNAL OF MEDICINE,
bibliographic databases such as MEDLINE, handbooks such as the Drug Information
Handbook, decision support materials such as the Poisoning and Toxicology
Compendium and Continuing Medical Education programs from the Boston University
School of Medicine and Professional Postgraduate Services. Our patient focused
online library includes patient education materials such as a series of over
3,000 patient education brochures published by the Clinical Reference Systems
division of Access Health. We have also created "Healthy Living" Webzines, a
proprietary series of consumer health magazines distributed exclusively through
the Web, and have produced Wellness Centers, which are compilations of selected
information from our online libraries for consumers, on 100 of the most
prevalent illnesses, diseases and medical conditions. In addition, we use our
technology to provide text conversion and Web site hosting services for
traditional print publishers, thereby increasing the number of online healthcare
resources accessible through our content libraries. While we aggregate and
develop content with the goal of meeting the specific needs of professionals,
patients and health-conscious consumers, we do not restrict access to the target
audience, for instance, giving patients and consumers access to more in-depth
information like leading medical journals written for medical professionals.
We distribute our content through a network of proprietary and affiliated
Web sites that comprise the HealthGate Network. The HealthGate Network includes
(1) our own Web sites, www.healthgate.com and www.bewell.com in the United
States and www.healthgate.co.uk in the United Kingdom; (2) customized,
co-branded CHOICE-Registered Trademark- Web sites for institutions, principally
hospitals, and businesses, which carry both HealthGate's and an enterprise
client's name, are designed as a seamless component of an enterprise client's
Web site and, for certain institutions and businesses, complement the healthcare
information, products and services they already offer or sell through their own
Web sites; and (3) other third party co-branded Web sites to which we syndicate
our proprietary and licensed content, including the Health Channel of
www.snap.com for which we will be designated as an anchor tenant provider of
health content following the completion of this offering.
We currently generate revenue from the following activities:
- syndicating content to third party Web sites;
- providing our activePress-TM- Web publishing services to traditional print
publishers;
46
<PAGE>
- offering banner advertising and sponsorship of discrete portions of our
content libraries to pharmaceutical companies, other healthcare
advertisers and other businesses and organizations;
- participating in e-commerce opportunities, including selling articles from
full-text journals, monthly online subscriptions and medical text books;
and
- developing co-branded CHOICE Web sites for enterprise clients and
distributing content through these CHOICE Web sites.
INDUSTRY BACKGROUND
During the past decade, the Internet has emerged as a significant global
communications medium and an effective alternative to many forms of traditional
media. The Internet enables consumers to instantly retrieve information,
communicate with others and engage in e-commerce. As a result, Internet use is
growing rapidly. According to Jupiter Communications, an industry research firm,
the number of Internet users in the United States is expected to grow from
approximately 63 million in 1998 to approximately 116 million by 2002.
The rapid growth of the Internet as a tool for communication, entertainment
and e-commerce has resulted in a proliferation of Web sites dealing with myriad
topics, products and services. Web sites such as America Online and Yahoo!
developed in response to Internet users' need for a simple means of navigating
the Internet. As the number of Internet users has increased, discrete user
groups have developed that share the same interests, such as people searching
for health and medical information, world and national news headlines and
personal investment information. These groups have, in turn, created a demand
for more focused subject specific Web sites. These subject specific Web sites
are a growing segment of the Internet. Among the most popular topics of these
types of Web sites is healthcare. A July 1999 research report published by Cyber
Dialogue, Inc., an industry research firm, estimates that approximately
25 million adults in the United States search online for health and medical
information, a number which Cyber Dialogue projects will grow to approximately
30 million in 2000.
This demand for online healthcare content is creating many opportunities for
businesses to reach new consumers and expand their relationships with existing
customers. According to Cyber Dialogue, people that use the Internet to retrieve
online medical information are an attractive audience to businesses because
these individuals are typically older and more affluent than the general online
population. The Internet, unlike traditional media sources, allows businesses to
effectively target these consumers in an interactive manner. Through banner ads
and sponsorships, businesses are able to dynamically market their goods and
services in an efficient manner. According to Jupiter Communications, online
health and medical advertising in the U.S. is expected to grow from
$12.3 million in 1998 to $265.1 million in 2002. In addition to providing a new
marketing medium, the Internet has become a new distribution channel for
businesses, through which they can sell products to consumers.
We believe that the company that establishes a clear brand identity as a
reliable source of comprehensive online healthcare information and services will
have a significant opportunity to capture a leading share of the online health
audience as this industry continues to grow.
BUSINESS STRATEGY
Our objective is to capture a leading share of the online health audience as
this industry continues to grow. We plan to achieve this objective by delivering
a broad array of healthcare content and related
47
<PAGE>
services to healthcare professionals, patients and consumers through the
HealthGate Network. Our strategy includes the following key elements:
PROVIDE LEADING HEALTHCARE CONTENT AND TECHNOLOGY. We seek to continually
expand our health and medical content libraries to enable healthcare
professionals, patients and consumers to easily satisfy their health-related
information needs without leaving the HealthGate Network. We are currently
focusing on expanding our content in the areas of prescription and over the
counter drugs, mental health, toxicology, decision support, alternative health
and geriatrics. In addition to continually expanding our content, we intend to
continue integrating content with technology in order to enhance the online user
experience. We are currently pursuing technology initiatives designed to provide
enhanced alert services, more sophisticated database searching capabilities and
personalization and content customization for the individual users. Given the
diversity of health-related Web sites, and the varying degrees of quality and
amount of information available on these Web sites, we believe professionals,
patients and consumers have a desire to be able to access reliable, objective,
comprehensive and up-to-date information on specific topics in a user-friendly
manner. We plan to continue to lead the way in making this information
accessible to both healthcare professionals and lay people.
EXPAND THE HEALTHGATE NETWORK. The HealthGate Network consists of (1) our
own Web sites, www.healthgate.com, www.bewell.com and www.healthgate.co.uk;
(2) clients' co-branded CHOICE Web sites; and (3) other co-branded Web sites,
which will include a co-branded Snap/HealthGate Web site, and other third party
Web sites, including the Health Channel of www.snap.com for which we have been
designated as an anchor tenant provider of health content, and Inteli-Health and
WebMD, which carry our syndicated content under license agreements. We plan to
increase the number of CHOICE Web sites on the HealthGate Network through
expanded marketing efforts, using both our in-house sales force and value added
resellers, such as Data General Corporation and GE Medical Systems, which resell
our products and services together with their complementary products and
services. We intend to further expand the HealthGate Network by continuing to
syndicate portions of our content libraries to other health-related Web sites.
By expanding the HealthGate Network, we believe we will be able to continue to
increase user traffic, thereby enabling us to generate increased revenue from
advertising, sponsorships and e-commerce opportunities.
CONTINUE TO BUILD THE HEALTHGATE BRAND. We believe that increased awareness
of the HealthGate brand will be important to our ability to continue to build
our user base and to attract additional customers, advertisers, sponsors and
strategic affiliates. We plan to allocate significant resources to continue to
build brand recognition by expanding the reach of the HealthGate Network. We
recently entered into a strategic alliance with Snap under which they will
provide various services to us to promote our name, our www.healthgate.com Web
site, our co-branded CHOICE Web Sites and the products and services we offer. We
believe that our relationship with Snap will increase awareness of the
HealthGate brand and help drive traffic to the HealthGate Network. Additionally,
by continuing to increase the number of co-branded CHOICE Web sites, we plan to
attract new users and build online communities, which are linked groups of users
with similar health related interests, by leveraging the name recognition of
local enterprises, including hospitals and other healthcare organizations,
corporations and academic institutions. We build brand awareness on our
www.healthgate.com, www.bewell.com and www.healthgate.co.uk Web sites by
offering users free access to a portion of our content libraries. Moreover, we
will continue to syndicate content under license agreements that require
licensees to display our name prominently on the syndicated content pages. These
agreements also require these licensees to enable users to reach our
www.healthgate.com Web site from the licensee's Web site by clicking on a
HealthGate link. In addition, we plan to build recognition of the HealthGate
brand through online and traditional media advertising, including advertising on
CHOICE Web sites, other promotional activities and marketing initiatives, and
through additional strategic affiliations, such as our affiliations with
Columbia Information Systems and Snap and Xoom.
48
<PAGE>
BROADEN THE RANGE OF PRODUCTS AND SERVICES. We believe that broadening the
variety of products and services offered through the HealthGate Network will
allow us to better serve existing users, attract new users and keep our users on
the HealthGate Network for longer periods per visit. We intend to enhance our
offering of products and services to provide physician counseling services,
clinical trial recruitment and an integrated platform for linking clinical
information and patient education materials with electronic medical records. We
plan to leverage the HealthGate Network, including our enterprise-based CHOICE
accounts, to market these new, predominantly fee-based products and services. We
believe that these products and services will also make the HealthGate Network
even more attractive to potential advertisers and sponsors seeking a targeted
audience. Additionally, we are pursuing e-commerce partners to further leverage
revenue opportunities from the HealthGate Network user base.
PURSUE ACQUISITIONS AND ADDITIONAL STRATEGIC AFFILIATIONS. We intend to
pursue an acquisition and affiliation strategy focusing on proprietary content
and complementary technologies and services. Acquiring providers of proprietary
content will allow us to customize acquired content to better meet the needs of
our users and clients, as well as allow us to increase our user base. We also
plan to continue to pursue additional strategic affiliations with content
providers to expand our libraries, similar to our activePress content
affiliations with Blackwell Science and the NEW ENGLAND JOURNAL OF MEDICINE. In
addition, we intend to pursue exclusive strategic affiliations with content
providers to produce additional unique content, similar to our arrangement to
produce a consumer version of the NEW ENGLAND JOURNAL OF MEDICINE with the
Massachusetts Medical Society. We also plan to pursue strategic affiliations
with companies that offer complementary technologies, products and services,
such as Web site design and development firms, electronic medical records
providers and online prescription information and transaction service companies.
CONTINUE TO GROW INTERNATIONALLY. Interest in obtaining reliable healthcare
information is universal. We believe that a significant opportunity exists to
establish HealthGate as the premier supplier of healthcare information over the
Internet in markets outside the United States. Building upon the expertise
gained from the May 1998 launch of our www.healthgate.co.uk Web site, which was
specifically developed for United Kingdom users, we intend to establish
additional HealthGate country specific Web sites. Our strategy includes
licensing and creating content of specific interest to a particular country's
users, in addition to providing internationally recognized English language
sources of medical information, such as MEDLINE, and customizing and translating
the user interface into the local language. In addition, we plan to continue
syndicating portions of our content libraries to online providers in foreign
markets. For example, we have established relationships with online providers in
Italy and Australia who are providing co-branded HealthGate syndicated content
as part of their product offerings.
HEALTHGATE CONTENT
We believe we offer professionals, patients and consumers one of the most
reliable, objective, comprehensive and up-to-date collections of health and
medical information available on the Internet, with presently over 27 million
different pages of healthcare information from approximately 300 sources. Our
content libraries are updated regularly with the latest available health and
medical information, on a daily, weekly or monthly basis, or as appropriate. We
segment our content libraries into appropriate collections to facilitate access
for professionals, patients and consumers. However, content from any collection
is available to any type of user under a variety of pricing structures. For
example, a patient who might typically access one of our free Healthy Living
Webzines for general information about a particular medical condition, illness
or disease is also able to access relevant articles in the
professionally-oriented NEW ENGLAND JOURNAL OF MEDICINE for a one time
transaction fee in order to explore the most recent and authoritative scientific
studies of that condition, illness or disease.
49
<PAGE>
Generally, certain licensed content, including MEDLINE, CANCERLIT and
AIDSLINE, is free to users throughout the HealthGate Network. Other licensed
content, including PsycINFO, CINAHL and the EMBASE Cardiology Consultant, is
accessible for a fee on a transaction specific basis or through subscription
plans. In order to meet the needs of their communities of users, CHOICE Web site
clients and licensees of our syndicated content pay us to make selected portions
of our libraries available to their users.
We compile our online libraries in three ways: (1) licensing content from
healthcare and medical information providers; (2) developing proprietary
in-house content; and (3) licensing content from our activePress publishing
clients in conjunction with providing these clients with Web site development
and hosting services. These categories of content are described in the following
table:
<TABLE>
CONTENT PROVIDER DESCRIPTION REPRESENTATIVE SOURCES DISTRIBUTION CHANNELS
<S> <C> <C> <C>
Independent Well known, authoritative - MEDLINE (National Library - healthgate.com
Licensors content sources licensed of Medicine) - CHOICE Web sites
from government agencies, - Adult Health Advisor - Syndicated third party Web
professional associations, (Clinical Reference sites
not-for-profit Systems) - healthgate.co.uk
organizations, medical - Continuing Medical
centers, publishers and Education (Boston
other third parties. University School of
Medicine)
- Reuters Medical News
(Reuters Health)
- EMBASE Cardiology
Consultant (Elsevier
Science B.V.)
HealthGate Eleven different consumer - Healthy After 50 - healthgate.com
health magazines developed - Healthy Athlete - CHOICE Web sites
by HealthGate specifically - Healthy Eating - Syndicated third party Web
for Web-based distribution. - Healthy Man sites
Updated weekly with new - Healthy Mind - healthgate.co.uk
articles, written or - Healthy Parenting
purchased by HealthGate. - Healthy Rx
- Healthy Sexuality
- Healthy Traveler
- Healthy Woman
- Alternative Health
activePress Clients Full-text journals and - NEW ENGLAND JOURNAL OF - nejm.org
similar content from MEDICINE (Massachusetts - blackwell-synergy.com
traditional print Medical Society) - healthgate.com
publishers, converted for - BRITISH JOURNAL OF SURGERY - CHOICE Web sites
Web access and hosted by (Blackwell Science) - Syndicated third party Web
HealthGate's activePress sites
unit for a fee. - healthgate.co.uk
</TABLE>
50
<PAGE>
LICENSED CONTENT
This category includes well known, independent and authoritative health and
medical content licensed by us for distribution via the HealthGate Network. This
content is typically peer-reviewed and many of our licensed content sources are
recognized by healthcare professionals and academia for their high quality.
Content in this category includes the following types of information and
representative sources:
- bibliographic databases, such as MEDLINE, produced by the National Library
of Medicine; CANCERLIT, produced by the National Cancer Institute; and
EMBASE Drugs and Pharmacology, produced by Elsevier Science B.V.;
- patient education and consumer health materials, such as the Merriam
Webster Medical Dictionary, the Advisor Series of over 3,000 informational
brochures from Clinical Reference Systems and compilations of information
that we prepare on 100 of the most prevalent medical conditions, illnesses
and diseases and make available through our Wellness Centers;
- Continuing Medical Education programs, such as those produced by
Professional Postgraduate Services, a division of Physicians World
Communications Group;
- decision support materials, such as the Poisoning and Toxicology
Compendium published by Lexi-Comp, Inc.; and
- newsfeeds, such as Reuters Medical News and the Los Angeles Times
Syndicate.
All licensed content must meet certain criteria prior to being added to our
content libraries. The criteria used to evaluate the content include the content
provider's own review process, comparison with comparable sources and the
frequency of updates.
HEALTHGATE PROPRIETARY CONTENT
This category currently includes eleven Web-based consumer health magazines
we produce called Healthy Living. The Webzines in the Healthy Living series
cover subjects such as men's health, women's health, parenting, nutrition,
travel medicine, sexuality, sports medicine, mental health, prescription and
over-the-counter drugs, alternative health and aging. Articles for these
publications are written by medical writers, physicians, dentists, dieticians
and nurses exclusively for us. These articles discuss current health trends,
newly published research findings, health-related lifestyle issues and late
breaking topics recommended by the Healthy Living Editorial Board. This
Editorial Board is comprised of five physicians affiliated with institutions
including the Harvard University School of Medicine, Boston University School of
Medicine, Massachusetts General Hospital and Dana Farber Cancer Institute. In
order to assure accurate and high quality content, all articles are reviewed
prior to publication by medical editors and by our Editorial Board. Several
Healthy Living Webzines have been recognized for their quality by the American
Medical Writers Association, Tufts University School of Nutrition, Lycos and the
Disney Go Network.
ACTIVEPRESS CONTENT
This category currently includes the NEW ENGLAND JOURNAL OF MEDICINE,
published by the Massachusetts Medical Society, and all medical, scientific and
technical journals published by the worldwide publishing units of Blackwell
Science. Through our activePress service, we convert these journals for delivery
through the Internet and provide access to the converted journals by developing
and hosting these publishers' Web sites. In addition to being paid a fee for our
activePress development, implementation and hosting services, we receive the
right to distribute these journals through our www.healthgate.com and
www.healthgate.co.uk Web sites. We are also able to distribute the Blackwell
Science journals throughout the rest of the HealthGate Network.
51
<PAGE>
STRATEGIC AFFILIATIONS AND RELATIONSHIPS
We believe that strategic affiliations and relationships enable us to
acquire content more rapidly, develop and further distribute our products and
services, generate additional traffic on our own Web sites and CHOICE Web sites,
enhance the HealthGate brand and capitalize on additional revenue opportunities.
We have entered into strategic affiliations and relationships for healthcare
content, related products and services, marketing and online distribution and
syndication with the following companies:
CONTENT
BLACKWELL SCIENCE, LTD. Through our activePress service, we are the
exclusive developer on the Web of a collection of 200 full text journals for
Blackwell Science. Blackwell Science is the largest publisher of medical
societies' journals and one of the world's largest medical publishers. We have
converted and currently offer online all 200 peer reviewed journal titles
covered by our initial agreement with Blackwell Science. As part of this
service, we link these journals with the MEDLINE bibliographic database and make
them available to Blackwell Science's individual and institutional subscribers
through the www.blackwell-synergy.com Web site, developed and hosted by us. Our
hosting services include storing, maintaining and updating all converted
journals on our computer system, providing links between these journals and
other relevant databases, providing secure transaction processing through the
Web site and managing advertising and sponsorship for the Web site. In addition
to the revenue derived from the development and hosting of the
www.blackwell-synergy.com Web site, we receive a fee for each online subscriber
to a Blackwell journal and a transactional fee for each Blackwell journal
article purchased through the HealthGate Network. We have the right to syndicate
these journals throughout the HealthGate Network and share revenue from
syndication with Blackwell Science. In September 1999, we entered into a new
two-year activePress agreement to expand and extend our activePress relationship
with Blackwell Science through December 2001. Under the terms of this new
agreement, effective January 1, 2000, we will enhance Blackwell Science's Web
site and convert and bring online an additional 72 full text journals.
NEW ENGLAND JOURNAL OF MEDICINE. In April 1999, we entered into an
agreement with the Massachusetts Medical Society, publisher of the NEW ENGLAND
JOURNAL OF MEDICINE, the most cited publication in medicine, to be the exclusive
developer and host of an enhanced Web site for the JOURNAL using our activePress
service. Through this enhanced Web site, developed using our activePress
service, the JOURNAL will offer electronic subscriptions and be able to provide
individual article delivery and links to the MEDLINE bibliographic database,
thereby improving reader access to this important resource. As part of this
agreement, when this enhanced Web site is re-launched, we will have the right to
distribute the JOURNAL through our own Web sites, through CHOICE Web sites, and,
with the prior approval of the publisher, through syndication to third party Web
sites. In addition to the revenue derived from the development and hosting of
this Web site, we receive a fee for each online subscriber to the JOURNAL and a
transactional fee for each JOURNAL article purchased by a non-subscriber. The
initial term of our activePress agreement with the Massachusetts Medical Society
runs through April 2001 and is renewable annually by mutual agreement. Until the
JOURNAL's enhanced Web site is re-launched, which we currently expect to occur
by the end of 1999, HealthGate users and JOURNAL subscribers are able to access
the JOURNAL's existing Web site through a link from HealthGate's own Web site.
During this interim period, HealthGate users will be able to access various
portions of the JOURNAL's existing Web site, but only JOURNAL subscribers will
be able to access the past issues of the JOURNAL available online.
CONSUMER VERSION OF THE NEW ENGLAND JOURNAL OF MEDICINE. In June 1999, we
entered into an agreement with the Massachusetts Medical Society to create a
Web-based consumer version of the NEW ENGLAND JOURNAL OF MEDICINE. Under this
agreement, we will be the exclusive distributor of this unique version of the
JOURNAL, although, beginning six months after delivering the first issue to us,
the Society
52
<PAGE>
may make this version of the JOURNAL available on its own Web sites. We will pay
an annual fee of $500,000 for the Society to re-write all original articles
appearing each week in the JOURNAL in common, non-technical language. We, in
turn, plan to use our technology platform to adapt and integrate this content
and to link it to MEDLINE, to drug databases, to other content sources and to
relevant sites on the Web. We currently intend to make the publication available
through subscription. We plan to sell both targeted advertising and sponsorship
on these pages. Revenue derived from the consumer version of the JOURNAL will be
shared by the Society and us. We expect to release the consumer version of the
JOURNAL in early 2000. The initial term of this agreement is two years from the
date on which the Society delivers the first issue to us and is renewable for
two additional 18 month periods by mutual agreement.
PRODUCTS AND SERVICES
PHYSICIANS WORLD COMMUNICATIONS GROUP. We have an agreement with Physicians
World Communications Group, an independent medical education company in the
United States. Professional Postgraduate Services, a division of Physicians
World, is accredited by the Accreditation Council for Continuing Medical
Education to offer Category 1 Continuing Medical Education (CME) credit.
Physicians World pays us to format original CME programs for the Web to enhance
the ease of use and quality of the educational experience by adding
interactivity, graphics and audio and video components. We share the revenue
with Physicians World generated from physicians purchasing these programs
through the HealthGate Network. We have agreed to develop CME programs for Web
distribution exclusively with Physicians World, with the exception of CME
programs developed by Boston University School of Medicine and online continuing
healthcare professional education programs related to our recent arrangement
with HealthStream, Inc.
BOSTON UNIVERSITY SCHOOL OF MEDICINE. We have an agreement with Boston
University School of Medicine to distribute Continuing Medical Education
programs developed by the School of Medicine through our own Web sites, through
our CHOICE Web sites and through licensees of our syndicated content. Boston
University is accredited by the Accreditation Council for Continuing Medical
Education to offer Category 1 CME credit. We include 34 different CME programs
from Boston University in our content libraries. We plan to develop additional
programs with Boston University through this relationship.
HEALTHSTREAM, INC. In September 1999, we entered into a continuing
education services agreement with HealthStream, Inc., a provider of computer and
Web-based education and training services for the healthcare industry. This
agreement provides for the creation of a Web site, hosted by HealthStream and
co-branded by both HealthStream and HealthGate, and allows us to distribute
HealthStream's Category 1 Continuing Medical Education programs and other
accredited continuing education programs for nursing and allied health
professionals to users of our www.healthgate.com Web site and our co-branded
CHOICE Web sites. We expect that this HealthStream/HealthGate Web site will be
operational by the end of the first quarter of 2000. We will share the revenue
generated from physicians and other healthcare professionals purchasing these
online programs. As part of this agreement, HealthStream will pay us a minimum
of $250,000 annually for, among other things, sponsorship on our own Web sites
and on our co-branded CHOICE Web sites. The initial term of our continuing
education services agreement with HealthStream is two years and is renewable
annually by mutual agreement. Pursuant to a separate marketing services
agreement with HealthStream we have committed to spend $100,000 annually to
promote the co-branded HealthStream/HealthGate Web site. We have also agreed to
purchase a minimum of $150,000 of CME courses annually from HealthStream for
distribution to healthcare professionals for promotional purposes. We expect to
record revenue under this arrangement net of any amounts made to purchase CME
courses.
Physicians take CME courses in order to: (1) comply with state licensure
requirements; (2) qualify for lower insurance premiums; and (3) fulfill
membership requirements of professional associations.
53
<PAGE>
Generally, Category 1 CME courses are considered by most physicians to be more
valuable than other types of CME courses. Approximately 20 hours of Category 1
credit is required annually by most states for physician re-licensure.
MARKETING AND DISTRIBUTION
COLUMBIA INFORMATION SYSTEMS, INC. In November 1999, we entered into a
three-year development agreement with Columbia Information Systems, Inc., a
subsidiary of Columbia/HCA Healthcare Corporation, to design, develop and
maintain customized, co-branded CHOICE Web sites for up to 280 Columbia/HCA
hospitals and affiliates. In addition, we will design, develop and maintain a
health portal site for Columbia Information Systems. We will also provide
content and services to both Columbia Information Systems' health portal site
and its customized, co-branded CHOICE Web site product. The agreement provides
for an annual license fee of $3.5 million to be paid by Columbia Information
Systems for all products and services that we provide under the agreement. The
annual license fee is subject to prospective adjustment in certain events,
including the delivery by us of fewer than 200 or more than 280 customized,
co-branded CHOICE Web sites. However, if we deliver fewer than 200 customized,
co-branded CHOICE Web sites, the adjustment is limited to a minimum annual
license fee of $2.5 million. In addition, we will share advertising and
sponsorship revenues and certain e-commerce revenues. The agreement may be
terminated without cause by Columbia Information Systems on June 1, 2001, upon
payment of a $1.0 million termination fee to HealthGate. We expect to have the
customized co-branded CHOICE Web site product ready for initial distribution in
the fourth quarter of 1999 and to have the health portal site operational in the
first quarter of 2000.
In November 1999, we entered into a separate three-year marketing and
reseller agreement with Columbia Information Systems under which Columbia
Information Systems agreed to endorse us as the preferred provider of patient
and consumer oriented health content for Web sites owned or operated by
Columbia/HCA hospitals and affiliates. We believe as an endorsed preferred
provider, it is more likely that Columbia/HCA hospitals and affiliates will use
our products and services. The agreement provides us, among other things, the
right to make a first offer to provide services for adding content to the
Columbia Information Systems' health portal site and any Web site owned or
operated by or affiliated with Columbia Information Systems or Columbia/HCA. We
also have the exclusive right to host on the Internet content provided to us by
healthcare providers owned, controlled or operated by any entity owned or
controlled by Columbia/HCA Healthcare Corporation. To date, we have not hosted
Columbia/HCA content. Further, Columbia Information Systems may, for a
commission, market and sell our CHOICE Web site product to entities unaffiliated
with Columbia/HCA, subject to our approval.
In connection with this agreement, we have issued a warrant to CIS Holdings,
Inc. for the purchase of up to 1,941,035 shares of our common stock. The warrant
has a term of three years and will be exercisable on the earlier of the
consummation of this offering, certain private placements of securities, a sale
of HealthGate or March 31, 2000. The exercise price per share will be equal to
our initial public offering price. If an initial public offering is not
completed by March 31, 2000, the exercise price per share will be the common
equivalent price per share received by HealthGate in its next qualifying private
placement. If neither an initial public offering nor a qualifying private
placement occur before March 31, 2000, the exercise price per share will be
adjusted to $3.46 on March 31, 2000. In the event we issue common stock or other
equity or debt instruments which are convertible into common stock for an amount
less than the current exercise price, then the exercise price and number of
shares of this warrant will be adjusted accordingly. These adjustment provisions
will terminate upon the completion of an initial public offering. If HealthGate
is sold prior to the consummation of its initial public offering or a qualifying
private placement, the exercise price per share will be adjusted to $3.46 per
share effective with such sale. The shares of common stock issuable under the
warrant will have registration rights similar to those granted to holders of our
Series A, B, C and D Stock. We
54
<PAGE>
expect to record the fair value of this warrant as marketing and distribution
rights, and amortize the value as a sales and marketing expense on a
straight-line basis over the three year contractual term of the related
agreement. Based on the currently anticipated offering price range, we expect
the value of this warrant to range from approximately $10.7 million to
$13.1 million. If the initial public offering price is above the currently
anticipated offering price range, this value will be higher.
SNAP! LLC AND XOOM.COM, INC. In October 1999, we entered into a three-year
strategic alliance agreement with Snap! LLC and Xoom.com, Inc. Snap and Xoom are
expected to combine with certain assets of NBC to form NBC Internet, which
combination is expected to occur prior to December 31, 1999. Under our strategic
alliance agreement, Snap will provide the services, described below, to promote
our name, our www.healthgate.com Web site, our co-branded CHOICE Web sites and
the products and services we offer, and we will design, develop and host a
co-branded Snap/HealthGate Web site, which will provide the features and
functionality of our www.healthgate.com Web site. After the co-branded
Snap/HealthGate Web site is brought online, which is scheduled to occur
following our payment of fees to Snap with a portion of the proceeds from this
offering, Snap will feature us as the anchor tenant, giving us the exclusive
right to be the most prominent content provider, for seven of the major content
areas within the Health Channel which is part of Snap's Web site located at
www.snap.com. Both Snap's Health Channel and the co-branded Snap/HealthGate Web
site will contain portions of our content libraries and link to our
www.healthgate.com Web site to provide users access to our complete content
libraries. If Snap adds new content areas to its Health Channel, we have a right
of first offer to provide health-related content to the new areas as long as our
content continues to be of at least the same quality as that of our top
competitors. We will also have the exclusive right to sell advertising on the
co-branded Snap/HealthGate Web site. Snap will display various promotions for
us, at discounted rates, designed to deliver click-throughs to the co-branded
Snap/HealthGate Web site, our co-branded CHOICE Web sites and our
www.healthgate.com Web site from Snap's www.snap.com Web site and other Web
sites affiliated with Snap. Snap has agreed to deliver a minimum number of these
promotions during each year of the agreement, but it will be able to satisfy
these minimums by displaying them within the six months following the relevant
year. If these minimums are not delivered within those six months, Snap must
refund a pro rata portion of the fee paid by us under the agreement. In
addition, Snap will create and run a series of television ads on the NBC
television network, local television stations or cable services featuring in
part the health-related content areas of its Web sites and our name, brand or
services.
In exchange for the services provided to us by Snap during the first year of
the agreement, we have agreed to pay Snap a minimum fee of $10.0 million and
500,000 shares of our common stock, plus a $250,000 production and content
integration fee. The $10.3 million cash component of the first year minimum fee
due to Snap is payable within thirty days after the registration statement filed
with the SEC in connection with this offering is declared effective by the SEC.
We have agreed to pay Snap minimum fees of $15.0 million in each of the second
and third years of the agreement for the services provided to us by Snap in
those years. We have also agreed to pay Snap up to an additional $5.0 million in
the first year, $10.0 million in the second year and $15.0 million in the third
year of the agreement if Snap delivers more than a minimum number of
click-throughs to the co-branded Snap/ HealthGate Web site in the respective
years. Either Snap or we may terminate this agreement if the other party commits
a material breach. If Snap terminates the agreement based on a material breach
by us, including non-payment, insolvency, or failure to deliver or timely update
content, we have agreed to continue to pay Snap 55% of all fees payable by us
under the agreement for the remaining term of the agreement. If Snap and Xoom do
not combine with certain assets of NBC to form NBC Internet on or before March
31, 2000, we may terminate the agreement and Snap must return to us all
payments, including the common stock we have issued to them as partial payment
for the first year minimum fee, made prior to the termination.
55
<PAGE>
As part of this agreement, Xoom shall have the right to use information we
collect on users of the co-branded Snap/HealthGate Web site and, with our
consent, users of our www.healthgate.com Web site for Xoom's direct marketing
efforts. In exchange, Xoom will send up to one promotional email per month for
us. Xoom will also pay us a fee for each unique user who purchases a product via
e-commerce as a result of a Xoom email to individuals for whom we provided user
information to Xoom from our user database.
GE MEDICAL SYSTEMS. In June 1999, we entered into a development and
distribution agreement with GE Medical Systems, the medical diagnostic equipment
and services division of General Electric Company. Under the terms of this
agreement, we will develop and host GE Medical Systems branded enhanced versions
of our CHOICE Web site product. GE Medical Systems will have an exclusive
worldwide right to sell these enhanced CHOICE Web sites to hospitals and other
patient care facilities. GE Medical Systems will also have the exclusive right
to sell our standard CHOICE Web site product to a select group of hospitals and
other patient care facilities. In addition, GE Medical Systems will have the
non-exclusive right to sell our standard CHOICE Web site product to other
healthcare institutions, subject, in certain cases, to our prior consent. GE
Medical Systems has a worldwide customer base of hospitals and other patient
care institutions and a sales and marketing organization dedicated to
healthcare. GE Medical Systems' customer base presents an attractive audience
for both our own CHOICE Web sites and the enhanced GE Medical Systems branded
versions of our CHOICE Web sites. Revenue derived from CHOICE Web sites sold by
GE Medical Systems will be shared by GE Medical Systems and us. The initial term
of our development and distribution agreement with GE Medical Systems is one
year and is renewable annually by mutual agreement.
In connection with the development and distribution agreement, we issued to
General Electric Company a warrant for the purchase of up to 1,189,800 shares of
our common stock. The warrant has a term of five years, an exercise price of
$9.49 per share and is immediately exercisable. In the event HealthGate issues
common stock or other equity or debt instruments which are convertible into
common stock for an amount less than the current exercise price of this warrant,
then the exercise price and number of shares issuable under this warrant will be
adjusted accordingly. These adjustment provisions will terminate upon the
completion of an initial public offering. However, if we fail to complete an
initial public offering, a private placement of securities, or a sale of
HealthGate by December 31, 1999, the exercise price will be adjusted to $3.46
per share on January 1, 2000. In the event the exercise price of this warrant is
adjusted, its fair value will increase. The shares of common stock issuable
under the warrant will have registration rights similar to the registration
rights provided to GE Capital Equity Investments, Inc. and Blackwell Science.
See "Shares Eligible for Future Sale--Registration Rights."
The fair value of the warrant of $10.3 million was recorded as marketing and
distribution rights in assets, and will be amortized as sales and marketing
expense on a straight-line basis over the one year contractual term of the
related development and distribution agreement. During the nine months ended
September 30, 1999, amortization expense totaled $2,941,000. In the event the
exercise price of the warrant is adjusted downward, its fair value will
increase.
DATA GENERAL CORPORATION. We have a marketing relationship with Data
General Corporation, an information technology products and services company
which has recently been acquired by EMC Corporation. Data General has a current
customer base of approximately 2,500 hospitals and healthcare institutions
worldwide and a sales and marketing group dedicated to healthcare. Data
General's healthcare customer base presents an attractive target market for our
CHOICE Web sites. As a value added reseller, Data General will offer our
co-branded CHOICE Web site product to complement the suite of products and
services that it currently offers to its customers, which products and services
include electronic medical records services, imaging and archival software and
Web-authoring tools. Data General will distribute our CHOICE Web site product to
its customers by purchasing it from us and then reselling it to specific
enterprises based on a CHOICE end-user license
56
<PAGE>
agreement entered into between HealthGate and the specific enterprise. We have
granted Data General an exclusive right to resell our CHOICE Web site product to
a defined group of its current customers until December 31, 1999. This exclusive
right may be extended if Data General achieves sales targets, to be determined
by mutual agreement, by that date. Data General has agreed that, during the term
of the agreement, it will not market any other products or services that are
similar to our CHOICE Web site product. The initial term of our agreement with
Data General runs through June 2001 and is renewable for one additional year by
mutual agreement.
SYNDICATION
We have syndication relationships with three high-traffic, health-related
Web sites to distribute portions of our content libraries through licensing
agreements. Our present syndication relationships are with WebMD, Inteli-health
and the American Medical Association. In addition to providing licensing fees to
us, these agreements, in most cases, provide for sharing advertising and
sponsorship revenue generated through these third party Web sites. The license
fees from syndicating our content are classified as services revenue. Through
licensed syndication, we are able to leverage the user bases of these HealthGate
Network Web sites to drive additional traffic to our content libraries in order
to further increase awareness of the HealthGate brand and develop additional
advertising and sponsorship and e-commerce revenue opportunities. Our name,
embedded with a link to our www.healthgate.com Web site, is displayed on each
page viewed by the user accessing our syndicated content through third party Web
sites.
HEALTHGATE'S PRODUCTS AND SERVICES
We have established four distinct product and service offerings: (1) our own
Web sites; (2) CHOICE Web sites; (3) content syndication; and (4) activePress
services. The target groups for these products and services cover a broad
spectrum of customers and users, providing multiple revenue sources, as
summarized in the following chart.
57
<PAGE>
<TABLE>
TARGET CUSTOMER AND USER
PRODUCTS AND SERVICES GROUPS REVENUE SOURCES
<S> <C> <C>
www.healthgate.com Individuals - Advertising and sponsorship
www.healthgate.co.uk - Professionals - E-commerce
- Patients
- Consumers
CHOICE Web sites Enterprises - Services
- Hospitals - Annual hosting fees
- Healthcare institutions - Development fees
- Integrated Delivery - Licensing fees
Networks - Advertising and sponsorship
- Businesses - E-commerce
- Colleges and universities
Content Syndication Third party health - Services
information Web sites - Annual hosting fees
- WebMD - Development fees
- Inteli-Health - Licensing fees
- American Medical - Advertising and sponsorship
Association - E-commerce
activePress service Publishers - Services
- Blackwell Science - Annual hosting fees
- Massachusetts Medical - Development fees
Society - E-commerce
</TABLE>
In addition, we have established an alliance with Snap and Xoom to supply
portions of our content libraries to users of the Snap Web portal site and to
design, develop and host a co-branded Snap/ HealthGate Web site. We anticipate
that our relationship with Snap will drive traffic to the co-branded
Snap/HealthGate Web site, resulting in additional traffic to our own
www.healthgate.com Web site and our co-branded CHOICE Web sites that we host for
hospitals. We believe that additional traffic to these sites will increase
awareness of the HealthGate brand and develop additional advertising,
sponsorship and e-commerce revenue opportunities.
THE WWW.HEALTHGATE.COM AND WWW.HEALTHGATE.CO.UK WEB SITES
We provide healthcare information, products and services through our own Web
sites, www.healthgate.com in the United States and www.healthgate.co.uk in the
United Kingdom. The www.healthgate.com Web site, targeted to a wide range of
users, was the first to provide free Web access to the complete MEDLINE
database. This site provides a range of medical information, from basic
background information on general health matters, wellness, illnesses and
diseases to in-depth scientific research on specific medical conditions, from a
variety of licensed and proprietary content sources. The content available on
this site is divided into collections targeted to professionals, patients or
consumers. However, content from all collections is available to any type of
user. For example, a patient can access an article on a specific medical
condition in the professionally oriented NEW ENGLAND JOURNAL OF MEDICINE.
Content sources include patient education and wellness information,
bibliographic databases, Continuing Medical Education programs and decision
support materials. Presently, our consumer information is accessible through
www.healthgate.com and www.bewell.com, our companion consumer Web site. We plan
to combine our www.bewell.com Web site with our www.healthgate.com Web site by
the end of 1999.
The healthgate.co.uk site, launched in May 1998, is our first
country-specific Web site. In addition to internationally recognized sources of
medical information, such as MEDLINE, this site provides access to content of
specific interest to users in the United Kingdom. We use our existing technology
58
<PAGE>
platform to provide easy access to the information on this site. We also use our
technology platform to conform our content to local cultural and language
nuances.
Users may access portions of our content libraries on our own Web sites for
free. Other licensed content, such as PsycINFO, CINAHL, the EMBASE Cardiology
Consultant, and articles from the journals we make available, are available for
a fee on a transaction specific basis.
CO-BRANDED CHOICE WEB SITES FOR ENTERPRISE CLIENTS
Our CHOICE Web sites are customized, co-branded Web sites linked to an
enterprise's own Web site to provide an enterprise with the ability to offer
online healthcare information to its communities of users. We market CHOICE Web
sites to the following types of enterprises:
- HEALTHCARE INSTITUTIONS--Healthcare Institutions include hospitals,
managed care organizations and physician groups. These institutions may
wish to provide online healthcare information to their staff and patients
and better market their services to the local community.
- INTEGRATED DELIVERY NETWORKS--Integrated Delivery Networks are networks of
hospitals and clinics. Integrated Delivery Networks can utilize CHOICE Web
sites as part of their suite of services to achieve better brand
recognition while still maintaining the personalized level of service from
each individual component in their network.
- CORPORATE ENTITIES--Our CHOICE Web sites enable businesses to license our
content to complement their own information that they distribute on the
Web and the products and services they sell on the Web. In addition, our
CHOICE Web sites enable any business to provide its employees health and
wellness information through corporate intranets and extranets. By
providing information for health and wellness programs, businesses may be
able to lower their direct healthcare costs, reduce sick days and increase
worker productivity.
- COLLEGES AND UNIVERSITIES--Students, faculty and staff can use our CHOICE
Web sites to access information needed for research papers, theses,
dissertations and for information concerning their own health.
We establish co-branded Web sites customized for our CHOICE clients to
provide healthcare information from our content libraries and related services
tailored to the needs of the specific enterprise's users. Our content and
services are offered to the CHOICE client in separate modules so that the
enterprise client can choose to have all or individual segments of our content
libraries and services available through its CHOICE Web site. The three basic
content modules divide our content libraries into:
- a professional series, which offers clinically oriented content such as
MEDLINE;
- a patient series, which includes 3,000 different condition-specific
informational brochures; and
- a consumer series, featuring general introductory magazine articles from
our Healthy Living Webzines.
We are continually developing additional service modules for our CHOICE
clients. For example, we recently added the following new module options:
- PRINTING MODULE FOR PATIENT BROCHURES. Allows printing of customized
patient information brochures using content from our content libraries
with a signature look and feel unique to the specific CHOICE customer,
using customized headers and footers, including organization name, logo,
physician name, contact information and other appropriate information.
59
<PAGE>
- RESOURCE LOCATOR MODULE, WITH CONTENT SENSITIVE LINKS. Allows information
retrieval on any of the hospital's physicians, facilities, special
services or programs, using the hospital's or independent information
databases, such as OneSource, a database of physicians.
We further customize the CHOICE Web site by designing it to be a seamless
component of the enterprise's existing Web site. We have developed a number of
templates for CHOICE Web site design from which we are able to conform the
design with the enterprise's own Web site. Because we use a standard format for
our content and have developed flexible Web site templates, we are generally
able to bring CHOICE Web sites online within 10 to 15 business days of signing
an agreement with a CHOICE client.
To date, we have sold CHOICE Web sites under agreements that provide for
development, implementation and hosting fees to be paid by the enterprise client
for a term of one to three years. As of September 30, 1999, we had delivered 39
co-branded CHOICE Web sites providing health information to 32 hospitals,
including Swedish Medical Center (Seattle, Washington), St. Joseph's Hospital, a
unit of Carondelet Health Systems (Kansas City, Missouri) and Winchester
Hospital (Winchester, Massachusetts), one university, Indiana State University
(Terre Haute, Indiana), one corporate wellness center, Data General Corporation,
and 5 businesses, including GlobeRx.com, Handbag.com, Med-Emerg International,
Nichols TXEN and ProxyMed. The CHOICE client can also choose to participate in
advertising and sponsorship and e-commerce opportunities for its CHOICE Web
site. The revenue from these opportunities is allocated between the CHOICE
client and us. We sold 14 of our initial CHOICE Web sites on a promotional
basis, under which we guarantee certain amounts of advertising and sponsorship
revenue to these CHOICE sites, generally in amounts equal to the fees to be paid
by these customers. We intend to market our CHOICE Web site product to
additional target enterprise clients including Integrated Delivery Networks, but
have not yet sold a CHOICE Web site to this target client group.
60
<PAGE>
The following is an example of Web pages from a CHOICE Web site we developed
and host for Joseph Brant Memorial Hospital.
[Screen shots of co-branded CHOICE Web site, with the following captions:
Co-branded CHOICE site designed for Joseph Brant Memorial Hospital.
Professionals can access databases, reference materials, the latest news
and CME courses to assist in patient care and in research.
Patients can search 3,000 different brochures for information on
specific, illnesses and conditions.
Health-conscious consumers can access HealthGate's Webzines to help them
lead a healthier lifestyle.]
61
<PAGE>
CONTENT SYNDICATION
We selectively syndicate portions of our content libraries to other
high-traffic, health-related Web sites pursuant to licensing agreements. Through
syndication, we are able to drive additional traffic to the HealthGate Network
in order to further increase awareness of the HealthGate brand and develop
additional advertising, sponsorship and e-commerce revenue opportunities. Our
name, embedded with a link to our www.healthgate.com Web site, is displayed on
each page viewed by the user accessing our syndicated content through third
party Web sites. In addition to generating revenue from licensing fees for the
syndication of our content, most of these syndication arrangements provide for
sharing advertising and sponsorship revenue generated through these Web sites.
To date, however, we have only realized revenue from these licensing fees and
have not recognized any revenue from advertising and sponsorship or e-commerce
on these Web sites. Presently, we have syndication affiliations with WebMD,
Inteli-health and the American Medical Association. For the nine months ended
September 30, 1999, our content syndication arrangement with WebMD accounted for
12% of our total revenue. We are presently negotiating with WebMD concerning the
terms and provisions of the annual renewal of the agreement which was
contemplated for October 30, 1999. During our negotiations, we are continuing to
provide content to WebMD under the same terms as provided under our earlier
agreement. We can not assure you that we will be able to reach mutually
agreeable terms of renewal with WebMD and, if we do not, we may lose WebMD as a
customer.
ACTIVEPRESS SERVICE FOR PUBLISHERS
Our activePress service, which was launched in 1998, provides a full service
Web-based solution to publishers and other parties that wish to offer Web-based
access to print materials or databases. Through this service, healthcare
publishers can reach an Internet audience through Web sites that we develop and
host. The activePress service utilizes our existing technology platform and
expertise to develop and host Web sites, convert the publisher's information for
the Internet and link the published information with relevant databases, such as
MEDLINE, enabling the publisher to deliver an enhanced electronic version of the
print publication to subscribers, institutions and authorized third parties. As
a result of these relationships, we also hold Web hosting rights to these
publications, requiring anyone seeking an online article from one of these
journals to access the publication either through the activePress enabled site
or through the HealthGate Network.
activePress service revenue includes fees for converting, hosting and
storing information and providing development, support and maintenance.
Additionally, transactional revenue is derived from fees associated with users'
access to the publisher's content. These fees, which may be paid by the user or
the publisher, are derived on a per subscriber, per page or per article basis.
Blackwell Science and Massachusetts Medical Society, the publisher of the
NEW ENGLAND JOURNAL OF MEDICINE, are currently clients of our activePress
service. See "--Strategic Affiliations and Relationships--Content."
WEB PORTAL ALLIANCE
We will provide access to selected portions of our content libraries to
users of Snap, a Web portal site. Web portal sites aggregate content from
various sources and make the content, or links to the content, available on a
single Web site, organized into related groupings of content, typically called
channels. Following our payment of fees to Snap with a portion of the proceeds
from this offering, HealthGate will be the anchor tenant, or most prominent
provider of healthcare information, for seven of the major content areas of
Snap's Health Channel. Our name will be prominently displayed throughout the
Snap Health Channel. Users of the Snap Health Channel will see selected portions
of our content libraries on the Snap Web site. When Snap users wish to access a
complete article, not just the portion available on the Snap Web site, they will
link from the Snap Health Channel to a co-
62
<PAGE>
branded Snap/HealthGate Web site that we will design, develop and host or our
www.healthgate.com Web site.
We anticipate that our relationship with Snap will drive traffic to the
co-branded Snap/HealthGate Web site, resulting in additional traffic to our own
www.healthgate.com Web site and our co-branded CHOICE Web sites that we host for
hospitals. We believe that additional traffic to these sites will increase
awareness of the HealthGate brand and develop additional advertising,
sponsorship and e-commerce revenue opportunities. In addition to promoting the
HealthGate brand, we will have exclusive rights to sell advertising on the
co-branded Snap/HealthGate Web site.
ADVERTISING AND SPONSORSHIP
The depth and breadth of our content and the variety of our distribution
channels developed for specific audiences of healthcare consumers offer
advertisers and sponsors opportunities to target their messages to particular
user groups. Advertisers may target groups by demographics such as gender and
geographic location or advertise more broadly to the general population of
health information users. The HealthGate Network's underlying technology
platform recognizes a wide range of information about individual users. This, in
turn, allows us to selectively target banner advertisements to users viewing
specific topics or content sources. For example, we can place a banner
advertisement for Tylenol on users' screens searching our content for
information on headaches. We also intend to offer advertisers the opportunity to
employ one-to-one advertising or niche marketing. This type of advertising
allows advertisers to target individual users based on registration details,
both through banner advertising and through e-mail.
We track banner advertising impressions and click-through rates for these
advertisements and issue a NetGravity Traffic Report weekly to our advertisers.
Statistics provided to both potential and current advertisers about our traffic
patterns are audited by Audit Bureau of Circulation Interactive to assure
accuracy.
Recent advertisers on the HealthGate Network, predominantly on our own Web
sites, have included the following pharmaceutical companies, manufacturers of
consumer and health goods, providers of health information and others.
- Pharmaceutical companies, including American Home Products (Enbrel),
Johnson & Johnson (Tylenol and Procrit), Pfizer (Zyrtec) and Biogen
(Avonex);
- Consumer health goods, including HealthShop.com (vitamins and
supplements), SelfCare (health aids), Dr. Scholls (health aids) and
CVS.com (online drugstore);
- Providers of health information, including Medical Economics (books) and
MedBookStore.com (books); and
- Others, including Entrepreneur Magazine, the U.S. Air Force, the U.S.
Army, NextCard and Ameritrade.
In October 1999, approximately 8.5 million advertisements were displayed on
our own Web sites, approximately 4.1 million of which were sold for cash to
advertisers, approximately 54,000 of which were used to fulfill barter
arrangements and the remainder of which were used for internal marketing
purposes.
We offer sponsorship opportunities to companies that wish to target specific
topics, content sources or CHOICE Web sites. Sponsorships are designed to
support broad marketing objectives, including branding and product
introductions, generally on an exclusive basis. For example, sponsorships allow
businesses to have their name, message or products appear together with a link
to their own Web site in every page of a Healthy Living Webzine, a CHOICE Web
site or a condition specific Wellness Center. Sponsorships are sold for specific
periods of time and portions of the Web site.
63
<PAGE>
The following screen illustrates opportunities for advertising and
sponsorship within a co-branded CHOICE Web site:
[Screen shot of a co-branded CHOICE Web site, with lines indicating logo,
advertising, sponsorship and additional feature areas of the page.]
E-COMMERCE
Currently, we use e-commerce to provide portions of our licensed content,
including PsycINFO, CINAHL, the EMBASE Cardiology Consultant and full-text
journals via the activePress service on a pay per view or transaction fee basis.
In addition, we provide users the opportunity to purchase medical textbooks and
other print products from MedBookStore, a Web-based medical bookstore offered by
Medsite Publishing, and photocopies of articles not available from our
collection of full-text journals from Infotrieve, a document delivery service.
Also, users can subscribe to certain fee-based content sources on a monthly
basis.
We believe that significant opportunities exist to provide additional
healthcare related products to professionals, patients and consumers using our
technology platform and the HealthGate Network. In order to pursue these
opportunities, we are exploring options for expanding the products and services
currently offered using e-commerce.
SALES AND MARKETING
We sell our products and services through our own direct sales force and
through value added resellers. Our direct sales force consists of two teams: (1)
CHOICE Web site sales; and (2) advertising and sponsorship sales. We divide the
United States and Canada into seven direct sales regions for CHOICE Web site
sales and assign direct sales representatives to each region. Our CHOICE Web
site sales team consists of two groups, outside sales and inside sales. The
outside sales group is responsible for delivering focused and targeted marketing
for CHOICE Web sites, content syndication customers and other customers,
increasing consumer awareness of the HealthGate brand and establishing campaigns
to develop brand loyalty. Our inside sales group is responsible for facilitating
the entire sales process, identifying leads through telemarketing and supporting
our customers. The inside sales group's support functions include maintenance of
customer and prospect databases, online demonstration sessions, preparation of
presentations and proposals and development of relationships with current and
future clients. Our advertising and sponsorship sales efforts are conducted from
our headquarters in Burlington, Massachusetts.
In addition to our direct sales force, we have established a value added
reseller relationship with Data General. Through this relationship, we leverage
the cross selling opportunities offered by Data General's worldwide healthcare
sales force in their sales calls to their customer base of approximately 2,500
hospitals and healthcare institutions worldwide.
In June 1999, we entered into a development and distribution relationship
with GE Medical Systems pursuant to which GE Medical Systems will be able to
sell our CHOICE Web site product and GE Medical Systems branded enhanced
versions of our CHOICE Web site product through its worldwide sales force into
its worldwide customer base of hospitals and other patient care facilities. See
"--Strategic Affiliations and Relationships--Marketing and Distribution."
In Europe, our sales efforts are coordinated through our subsidiary,
HealthGate Europe, Limited, based in London. HealthGate Europe concentrates its
efforts on licensing our syndicated content to third parties and developing
additional activePress relationships.
We presently market our products and services through traditional means,
including direct mail, print advertising and telemarketing. We also use
Web-based banner advertising and sponsorship on our
64
<PAGE>
own Web sites, portions of the HealthGate Network and other third-party sites,
targeted linking on the HealthGate Network and e-mail alerts to registered users
of our own Web sites. Additionally, we have agreed to purchase a significant
amount of advertising and sponsorship on Snap.com and related Web sites as part
of our strategic alliance agreement with Snap, as described under "--Strategic
Affiliations and Relationships--Marketing and Distribution." We intend to
purchase additional advertising and sponsorship on certain CHOICE Web sites. We
are also considering adding radio and television advertising to our marketing
efforts.
We expect to use a portion of the net proceeds of this offering to expand
our sales and marketing efforts. See "Use of Proceeds."
CUSTOMER SERVICE
We are committed to providing a high level of service and support to our
clients and users. We believe that customer service is important to our ability
to attract and retain clients and users. We provide service and support via a
toll-free telephone number, e-mail and, on the Web site itself, through help
screens and Frequently Asked Questions (FAQ) areas. The customer service staff
includes medical librarians who are experienced in medical information
retrieval.
TECHNOLOGY PLATFORM
Our technology, consisting of internally developed and commercially
available software programs, is designed to leverage the benefits of modular
components so that all elements of our various content libraries and other
databases can be channeled into one unified platform. From this platform, we can
quickly and easily adapt all of this content and other data for numerous online
applications, such as: (1) standardizing the appearance of disparate content
sources; (2) integrating advertising and sponsorship; and (3) facilitating
information retrieval for our customers and users. In addition, the modular
composition of our technology platform enables us to reuse, update, scale,
extend and replace components as needed. As content is added to our technology
platform and moves through the various modules during processing, each
individual module adds specific and unique features and functionality to the
content.
There are three specific groups of modules: (1) Content Standardization; (2)
Content Enhancement; and (3) Content Delivery. Unless otherwise noted, all
modules are either available through the HealthGate Network or through our
activePress service. We plan to integrate modules presently available only
through our activePress service into the HealthGate Network.
CONTENT STANDARDIZATION
CONTENT NORMALIZATION. The content normalization module converts original
content, regardless of format supplied by the content provider, into a single,
consistent Extensible Markup Language (XML) format. XML is a markup language
used to identify structures and their roles within a document. For example,
words within a document are classified as structures. The specific words in the
document's footnotes are indicative of the role these words, or structures, have
in the document. Meta-information, or information describing the content
supplied by the provider, is retained. However, this module adds additional
tagging to the provider-supplied meta-information for use in the searching,
topics and dynamic formatting modules. The use of XML in the content
normalization module enables us to offer, through other modules, multiple
product offerings with different features, while using the same content from the
same repository.
CONTENT ANALYSIS. The content analysis module attaches value-added
information to content. For example, footnotes, endnotes or bibliographies from
journal articles are linked to abstracts or more detailed information found in
other content sources such as MEDLINE. Features under development include the
linking of drug trade names to a pharmaceutical source, identifying company
names and
65
<PAGE>
providing appropriate links to other sources and associating content with
various conditions, illnesses or related topics.
CONTENT MATCHING. The content matching module integrates three separate
databases enabling them to interact and relay information to each other as a
user moves through our various content sources. The different databases are
Users, Content Sources and Usage. The content matching module tracks individual
users (Users) through the HealthGate Network, recording what content they use
(Content Source), and recording the transaction for later use (Usage).
CONTENT ENHANCEMENT
AUTHENTICATION, ACCESS CONTROL AND E-COMMERCE. The authentication, access
control and e-commerce module confirms a user's identity, allows the user access
to the various content sources and records any transaction or usage for that
user. This module is analogous to a content store, offering access to content on
a fee per use basis. These sales can be via a one-time credit card transaction
or through institutional access. This module allows us to package content
through different methods to different user groups using various pricing models.
For example, information from a particular journal can be sold to the user by
year, by the issue, by the article, or even by the page.
SEARCHING. The searching module, using our ReADER search software that
provides a natural language searching tool, enables professionals, patients and
consumers access to content without regard for the level of their expertise,
knowledge of medical terms, or knowledge of specific database searching
commands. For example, if a user searches the MEDLINE database for the common
concept "CAT Scan," the ReADER tool would translate that phrase into a search
for the medical term "Tomography, X-Ray Computed" yielding more relevant
results.
TOPICS. The topics module creates topic hierarchies or organizes specific
content for the professionals, patients, or consumers according to pre-defined
algorithms. Topics are created using both searching and keyword technologies.
Patient and consumer topics are organized by medical condition. Professional
topics are organized by medical specialty. Topics allow for quick access to the
latest information without requiring the user to search multiple content
sources.
ADVERTISING. The advertising module enables us to target specific
advertisements to individuals or groups based on demographic information, user
registration, or specific content sources. For example, a user searching for
information on headaches could be shown an advertisement for Tylenol. This
module also handles scheduling of advertisements, reporting of results to
advertisers and the placement and screening of advertisements.
PERSONALIZATION. The personalization module enables content to be
customized for the individual user. Among the features provided through this
module are user-managed subscriptions and commerce, e-mail updates and saved
searches. A new feature under development will allow a user to create a
customized Web page displaying only information based upon a user provided
profile. Personalization is currently available through our activePress service
and is being integrated into the HealthGate Network.
RELEVANT INFORMATION LINKING. The relevant information linking module
enables dynamic cross-referencing or linking among related content and features.
For example, content targeted for the physician can be linked to corresponding
patient education materials, enabling the physician to produce a customized
brochure handout, written specifically for the patient, without accessing
multiple content sources.
COMMUNITY BUILDING. Currently under development, the community building
module will enable users to interact and establish relationships with other
users possessing similar health-oriented interests. For example, discussion
groups can be formed around specific conditions, individual journal articles, or
66
<PAGE>
treatment options. An option currently available called "Send to a Friend"
enables users to send e-mail, with a link to a specific article from content
available from HealthGate, to friends or colleagues.
ADAPTIVE PROFILING. Currently under development, the adaptive profiling
module modifies what a user sees or is alerted to based upon the user's
behavior, usage of a particular content source and navigation by the user
through the site.
CONTENT DELIVERY
DYNAMIC FORMATTING. The dynamic formatting module allows for active layout
of content for presentation to the user. Formatting can be based upon a specific
user's registration information, the type of content the user is viewing, the
CHOICE Web site and access point. The utilization of Extensible Style Language
(XSL) allows for quick and efficient formatting modifications. For example, XSL
converts or transforms information stored in XML into other data formats, such
as Hypertext Markup Language (HTML), used to construct most Web pages. This
module gives us the option of having multiple product offerings with different
features, while using the same content from the same repository.
COMPETITION
The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. With no substantial barriers to entry, over
15,000 Web sites presently offer users healthcare content and products and
services, and we expect that competition will continue to grow. We compete,
directly and indirectly, for subscribers, consumers, content and service
providers, advertisers, sponsors and acquisition candidates with a variety of
companies from traditional healthcare print publishers and distributors, to
health focused and general Web sites, to large healthcare information systems
companies.
Many of our competitors enjoy significant competitive advantages including:
greater resources that can be devoted to the development, promotion and sale of
their products and services; longer operating histories; greater brand
recognition; and larger customer bases.
We believe that the principal competitive factors in our target markets are
comprehensiveness of content, integration with existing technologies, brand name
recognition, performance, ease of use, pricing, features and quality of support.
We also believe that we are the only provider among our competitors to serve all
of our target markets and that the combination of the depth and breadth of our
content libraries and the flexibility of our technology platform allows us to
compete favorably in each of our target markets. See "Risk Factors--We face
intense competition in providing our Internet-based healthcare information
products and services and we may not be able to compete effectively."
We syndicate portions of our content to other competing health related Web
sites, including WebMD and Inteli-health. We believe that the benefits of
content syndication, including additional traffic to the HealthGate Network,
increased awareness of the HealthGate brand and additional advertising and
sponsorship and e-commerce opportunities, outweigh the disadvantages of a
potential increase in competition that may result from our content syndication
to these competitors. See "Business--HealthGate's Products and Services--Content
Syndication."
GOVERNMENTAL REGULATION
Currently, there are a number of laws that regulate communications or
commerce on the Internet. Federal, state, local and foreign governments and
agencies are considering laws and regulations that address issues such as user
privacy, pricing, online content regulation, taxation and the characteristics
and quality of online products and services. In addition, several
telecommunications carriers have petitioned the Federal Communications
Commission to regulate Internet service providers and online
67
<PAGE>
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these providers. Regulation of this type, if imposed,
could substantially increase the cost of communicating on the Internet.
Internet user privacy has become an issue both in the United States and
abroad. The Federal Trade Commission and government agencies in some states and
countries have been investigating certain Internet companies regarding their use
of personal information. Any regulations imposed to protect the privacy of
Internet users may affect the way in which we currently collect and use personal
information.
As is typical with most Web sites, our Web sites place "cookies" on a user's
hard drive without the user's knowledge or consent. This technology enables Web
site operators to target specific users with a particular advertisement and to
limit the frequency with which a user is shown a particular advertisement.
Certain currently available Internet browsers allow users to modify their
browser settings to remove cookies at any time or to prevent cookies from being
stored on their hard drives. If this technology is reduced or limited, the
Internet may become less attractive to advertisers and sponsors.
It may take years to determine the extent to which existing laws related to
issues such as intellectual property ownership and infringement, libel,
obscenity and personal privacy are applicable to the Internet and for new laws
to be adopted. Any new laws or regulations relating to the Internet, or the
application or interpretation of existing laws, could slow the growth in the use
of the Internet, decrease demand for our Web sites or otherwise materially
adversely affect our business. See "Risk Factors--Government regulation of the
Internet may result in increased costs of using the Internet which could
adversely affect our business," "--Privacy-related regulation of the Internet
could adversely affect our business," "--Tax treatment of companies engaged in
Internet commerce may adversely affect the Internet industry and our company"
and "--We may be subject to liability for claims that the distribution of
medical information to consumers constitutes practicing medicine on the
Internet."
INTELLECTUAL PROPERTY
We regard our intellectual property as important to our business, and we
rely upon trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
strategic partners and others to protect our rights in this property. Effective
trademark, copyright and trade secret protection may not be available in every
country in which our products and media properties are distributed or made
available through the Internet. Therefore, we can not guarantee that the steps
we have taken to protect our proprietary rights will be adequate to prevent
infringement or misappropriation by third parties or will be adequate under the
laws of some foreign countries which may not protect our proprietary rights to
the same extent as do the laws of the United States.
We license almost all of our content from third parties. Although under most
of our license agreements, the licensor has agreed to defend and indemnify us
for losses with respect to third-party claims that the licensed content
infringes third-party proprietary rights, we can not assure you that these
provisions will be adequate to protect us from infringement claims.
We also rely on a variety of technologies that are licensed from third
parties, including our database and Internet server software, which is used for
our Web sites to perform key functions. These third-party licenses may not be
available to us on commercially reasonable terms in the future. The loss of or
inability to maintain any of these licenses could delay the introduction of
software enhancements, interactive tools and other features until equivalent
technology can be licensed or developed. See "Risk Factors--Our business may
suffer if we are not able to effectively protect our intellectual property
rights."
68
<PAGE>
LEGAL PROCEEDINGS
We are not currently a party to or aware of any material legal proceedings
involving us.
We received a letter dated July 27, 1999 from TechSearch L.L.C. claiming
ownership of a patent that claims exclusive rights to all electronic methods of
on-demand remote retrieval of graphic and audiovisual information. The letter
asserted that the use of our Web site, www.healthgate.com, infringes the patent.
In the letter, TechSearch offered to license the patent perpetually and
retroactively to us for a one-time fee of between $50,000 and $150,000 depending
upon the number of "hits" per day on our web site. We are currently
investigating this matter. At this time, however, we are unable to predict its
outcome.
69
<PAGE>
MANAGEMENT
The following table sets forth certain information regarding our executive
officers, key employees and directors as of October 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
William S. Reece..................................... 34 Chairman of the Board of Directors,
President and Chief Executive Officer
Mary B. Miller....................................... 42 Chief Financial Officer and Treasurer
Mark A. Israel....................................... 31 Chief Technology Officer
Richard J. Fecher.................................... 40 Vice President of Sales
Rick Lawson.......................................... 40 Vice President of Content and Secretary
Tina M. H. Blair, M.D. (1)........................... 51 Director
Jonathan J. G. Conibear (1).......................... 47 Director
Edson D. de Castro (2)............................... 61 Director
David Friend (2)..................................... 51 Director
Chris H. Horgen (1), (2)............................. 52 Director
</TABLE>
- ------------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
WILLIAM S. REECE is a founder of HealthGate and has served as a member of
our board of directors and our President and Chief Executive Officer since our
inception in 1994. Mr. Reece has served as the Chairman of our board of
directors since December 1994. From June 1988 to May 1994, Mr. Reece served in
several positions, including Vice President, Sales and Marketing, Manager of
U.S. Sales and Marketing Representative at PaperChase, a medical literature
retrieval software company owned by Beth Israel Hospital in Boston.
MARY B. MILLER has served as our Chief Financial Officer and Treasurer since
April 1999. From 1998 to 1999, Ms. Miller was self-employed as a financial
consultant for small and medium sized high technology firms. From 1996 to 1998,
Ms. Miller was Vice President of Finance and Chief Financial Officer of
Multilink, Inc., a communications company. From 1988 to 1996, Ms. Miller held
several positions at Progress Software Corporation, a publicly-traded computer
software company, including Director of Finance and Administration and Chief
Accounting Officer, U.S. Controller and Assistant Controller. Ms. Miller is a
Certified Public Accountant.
MARK A. ISRAEL has served as our Chief Technology Officer since July 1997.
From September 1995 to July 1997, Mr. Israel served as a system architect and
director at Individual Inc., an Internet news company. From September 1992 to
September 1995, Mr. Israel served as a Senior Consultant at Fusion Systems
Group, a software consulting firm. From 1991 to September 1992, Mr. Israel
served as a Consultant at Cambridge Technology Partners, a software consulting
firm.
RICHARD J. FECHER has served as our Vice President of Sales since
September 1999. From May 1999 to September 1999, Mr. Fecher served as our
National Sales Director. From August 1995 to April 1999, Mr. Fecher held various
sales management and sales positions within the healthcare, commercial and
financial divisions of Data General Corporation. From 1994 to 1995, Mr. Fecher
was an Account Manager with SiliconGraphics Computer Systems. From 1993 to 1994,
Mr. Fecher was a Regional Manager with Kendall Square Research. From 1986 to
1993, Mr. Fecher held various management and sales positions with Data General
Corporation.
70
<PAGE>
RICK LAWSON is a founder of HealthGate and has served as our Vice President
of Content and Secretary since November 1994. From November 1987 to November
1994, Mr. Lawson served in several positions, including Vice President, Account
Services/Operations, Director of User Services and Manager of Customer Service
at PaperChase, a medical literature retrieval software company owned by Beth
Israel Hospital in Boston.
TINA M. H. BLAIR, M.D. has served as a member of our board of directors
since March 1995. Since 1995, Dr. Blair has served as a partner and Director of
Emergency Medicine for Emergency Medical Associates of New Jersey, based at
Mountainside Hospital in Montclair, New Jersey. From 1992 to 1995, Dr. Blair
served as a physician on the staff at Addison Gilbert Hospital in Gloucester,
Massachusetts.
JONATHAN J. G. CONIBEAR has served as a member of our board of directors
since December 1996. Since 1986, Mr. Conibear has served as Executive Director
of Blackwell Science, Ltd., the largest publisher of medical societies' journals
and one of the world's largest medical publishers, with headquarters in Oxford,
UK. From 1985 to 1997, Mr. Conibear had other responsibilities with Blackwell
Science, including President, Blackwell Science Inc., Blackwell's U.S.
subsidiary, Chair, Blackwell's Asian subsidiary, and Sales Director. From 1974
to 1985, Mr. Conibear served in various positions with Oxford University Press.
EDSON D. DE CASTRO has served as a member of our board of directors since
December 1994. Since 1997, Mr. de Castro has been a self-employed business
consultant. From 1992 to 1997, Mr. de Castro was Chairman of Xenometrix, Inc., a
biotechnology company. From 1989 to 1990 Mr. de Castro was Chairman of the Board
of Directors of Data General Corporation. From 1968 to 1989, Mr. de Castro
served as President and Chief Executive Officer of Data General. Mr. de Castro
is a director of Boston Life Sciences, Inc., a biotechnology company, AVAX
Technologies, Inc., a biopharmaceutical company, and of UOL Publishing Inc., a
publisher of educational courseware for Internet training programs. Mr. de
Castro is also a trustee of Boston University and a Member of the Visiting
Committee of Clark University School of Management. Mr. de Castro is also a
Member of the Corporation of Partners Healthcare System Inc.
DAVID FRIEND has served as a member of our board of directors since April
1995. In June 1999, Mr. Friend became Chief Executive Officer of eYak, Inc., a
teleconferencing company. Since 1995, Mr. Friend has also served as Chairman of
the Board of Directors of FaxNet Corp., a provider of messaging services to the
telecommunications industry. During 1994 and 1995, Mr. Friend served as a
lecturer at Massachusetts Institute of Technology. From 1983 to 1994, Mr. Friend
served as Chairman of the board of directors of Pilot Software, an international
software firm. Mr. Friend is also a Director of Nichols Research Corporation, a
publicly-traded information technology company.
CHRIS H. HORGEN has served as a member of our board of directors since
October 1995. Since 1991, Mr. Horgen has served as Chairman of the Board of
Directors and Chief Executive Officer of Nichols Research Corporation, a
publicly-traded information technology company. From 1976 to 1997, Mr. Horgen
also served in a number of other positions with Nichols Research, including
Chief Executive Officer, Co-Chairman of the board of directors, and Executive
Vice President. Mr. Horgen is also a Director of South Trust Bank of Alabama,
N.A.
Executive officers of HealthGate are elected by the board of directors on an
annual basis and serve at the pleasure of the board of directors. There are no
family relationships among any of our executive officers or directors.
Pursuant to an amended and restated stockholders agreement, which will
terminate upon the closing of this offering, stockholders owning a majority of
our outstanding shares have agreed to elect as directors (1) a designee of GE
Capital Equity Investments, (2) two designees of our founders,
William S. Reece, Rick Lawson and Barry Manuel, (3) two designees of the holders
of Series A
71
<PAGE>
preferred stock, and (4) one designee of the holders of Series B preferred
stock. Mr. Reece and Mr. de Castro are the founders' designees; Mr. Friend and
Dr. Blair are the Series A holders' designees; and Mr. Horgen is the Series B
holders' designee. To date, GE Capital Equity Investments has not designated a
person to serve as a director.
In connection with its purchase of shares of our Series E preferred stock,
GE Capital Equity Investments, Inc. obtained the right, which it has not
exercised, to appoint a director to our board of directors. Additionally, we
have agreed that effective with the closing of a public offering of our common
stock, unless waived by GE Capital Equity Investments, we will nominate and
recommend for election as a director a designee of GE Capital Equity
Investments.
CLASSIFIED BOARD OF DIRECTORS
Our amended and restated certificate of incorporation and bylaws provide
that the size of the board shall be determined by resolution of the board. The
board is currently composed of six members.
Our stockholders have approved an amended and restated certificate of
incorporation that will take effect upon the closing of this offering and will
include a provision to establish a classified board of directors. Upon the
closing of this offering, our board of directors will be divided into three
classes. One class of directors will be elected each year at the annual meeting
of stockholders for a term of three years. Dr. Blair and Mr. Friend will serve
in the class whose term expires at the annual meeting of stockholders in 2000;
Mr. Horgen and Mr. Conibear will serve in the class whose term expires at the
annual meeting of stockholders in 2001; and Mr. Reece and Mr. de Castro will
serve in the class whose term expires at the annual meeting of stockholders in
2002. All directors will hold office until their successors have been duly
elected and qualified.
BOARD COMMITTEES
We have established an Audit Committee and a Compensation Committee.
AUDIT COMMITTEE. The Audit Committee consists of Messrs. de Castro, Friend
and Horgen. The Audit Committee's primary responsibilities are to assist the
board of directors by making recommendations to the board regarding the
selection of independent auditors, reviewing the results and scope of the audit
and other services provided by our independent auditors, and reviewing our
balance sheet, statement of operations and cash flows.
COMPENSATION COMMITTEE. The Compensation Committee consists of Dr. Blair
and Messrs. Conibear and Horgen. The Compensation Committee makes
recommendations to the board concerning salaries and incentive compensation for
our employees and consultants, including all executive officers and the Chief
Executive Officer.
DIRECTOR COMPENSATION
Directors of HealthGate who are also our employees will not receive
additional compensation for serving as directors. As compensation for their
services in 1996 through 1998, in December 1996, each of our non-employee
directors was granted stock options for the purchase of 29,745 shares of our
common stock under our 1994 Stock Option Plan. These options have an exercise
price of $1.16 per share, vested in three equal annual installments in 1996,
1997, and 1998 and expire in December 2001.
As compensation for their services in 1999 through 2001, in January 1999,
each of our non-employee directors was granted stock options for the purchase of
9,915 shares of our common stock under our 1994 Stock Option Plan. These options
have an exercise price of $0.89 per share, vest in three equal annual
installments in January 1999, 2000 and 2001 based on continuing service as a
director through each applicable period and expire in January 2004.
72
<PAGE>
In addition, Mr. de Castro was granted options to purchase an additional
9,915 shares of our common stock in November 1997 for consulting services he
rendered to us after the option grant date and prior to December 31, 1998. This
option had an exercise price of $0.49 per share, was fully vested during 1998
and was exercised by Mr. de Castro in October 1999.
Our directors do not receive cash remuneration for their services as
directors. We currently reimburse our non-employee directors for the
out-of-pocket expenses they incur in connection with rendering services as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more of its executive
officers serving as a member of our board of directors or Compensation
Committee. Our Compensation Committee currently consists of Dr. Blair and
Messrs. Conibear and Horgen, none of whom has ever been an officer or employee
of HealthGate.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned during the
year ending December 31, 1998 by our Chief Executive Officer and our two other
most highly compensated executive officers (the "Named Executive Officers")
whose total salary and bonus exceeded $100,000 for services rendered to
HealthGate in all capacities during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- -------- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
William S. Reece.................... 1998 138,583 66,500(1) 257,790(2) --
President and Chief
Executive Officer
Mark A. Israel...................... 1998 126,000 32,000(1) 118,980 --
Chief Technology Officer
Hamid Tabatabaie(3)................. 1998 151,846 -- 162,606 --
Vice President of Sales and
Marketing
</TABLE>
- ------------------------
(1) Represents amounts awarded in January 1999 for bonuses earned in 1998.
(2) Excludes a non-incentive stock option granted in January 1998 for 39,660
shares of our common stock, awarded as a bonus for services rendered in 1996
and 1997.
(3) Mr. Tabatabaie was elected by the board of directors to serve as Vice
President of Sales and Marketing on May 22, 1998. Mr. Tabatabaie's 1998
salary includes commissions and reflects compensation earned from April
through December 1998. Mr. Tabatabaie resigned from HealthGate in
August 1999.
73
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
The following table sets forth information concerning the individual grants
of stock options to each of the Named Executive Officers during the fiscal year
ending December 31, 1998. All options were granted under our 1994 Stock Option
Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
------------------------------------------ RATES OF STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO OPTION TERM (1)
UNDERLYING OPTIONS EMPLOYEES IN FISCAL EXERCISE EXPIRATION -----------------------
NAME GRANTED (#) YEAR(%)(2) PRICE($/SH) DATE 5%($) 10%($)
---- -------------------- ------------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William S. Reece..... 297,450(3) 36.0 1.882 1/23/03 $154,466 $341,953
Mark A. Israel....... 118,980 14.4 1.882 1/23/03 $ 61,787 $136,781
Hamid Tabatabaie..... 162,606 19.7 0.756 5/22/03 $ 33,932 $ 75,117
</TABLE>
- ------------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast future
appreciation of our stock price. The potential realizable value computation
does not take into account federal or state income tax consequences of
option exercises or sales of appreciated stock. The actual gains, if any, on
the stock option exercises will depend on the future performance of the
common stock, the optionee's continued employment through applicable vesting
periods and the date on which the options are exercised and the underlying
shares are sold.
(2) In 1998, we granted options to employees to purchase an aggregate of 826,911
shares of common stock.
(3) Includes a non-qualified option for 39,660 shares fully vested upon grant
and an incentive stock option for 257,790 shares, 1/3 of which vested on
January 23, 1999, 1/3 of which will vest on January 23, 2000, and the
remaining 1/3 of which will vest on January 23, 2001, subject to
Mr. Reece's continuing employment with HealthGate.
AGGREGATED OPTION EXERCISES IN 1998
AND 1998 YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
number and value of unexercised options held by the Named Executive Officers on
December 31, 1998. None of the Named Executive Officers exercised stock options
in 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William S. Reece............................... 39,660 257,790 $282,320 $1,835,078
Mark A. Israel................................. 41,246 201,671 $293,610 $1,435,602
Hamid Tabatabaie............................... 0 162,606 -- $1,340,524
</TABLE>
- ------------------------
(1) There was no public trading market for the common stock on December 31,
1998. Accordingly, for purposes of this table, the values in these columns
have been calculated assuming an initial public offering price of $9.00 per
share (rather than a determination of the fair market value of the common
stock on December 31, 1998), less the aggregate exercise price of the
options.
74
<PAGE>
EMPLOYEE BENEFIT PLANS
1994 STOCK OPTION PLAN. Our 1994 Stock Option Plan was adopted by the board
of directors and approved by the stockholders in June 1994. The 1994 Stock
Option Plan provides for the grant of "incentive stock options" intended to
qualify under Section 422 of the Internal Revenue Code and stock options that do
not so qualify. The granting of incentive stock options is subject to the
limitations set forth in the 1994 Stock Option Plan. Our directors, officers,
employees and consultants are eligible to receive grants under the 1994 Stock
Option Plan. The purpose of the 1994 Stock Option Plan is to promote the
interests of HealthGate and our stockholders by encouraging and enabling
eligible employees and other persons affiliated with HealthGate to acquire stock
in HealthGate. We believe that the granting of options will stimulate the
efforts of these persons, strengthen their desire to remain with HealthGate,
provide them with more aligned interests in HealthGate's success and assure a
closer identification between them and HealthGate.
The 1994 Stock Option Plan is administered by our board of directors, which,
subject to the limitations on incentive stock options discussed above, has
authority to determine the optionees, the number of shares covered by an option,
the option exercise price, the term of the option, the vesting schedule and
other terms and conditions. The 1994 Stock Option Plan provides for the grant of
options covering up to 3,599,997 shares of common stock. If an option expires,
terminates or is forfeited for any reason during the term of the 1994 Stock
Option Plan without having been exercised in full, the shares subject to the
unexercised portion of such option will again be available for grant pursuant to
the 1994 Stock Option Plan.
As of November 19, 1999, options for a total of 2,469,495 shares of common
stock are outstanding under the 1994 Stock Option Plan. In addition, 97,871
shares of common stock have been purchased under the 1994 Stock Option Plan
pursuant to exercises of options. A total of 1,032,631 shares remain available
for issuance under the 1994 Stock Option Plan.
401(K) PLAN. We have established a tax-qualified employee savings and
retirement plan, or the 401(k) Plan, which covers all of our full-time employees
who have completed three months of service. Under the 401(k) Plan, eligible
employees may defer up to 15% of their pre-tax earnings, subject to the Internal
Revenue Service's annual contribution limit. The 401(k) Plan permits additional
discretionary matching contributions by us on behalf of all participants in the
401(k) Plan in such a percentage amount as may be determined annually by the
board of directors. To date, we have made no matching contributions. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code so
that contributions by employees or by us to the 401(k) Plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) Plan, and so that our contributions, if any, will be deductible by us
when made. The trustee under the 401(k) Plan, at the direction of each
participant, invests the assets of the 401(k) Plan in any of a number of
investment options.
EMPLOYMENT AGREEMENT
Under an employment agreement dated October 1, 1995, HealthGate agreed to
employ Mr. Reece as Chairman of the Board, President and Chief Executive Officer
of HealthGate for a period of three years beginning on October 1, 1995, to be
automatically renewed on an annual basis, unless either party does not wish to
extend the employment agreement, in which case the agreement will terminate
three years from the applicable renewal date. Under the agreement, Mr. Reece's
minimum base salary is $110,000 per annum, subject to annual review by the board
of directors. Mr. Reece is also eligible to participate in any bonus programs we
adopt. Mr. Reece's 1998 annual base salary was $142,000, plus a bonus of
$66,500, as determined by the board of directors. Mr. Reece's 1999 annual base
salary is $200,000, and, pursuant to his employment agreement, he is eligible
for additional bonuses to be determined by the board of directors.
75
<PAGE>
We may terminate Mr. Reece's employment for malfeasance, nonfeasance or
breach of the employment agreement, as determined by 75% of the board of
directors. If we terminate Mr. Reece's employment for malfeasance, nonfeasance
or breach of the employment agreement, Mr. Reece will be entitled to receive a
lump sum severance payment equal to 12 months' compensation at his then-current
base salary, the amount of any bonus paid to him in the previous contract year,
and any accrued bonus through the date of termination, plus any benefits to
which he is entitled for 12 months following the date of termination. We may
also terminate Mr. Reece's employment if Mr. Reece is convicted of a felony
involving HealthGate. If we terminate Mr. Reece's employment for conviction of a
felony involving HealthGate, Mr. Reece will not be entitled to any further
compensation under the employment agreement, except as may be required by
applicable law.
In addition, Mr. Reece may elect to terminate the employment agreement for
good reason or following a change in control of HealthGate. In the event of an
election for good reason or change in control, Mr. Reece will be entitled to a
lump sum severance payment equal to 12 months' compensation at his then-current
base salary, any accrued bonus through the date of election, plus any benefits
to which he is entitled for 12 months following the date of election.
We do not have employment agreements with any of our other employees or
executive officers.
76
<PAGE>
CERTAIN TRANSACTIONS
Pursuant to the terms of various leases, ranging in terms from at-will to
two years, in 1996, 1997 and 1998, we leased our main offices in Malden,
Massachusetts from Leonard School Associates, Inc., the owner of these offices
until December 1998. Pursuant to these leases, in 1996 we paid rent of
approximately $58,000, in 1997 we paid rent of approximately $84,000 and in 1998
we paid rent of approximately $89,000. Leonard School Associates is owned in
part by Barry M. Manuel, M.D. Dr. Manuel holds options to purchase 22,209 shares
of our common stock, and holds, for himself and through trusts for which he is
the trustee and has sole voting power, an aggregate of 1,189,800 shares of our
common stock. Dr. Manuel is also the father-in-law of William S. Reece, our
Chairman, President and Chief Executive Officer.
In March 1998, we entered into an Electronic Journal Software Development
and Management Agreement with Blackwell Science. Blackwell Science is the
holder, together with Blackwell Wissenshafts-Verlag GmbH, a wholly-owned
subsidiary of Blackwell Science, of all of our issued and outstanding Series D
Convertible Preferred Stock, and Jonathan Conibear, one of our directors, is an
Executive Director of Blackwell Science. Pursuant to this agreement, we have
agreed to develop and host a Web site for Blackwell Science's journals and other
publications. We completed the development of this Web site in 1998. Blackwell
Science has paid a total of $1,400,000 for the development and hosting of the
Web site through December 1999. During 1998 and 1997, our revenue from Blackwell
Science represented 44% and 18% of our total revenue for those respective years.
In September 1999 we entered into a new activePress Journal Hosting and Delivery
Agreement with Blackwell Science pursuant to which the term of our services
relating to hosting and maintaining Blackwell Science's Web site was extended
through December 2001 and the scope of our services to be provided to Blackwell
Science will be expanded beginning January 1, 2000. Total fees payable to us
during the extended term are expected to be in excess of $800,000 annually. In
April 1999, we paid Blackwell Science $68,000 as a referral fee for their
assistance in adding several additional journals to our online libraries. In
addition, pursuant to the terms of a Stock Purchase Agreement dated as of
December 20, 1996 between HealthGate and Blackwell Science, in the event we
attempt to expand into Europe or Asia, we have agreed to negotiate in good faith
with Blackwell Science to determine in what manner Blackwell Science may serve
as our primary strategic alliance partner in connection with such expansion.
In May 1998, we purchased certain of the assets, principally computer
hardware and software and office furnishings, of Systems Architects, Inc. for
$70,000 in cash. Systems Architects, Inc. was a company owned by Hamid
Tabatabaie, our former Vice President of Sales and Marketing.
In September 1998, we received a $2,000,000 convertible bridge loan from
Blackwell Science. The loan accrued interest at a rate of 12% per year. The
principal amount of this loan was converted into 174,729 Series E preferred
stock in April 1999 concurrently with, and at the same per share price as, the
private placement of Series E preferred stock to GE Capital Equity Investments,
Inc. Upon conversion, all accrued and unpaid interest due on this loan was paid
to Blackwell Science in cash.
In connection with the sale of Series B preferred stock to Nichols Research
Corporation in 1996, we agreed to use certain consulting services of Nichols
Research. In 1996, we paid Nichols Research approximately $203,000 for these
consulting services. Additionally in 1996, we paid Nichols Research
approximately $90,900 under a capital lease arrangement for computer equipment.
Nichols Research is one of our stockholders and Chris Horgen, one of our
directors, is Chairman of the Board of Directors of Nichols Research.
In April 1999, pursuant to the terms of a Stock Purchase Agreement, we
issued and sold 546,028 shares of our Series E preferred stock to GE Capital
Equity Investments for an aggregate consideration of $6,250,000 in cash.
In June 1999, we entered into a development and distribution agreement with
GE Medical Systems pursuant to which we will develop GE Medical Systems branded
enhanced versions of our CHOICE
77
<PAGE>
Web site product. In connection with this agreement, we issued to General
Electric Company a warrant for the purchase of up to 1,189,800 shares of our
common stock. The warrant has a term of five years, an exercise price of $9.49
per share (subject to potential adjustments for certain equity offerings
subsequent to the warrant's issuance and other events) and is immediately
exercisable. See "Business--Strategic Affiliations and Relationships--Marketing
and Distribution." GE Capital Equity Investments, Inc., a stockholder of
HealthGate is an affiliate of General Electric Company.
In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. Under this agreement, Snap will provide
various services to us to promote our name, our www.healthgate.com Web site, our
co-branded CHOICE Web sites and the products and services we offer, and we will
design, develop and host a co-branded Snap/HealthGate Web site, which will
provide the features and functionality of our www.healthgate.com Web site. After
the co-branded Snap/ HealthGate Web site is brought online, which is scheduled
to occur following this offering, Snap will feature us as the anchor tenant,
giving us the exclusive right to be the most prominent content provider, for
seven of the major content areas within the Health Channel, which is part of
Snap's Web site located at www.snap.com. In exchange for the services provided
to us by Snap during the first year of the agreement, we have agreed to pay Snap
a minimum fee of $10.0 million and 500,000 shares of our common stock, plus a
$250,000 production and content integration fee. We have agreed to pay Snap
minimum fees of $15.0 million in each of the second and third years of the
agreement for the services provided to us by Snap in those years. We have also
agreed to pay Snap up to an additional $5.0 million in the first year,
$10.0 million in the second year and $15.0 million in the third year of the
agreement if Snap delivers more than certain minimum click-throughs to the
co-branded Snap/ HealthGate Web site. The minimum click-through threshold is
8,333,000 for year one, 9,375,000 for year two and 10,714,000 for year three.
NBC, a subsidiary of General Electric, owns a majority interest in Snap.
In November 1999, we entered into a three-year development agreement with
Columbia Information Systems. Under this agreement, we will design, develop and
maintain a health portal site for Columbia Information Systems and design,
develop and maintain customized, co-branded CHOICE Web sites for up to 280
Columbia/HCA hospitals and affiliates. The agreement provides for an annual
license fee of $3.5 million to be paid by Columbia Information Systems for all
products and services that we provide under the agreement. The annual license
fee is subject to prospective adjustment in certain events, including the
delivery by us of fewer than 200 or more than 280 customized, co-branded CHOICE
Web sites. However, if we deliver fewer than 200 customized, co-branded CHOICE
Web sites, the adjustment is limited to a minimum annual license fee of $2.5
million. In addition, we will share advertising and sponsorship revenues and
certain e-commerce revenues. The agreement may be terminated without cause by
Columbia Information Systems on June 1, 2001, upon payment of a $1 million
termination fee to HealthGate.
In November 1999, we also entered into a separate three-year marketing and
reseller agreement with Columbia Information Systems, under which Columbia
Information Systems agreed to endorse us as the preferred provider of patient
and consumer oriented health content for Web sites owned or operated by
Columbia/HCA hospitals and affiliates. The agreement provides us, among other
things, the right to make a first offer to provide services for adding content
to the Columbia Information Systems health portal site and any Web sites owned
or operated by or affiliated with Columbia Information Systems or Columbia/HCA.
We also have the exclusive right to host on the Internet content provided to us
by healthcare providers owned, controlled or operated by any entity owned or
controlled by Columbia/HCA Healthcare Corporation. In addition, Columbia
Information Systems may, for a commission, market and sell our CHOICE Web site
product to entities unaffiliated with Columbia/HCA, subject to our approval. In
connection with this agreement, we have issued to CIS Holdings, Inc., an
indirect, wholly-owned subsidiary of Columbia/HCA HealthCare Corporation and an
affiliate of Columbia Information Systems, a warrant for the purchase of up to
1,941,035 shares of our common stock. The warrant has a term of three years, an
exercise price per share equal to the initial public offering price (subject to
adjustment in certain circumstances) and is exercisable on the earlier to occur
of this offering, certain private placements of securities, a sale of HealthGate
or March 31, 2000.
78
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of November 19, 1999 and as adjusted to reflect
the sale of the shares of common stock offered hereby by: (a) each person who we
know owns beneficially more than 5% of our common stock; (b) each of our
directors; (c) each of the Named Executive Officers; and (d) all of our
directors and executive officers as a group. Unless otherwise indicated, the
mailing address for each person and business entity listed below is c/o
HealthGate Data Corp., 25 Corporate Drive, Suite 310, Burlington, MA 01803.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED (1)
SHARES ----------------------
BENEFICIALLY BEFORE THE AFTER THE
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ ---------- ---------
<S> <C> <C> <C>
General Electric Company(2)................................. 3,855,347 27.8% 24.7%
2135 Easton Turnpike
Fairfield, CT 06431
William S. Reece (3)........................................ 2,088,693 16.3 12.6
Blackwell Science, Ltd. (4)................................. 2,058,321 16.2 12.5
Oxney Mead, Oxford
OX2 0EL, United Kingdom
Jonathan J. G. Conibear (5)................................. 2,058,321 16.2 12.5
Chris H. Horgen (6)......................................... 1,867,557 14.7 11.3
Nichols Research Corporation................................ 1,831,208 14.4 11.1
4040 Memorial Parkway, S.
Huntsville, AL 35802
Columbia/HCA Healthcare Corporation (7)..................... 1,941,035 13.3 10.6
One Park Plaza
Nashville, Tennessee 37203
Barry M. Manuel, M.D. (8)................................... 1,212,009 9.5 7.4
65 Wellesley Road
Belmont, MA 02478
Rick Lawson (9)............................................. 832,860 6.5 5.1
David Friend (10)........................................... 432,667 3.4 2.6
Tina M. H. Blair, M.D. (10)................................. 348,750 2.7 2.1
Edson D. de Castro (11)..................................... 133,716 1.1 *
Mark A. Israel (12)......................................... 122,152 1.0 *
Hamid Tabatabaie (13)....................................... 54,334 * *
Executive officers and directors as a group (9 persons) 7,051,864 53.9 41.9
(14)......................................................
</TABLE>
- ------------------------
* Less than one percent of outstanding shares.
(1) Percentage ownership is based on 12,695,472 shares outstanding as of
November 19, 1999. Shares of common stock subject to options and warrants
currently exercisable or exercisable within 60 days of November 19, 1999 are
deemed outstanding for the purpose of computing the percentage ownership of
the person holding such options but are not deemed outstanding for computing
the percentage ownership of any other person. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
(2) Includes 1,189,800 shares issuable pursuant to a warrant granted to General
Electric Company in connection with our development and distribution
agreement with GE Medical Systems, an operating unit of General Electric
Company, and 2,165,547 shares owned by GE Capital Equity Investments, Inc.,
a wholly-owned subsidiary of General Electric Capital Corporation and an
affiliate of General Electric Company. GE Capital Equity shares beneficial
ownership of the 2,165,547 outstanding shares with General Electric Capital
79
<PAGE>
Corporation and GE Medical Systems with respect to all shares held of record
by GE Capital Equity. Also includes 500,000 shares of our common stock owned
by Snap! LLC, and, for purposes of calculating the percentage beneficially
owned after the offering only, and assuming an initial public offering price
of $10.00, 500,000 shares of our common stock for which Snap! LLC has
expressed a non-binding interest in acquiring in this offering. National
Broadcasting Company, Inc., a subsidiary of General Electric Company, owns a
majority interest in Snap! LLC.
(3) Includes 125,523 shares of common stock issuable upon the exercise of stock
options.
(4) Includes 36,349 shares of common stock issuable upon the exercise of stock
options and 266,277 shares owned by Blackwell Wissenschafts-Verlag GmbH, a
wholly-owned subsidiary of Blackwell Science.
(5) Includes 36,349 shares of common stock issuable to Blackwell Science upon
the exercise of stock options, 1,755,695 shares of common stock owned by
Blackwell Science and 266,277 shares owned by Blackwell Wissenschafts-Verlag
GmbH. Mr. Conibear is Executive Director of Blackwell Science. Mr. Conibear
disclaims beneficial ownership of all shares issuable to or owned, directly
or indirectly, by Blackwell Science.
(6) Includes 36,349 shares of common stock issuable to Mr. Horgen, individually,
upon exercise of stock options and 1,831,208 shares of common stock owned by
Nichols Research Corporation. Mr. Horgen is Chairman of the board of
directors of Nichols Research Corporation. Mr. Horgen disclaims beneficial
ownership of shares owned by Nichols Research.
(7) Includes 1,941,035 shares issuable pursuant to a warrant issued to CIS
Holdings, Inc., an indirect, wholly-owned subsidiary of Columbia/HCA
HealthCare Corporation and an affiliate of Columbia Information Systems,
Inc., in connection with our marketing and reseller agreement with Columbia
Information Systems.
(8) Includes 872,520 shares owned by Dr. Manuel, 317,280 shares held in trusts
for which Dr. Manuel serves as trustee for the benefit of his children and
grandchildren and 22,209 shares issuable to Dr. Manuel upon the exercise of
stock options. Dr. Manuel disclaims beneficial ownership of the 317,280
shares held in trust for the benefit of his children and grandchildren.
(9) Includes 39,660 shares of common stock issuable upon exercise of stock
options.
(10) Includes 36,349 shares of common stock issuable upon exercise of stock
options.
(11) Includes 3,303 shares of common stock issuable upon exercise of stock
options.
(12) Includes 102,322 shares of common stock issuable upon exercise of stock
options.
(13) Mr. Tabatabaie resigned from HealthGate in August 1999. Includes 54,334
shares of common stock issuable upon exercise of stock options.
(14) Includes 376,544 shares of common stock issuable upon exercise of stock
options excluding the 54,334 shares issuable to Mr. Tabatabaie, HealthGate's
former Vice President of Sales and Marketing.
80
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of HealthGate consists of:
- 20,000,000 shares of common stock, $0.01 par value per share;
- 1,000 shares of Series A Convertible Preferred Stock, par value $0.01;
- 1,000 shares of Series B Convertible Preferred Stock, par value $0.01;
- 1,000 shares of Series C Convertible Preferred Stock, par value $0.01;
- 1,667 shares of Series D Convertible Preferred Stock, par value $0.01; and
- 829,962 shares of Series E Convertible Preferred Stock, par value $0.01.
As of November 19, 1999, there were outstanding:
- 5,164,916 shares of common stock, held by 18 holders of record;
- 1,000 shares of Series A Stock, held by 16 holders of record;
- 1,000 shares of Series B Stock, held by one holder of record;
- 1,000 shares of Series C Stock, held by 22 holders of record;
- 1,667 shares of Series D Stock, held by two holders of record; and
- 720,757 shares of Series E Stock, held by two holders of record.
Effective upon the closing of this offering, the Series Stock will convert
into 7,530,556 shares of common stock.
Immediately after the closing of this offering, we will have 16,445,472
shares of common stock outstanding, assuming no exercise of options to acquire
2,610,684 additional shares of common stock or warrants to purchase 3,608,381
additional shares of common stock that are outstanding as of the date of this
prospectus.
Our amended and restated charter and our amended and restated bylaws will
each become effective upon the closing of this offering. Upon the effectiveness
of the amended and restated charter, our authorized capital stock will consist
of 100,000,000 shares of common stock, $.01 par value per share, and 10,000,000
shares of preferred stock, $.01 par value per share.
The description set forth below gives effect to the filing of the amended
and restated charter and the adoption of the amended and restated bylaws. The
following summary is qualified in its entirety by reference to our amended and
restated charter and bylaws, copies of which are filed as exhibits to the
registration statement of which this prospectus is a part.
COMMON STOCK
Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders. Holders of
common stock do not have cumulative voting rights, and therefore the holders of
a majority of the shares of common stock voting for the election of directors
may elect all of our directors standing for election. Subject to preferences
that may be applicable to the holders of outstanding shares of preferred stock,
if any, the holders of common stock are entitled to receive dividends as may be
declared by the board of directors. In the event of a liquidation, dissolution
or winding up of our affairs, whether voluntary or involuntary, and subject to
the rights of the holders of outstanding shares of preferred stock, if any, the
holders of shares of common stock shall be entitled to receive, on a pro rata
basis, all of our remaining assets available for distribution to our
stockholders. The holders of common stock have no preemptive, redemption,
conversion or subscription rights. All outstanding shares of common stock are,
and the shares of common stock to be issued pursuant to this offering will be,
fully paid and non-assessable.
81
<PAGE>
PREFERRED STOCK
The board is authorized to issue, subject to any limitations prescribed by
Delaware law, preferred stock in one or more series. At the time of issuance,
and without further vote or action by the stockholders, the board can:
- establish the number of shares to be included in each series;
- fix the powers, designations, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, of the shares of each series; and
- increase or decrease the number of shares of any series, subject to the
existing number of authorized shares of preferred stock.
The board is authorized to issue preferred stock with voting, conversion and
other rights and preferences that could adversely affect the voting power or
other rights of the holders of common stock. Therefore, although we have no
current plans to issue shares of preferred stock, the issuance of preferred
stock or of rights to purchase preferred stock could have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, a majority of the outstanding voting stock of
HealthGate.
WARRANTS
HealthGate has issued warrants to purchase an aggregate of 477,546 shares of
common stock, subject to certain antidilution adjustments. Warrants to purchase
455,892 shares have an exercise price of $0.00005 per share, may be exercised at
any time and expire in March 2008. Warrants to purchase 21,654 shares have an
exercise price of $2.89 per share, may be exercised at any time after April 20,
2000 and expire on April 21, 2002. Holders of warrants to purchase 455,892
shares of common stock are entitled to registration rights covering the shares
of common stock issuable upon exercise of these warrants. See "Shares Eligible
for Future Sale--Registration Rights."
Additionally, in connection with a development and distribution agreement
with GE Medical Systems, on June 17, 1999, HealthGate issued to General Electric
Company a warrant for the purchase of up to 1,189,800 shares of common stock
with an exercise price of $9.49 per share (subject to potential adjustments for
certain equity offerings subsequent to the warrant's issuance and other events)
and is immediately exercisable. General Electric will also have registration
rights covering the shares of common stock issuable under the warrant.
In connection with our marketing and reseller agreement with Columbia
Information Systems, we issued to CIS Holdings, Inc. a warrant for the purchase
of up to 1,941,035 shares of common stock with an exercise price per share equal
to our initial public offering price (subject to adjustment in certain
circumstances). The warrant will be exercisable on the earlier to occur of the
consummation of this offering, certain private placements of securities, a sale
of HealthGate or March 31, 2000. CIS Holdings will also have registration rights
covering the shares of common stock issuable under the warrant. See
"Business--Strategic Affiliations and Relationships--Marketing and Distribution"
and "Shares Eligible for Future Sale--Registration Rights."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE RESTATED CHARTER AND BYLAWS
The amended and restated charter and the amended and restated bylaws contain
certain provisions that could discourage potential takeover attempts and make
more difficult attempts by stockholders to change HealthGate's management. The
amended and restated charter authorizes the board to issue, without stockholder
approval, shares of preferred stock in one or more series and to fix the voting
powers, preferences and rights and the qualifications, limitations and
restrictions of those shares. Although we have no current plans to issue
preferred stock, the issuance of preferred stock or of rights
82
<PAGE>
to purchase preferred stock could make it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire, a majority of
our outstanding voting stock.
The amended and restated charter also provides for the division of the board
of directors into three classes as nearly equal in size as possible with
staggered three-year terms and for removal of directors only for cause. The
classification of the board of directors and the limitation on removal of
directors only for cause could make it more difficult for a third party to
acquire, or discourage a third party from attempting to acquire, control of
HealthGate. The amended and restated charter further provides that stockholders
may act only at stockholders' meetings and not by written consent in lieu of a
stockholders' meeting. The amended and restated bylaws provide that nominations
for directors may not be made by stockholders at any annual or special meeting
unless the stockholder intending to make a nomination notifies HealthGate of its
intentions a specified number of days, generally 60, in advance of the meeting
and furnishes to HealthGate certain information regarding itself and the
intended nominee. These provisions could delay any stockholder actions that are
favored by the holders of a majority of our outstanding stock until the next
stockholders' meeting. These provisions may also discourage another person or
entity from making a tender offer for HealthGate's common stock, because that
person or entity, even if it acquired a majority of the outstanding common stock
could only take action at a duly called stockholders' meeting and not by written
consent. The amended and restated bylaws also provide that special meetings of
stockholders may be called only by the Chief Executive Officer or a majority of
the directors. In addition, a stockholder wishing to bring business before any
annual or special meeting of stockholders must give advance notice to the
corporation, generally 60 days prior to the meeting, describing the proposal and
providing information regarding all stockholders known to be supporting the
proposal, including any material interest the supporting stockholders may have
in the proposal.
LIMITATION OF LIABILITY
The amended and restated charter provides that no director will be
personally liable to HealthGate or to any stockholder for monetary damages
arising out of such director's breach of fiduciary duty, except to the extent
that the elimination or limitation of liability is not permitted by the Delaware
General Corporation Law. The Delaware General Corporation Law, as currently in
effect, permits charter provisions eliminating the liability of directors for
breach of fiduciary duty, except that directors remain liable for:
(1) any breach of the director's duty of loyalty to a company or its
stockholders;
(2) any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(3) any payment of a dividend or approval of a stock purchase that is
illegal under Section 174 of the Delaware General Corporation Law; or
(4) any transaction from which the director derived an improper personal
benefit.
A principal effect of this provision of the amended and restated charter is
to limit or eliminate the potential liability of our directors for monetary
damages arising from breaches of their duty of care, unless the breach involves
one of the four exceptions described in (1) through (4) above. The provision
does not prevent stockholders from obtaining injunctive or other equitable
relief against directors, nor does it shield directors from liability under
federal or state securities laws.
The amended and restated charter and the amended and restated bylaws further
provide for the indemnification of directors and officers to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary. HealthGate
has entered into indemnification agreements with each of its directors and
officers, pursuant to which HealthGate has agreed to indemnify such directors to
the fullest extent permitted by law for amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
83
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 16,445,472 shares of common
stock outstanding, including 7,530,556 shares of common stock issuable upon
conversion of our outstanding preferred stock (assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options and
warrants). Of these shares, the 3,750,000 shares we are offering will be freely
tradable in the public market without restriction or further registration under
the Securities Act of 1933. However, any shares purchased by our "affiliates,"
as that term is defined in Rule 144 under the Securities Act, may generally only
be sold in compliance with the limitations of Rule 144 described below. The
remaining 12,695,472 shares of common stock outstanding upon completion of this
offering will be "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may not be sold except in
compliance with the registration requirements of the Securities Act or an
applicable exemption under the Securities Act, including an exemption pursuant
to Rule 144.
SALES OF RESTRICTED SECURITIES
Upon completion of this offering, 281,936 of the restricted securities will
become eligible for sale in the public market pursuant to Rule 144. Upon the
expiration of the lock-up agreements entered into by us, our executive officers
and directors and all principal stockholders and most of our other stockholders
in connection with this offering, 9,978,141 of the restricted securities may be
sold pursuant to Rules 144 or 701, subject in some cases to the volume and other
limitations imposed by those rules. The remaining 2,435,395 shares will be
eligible for sale upon the expiration of a one-year holding period, subject to
the restrictions and conditions of Rule 144.
In general, under Rule 144 as currently in effect, a person, including any
affiliate of HealthGate who has beneficially owned shares for at least one year,
will be entitled to sell in "brokers' transactions" or directly to market makers
within any three-month period commencing 90 days after the date of this
prospectus, a number of restricted securities that does not exceed the greater
of (1) 1% of the class of such shares then outstanding (approximately 164,455
shares immediately after this offering); or (2) the average weekly trading
volume of the common stock during the four calendar weeks immediately preceding
the sale. In addition, a person who is not an affiliate of HealthGate at any
time during the three months preceding any sale by such person, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell such shares under Rule 144(k) without regard to the limitations
described above.
In addition, existing holders with an aggregate of 8,255,626 shares of
common stock have the right to require registration of their shares under
certain circumstances. However, holders of 8,076,976 shares of this common stock
have entered into lock-up agreements with respect to these shares, which provide
that they will not sell or otherwise dispose of any shares of common stock
without the prior written consent of SG Cowen Securities Corporation for a
period of 180 days from the date of this prospectus. SG Cowen Securities
Corporation may, in its sole discretion and at any time without notice, release
all or any portion of the securities subject to lock-up agreements. See
"Registration Rights" and "Underwriting."
OPTIONS
As of November 19, 1999, options to purchase an aggregate of 1,003,893
shares of common stock were fully vested. Holders of fully vested options to
purchase 66,096 shares of common stock have the right to require registration of
their shares under certain circumstances. Of the total shares issuable pursuant
to vested options, 858,477 are subject to 180-day lock-up agreements. As of
November 19, 1999, options to purchase an additional 1,606,791 shares of common
stock were outstanding, but are subject to future vesting, and an additional
1,032,631 shares of common stock were available for future grants under our 1994
Stock Option Plan. See "Management--Employee Benefit Plans."
84
<PAGE>
In general, under Rule 701 of the Securities Act, any employee, officer or
director of, or consultant or advisor to HealthGate who purchases shares from
HealthGate pursuant to a written compensatory stock option or other benefit plan
or written contract relating to compensation is eligible to resell such shares,
in each case commencing 90 days after the date of this prospectus, in reliance
on Rule 144, but without compliance with certain restrictions contained in
Rule 144. Shares acquired pursuant to Rule 701 may be sold by nonaffiliates
without regard to the holding period, volume limitations, information or notice
requirements of Rule 144, and by affiliates without regard to the holding period
requirement.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issuable pursuant to our 1994 Stock Option Plan.
We expect to file these registration statements following the expiration of the
180-day lockup period described below, and these registration statements are
expected to become effective upon filing. Shares covered by these registration
statements will be eligible for sale in the public markets.
WARRANTS
As of November 19, 1999, warrants to purchase 1,645,692 shares of common
stock were exercisable and subject to 180-day lock-up agreements. In addition,
outstanding warrants to purchase 21,654 shares of common stock will become
exercisable on April 21, 2000. We have granted registration rights with respect
to the 1,645,692 shares of common stock issuable under the presently exercisable
outstanding warrants and we have granted registration rights to CIS Holdings in
connection with its warrant for 1,941,035 shares, which is exercisable on the
first to occur of the consummation of this offering, certain private placements
of our securities, a sale of HealthGate or March 31, 2000. CIS Holdings has
agreed to a 180-day lock-up agreement with respect to the shares issuable under
this warrant. See "Business--Strategic Affiliations and Relationships--Marketing
and Distribution" and "Registration Rights."
LOCK-UP AGREEMENTS
HealthGate, all of our executive officers and directors, all principal
stockholders and other existing stockholders who, upon the closing of this
offering, will beneficially own an aggregate of 12,413,536 outstanding shares of
common stock, together with holders of options to purchase 1,612,118 shares of
common stock and holders of warrants to purchase 3,586,727 shares of common
stock, have agreed that for a period 180 days following the date of this
prospectus, without the prior written consent of SG Cowen Securities
Corporation, they will not
- directly or indirectly, offer, sell, assign, transfer, encumber, pledge,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise dispose of, other than by operation of law,
any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock (including, without
limitation, common stock which may be deemed to be beneficially owned in
accordance with the rules and regulations promulgated under the Securities
Act); or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock whether any such transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise.
REGISTRATION RIGHTS
We have granted registration rights to most of our existing stockholders
covering:
- 440,027 shares of outstanding common stock;
85
<PAGE>
- 4,672,034 shares of common stock issuable upon conversion of the Series
Stock;
- 79,320 shares of common stock issuable upon exercise of outstanding
options; and
- 455,892 shares of common stock issuable upon exercise of outstanding
warrants.
These shares are referred to as "Registrable Securities." In addition, under
a registration agreement with GE Capital Equity Investments, Inc., Blackwell
Science and Blackwell Wissenschafts-Verlag GmbH, we have granted registration
rights with respect to 2,858,522 shares of common stock issuable upon conversion
of the Series E Stock (the "GE-Blackwell Securities"). Additionally we entered
into a registration agreement with General Electric Company granting
registration rights with respect to 1,189,800 shares of common stock issuable
upon exercise of a warrant. See "Business--Strategic Affiliations and
Relationships--Marketing and Distribution." The registration rights relating to
the securities issuable upon exercise of this warrant are substantially similar
to the registration rights of the GE-Blackwell Securities described below. We
have also entered into a registration agreement with CIS Holdings granting
registration rights with respect to 1,941,035 shares of common stock issuable
upon exercise of a warrant. See "Business--Strategic Affiliations and
Relationships--Marketing and Distribution." The registration rights relating to
the securities issuable upon exercise of this warrant are substantially similar
to the registration rights of the Registrable Securities described below. In
addition, we have granted piggy-back registration rights, which are subject to
the limitations on priority of registration permitted under all of our other
existing registration agreements, with respect to 500,000 shares of common stock
held by Snap.
DEMAND REGISTRATION RIGHTS. Subject to certain limitations in the
registration agreements, the holders of at least 40% of the Registrable
Securities may require, on two occasions at any time after six months from the
closing of this offering, that we use our best efforts to register all or part
of the Registrable Securities on Form S-1 or any similar long-form registration
statement. In addition, subject to certain limitations in the registration
agreements, the holders of at least 25% of the Registrable Securities may also
require, on four occasions at any time six months from the closing of this
offering, that we use our best efforts to register all or a portion of the
Registrable Securities on Form S-3 or any similar short-form registration
statement when use of one or more of these forms becomes available to us.
Subject to certain limitations in the registration agreement between us and
GE Capital Equity Investments, Blackwell Science and a Blackwell affiliate, the
holders of the GE-Blackwell Securities may require, on two occasions at any time
six months from the closing of this offering, that we use our best efforts to
register all or part of the GE-Blackwell Securities for public resale on
Form S-1 or any similar long-form registration, provided that the aggregate
offering value of each such long-form registration includes the lesser of:
- at least 30% of the common stock issuable upon conversion of the initial
87,364 shares of Series E Stock issued to GE Capital Equity Investments,
and
- the GE-Blackwell Securities requested to be registered having a minimum
anticipated offering price of at least $5 million. In addition, subject to
limitations in the registration agreements currently, the holders of the
GE-Blackwell Securities may also require, on four occasions at any time
six months from the closing of this offering, that we use our best efforts
to register all or a portion of the Registrable Securities on Form S-3 or
any similar short-form registration when use of one or more of these forms
becomes available to us.
PIGGYBACK REGISTRATION RIGHTS. If we register any of our common stock,
either for our own account or for the account of other security holders, and the
registration form to be used may be used for the registration of the Registrable
Securities or the GE-Blackwell Securities, the holders of the Registrable
Securities and the GE-Blackwell Securities are entitled to include their shares
of common stock in the
86
<PAGE>
registration. A majority of the holders of Registrable Securities and
GE-Blackwell Securities have waived their rights to register securities in
connection with this offering.
In all cases, a holder's right to include shares in a demand or piggyback
registration is subject:
- to the registration priority arrangement reached among HealthGate and the
holders of the Registrable Securities or GE-Blackwell Securities; and
- in an underwritten registration, to the ability of the underwriters to
limit the number of shares included in the offering.
All fees, costs and expenses of all of the registrations will be paid by us,
and all selling expenses (e.g. underwriting discounts, selling commissions and
stock transfer taxes) relating to the Registrable Securities or GE-Blackwell
Securities will be paid by the holders of the securities being registered.
87
<PAGE>
UNDERWRITING
HealthGate and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the number
of shares indicated in the following table at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. SG Cowen Securities Corporation, Volpe Brown Whelan & Company, LLC
and Warburg Dillon Read LLC are the representatives of the underwriters.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
SG Cowen Securities Corporation.............................
Volpe Brown Whelan & Company, LLC...........................
Warburg Dillon Read LLC.....................................
---------
Total................................................... 3,750,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are conditional and may be terminated at their discretion based on their
assessment of the state of the financial markets. The obligations of the
underwriters may also be terminated upon the occurrence of the other events
specified in the underwriting agreement. The underwriters are severally
committed to purchase all of the common stock being offered by us if any shares
are purchased, other than those covered by the over-allotment option described
below.
The underwriters, at the request of HealthGate, have reserved for sale to
HealthGate employees, friends and family members of employees and to employees
of companies with which HealthGate does business, at the initial public offering
price, up to five percent of the shares of common stock to be sold in this
offering. The number of shares available for sale to the general public will be
reduced to the extent that any reserved shares are purchased.
At the request of HealthGate, the underwriters will reserve up to
$5.0 million of common stock at the initial public offering price for sale to
Snap! LLC. National Broadcasting Company, Inc., a subsidiary of General Electric
Company, owns a majority interest in Snap. This amount would represent an
aggregate of 500,000 shares, based on an assumed initial public offering price
of $10.00 per share, the mid-point of the price range indicated on the cover of
this prospectus. The number of shares reserved for sale to Snap! LLC will reduce
the number of shares available to the general public. We cannot assure you that
any of these reserved shares will be purchased by Snap. Snap will agree that, if
it purchases any shares of common stock of HealthGate, it will not sell or
otherwise dispose of such shares for a period of 180 days following the date of
this prospectus. Any reserved shares not so purchased by Snap will be offered by
the underwriters to the general public on the same basis as the other shares
offered hereby.
The underwriters propose to offer the common stock directly to the public at
the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $ per share. Securities dealers may reallow a
concession not in excess of $ per share to other dealers. After the shares of
the common stock are released for sale to the public, the underwriters may vary
the offering price and other selling terms from time to time.
We have granted to the underwriters an option to purchase up to 562,500
additional shares of common stock at the public offering price set forth on the
cover of this prospectus to cover over-allotments, if any. The option is
exercisable for a period of 30 days. If the underwriters exercise their
over-allotment option, the underwriters have severally agreed to purchase shares
in approximately the same proportion as shown in the table above.
88
<PAGE>
The following table shows the per share and total public offering price, the
underwriting discount to be paid by HealthGate to the underwriters and the
proceeds from the sale of shares to the underwriters before HealthGate's
expenses. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- -------- --------
<S> <C> <C> <C>
Public offering price.......................... $ $ $
Underwriting discount.......................... $ $ $
Proceeds, before expenses, to HealthGate....... $ $ $
</TABLE>
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect of those liabilities.
HealthGate, our directors and executive officers, all principal stockholders
and other existing stockholders who hold an aggregate of 12,413,536 shares,
together with the holders of options to purchase 1,612,118 shares of common
stock and holders of warrants to purchase 3,586,727 shares of common stock, have
agreed with the underwriters that for a period of 180 days following the date of
this prospectus, without the prior written consent of SG Cowen Securities
Corporation, they will not dispose of or hedge any shares of common stock or any
securities convertible into or exchangeable for common stock.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making in
accordance with Regulation M under the Securities Exchange Act of 1934.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
common stock in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the
representatives to reclaim a selling concession from a syndicate member when the
common stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. In passive
market making, market makers in the common stock who are underwriters or
prospective underwriters may, subject to certain limitations, make bids for or
purchases of the common stock until the time, if any, at which a stabilizing bid
is made. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales in
excess of 5% of the common stock offered hereby to any account over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price was determined by
negotiations between us and the underwriters. Among the factors considered in
these negotiations were prevailing market conditions, the market capitalizations
and the stages of development of other companies that we and the underwriters
believe to be comparable to us, estimates of our business potential, our results
of operation in recent periods, the present state of our development and other
factors deemed relevant.
We estimate that our out of pocket expenses for this offering, not including
the underwriting discount, will be approximately $2,387,500.
89
<PAGE>
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby will be passed upon for HealthGate by Rich, May, Bilodeau & Flaherty,
P.C., Boston, Massachusetts. Stephen M. Kane, a member of Rich, May, Bilodeau &
Flaherty, P.C., is an Assistant Secretary of HealthGate and has been granted
options for the purchase of up to 1983 shares of HealthGate's common stock.
Mr. Kane and other attorneys of Rich, May, Bilodeau & Flaherty, P.C. will be
purchasing shares from the underwriters as part of HealthGate's reserved share
program. Certain legal matters will be passed upon for the underwriters by
Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements of HealthGate Data Corp. as of
December 31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998, which are included in this prospectus, have been so included
in reliance on the report (which contains an explanatory paragraph relating to
the Company's ability to continue as a going concern as described in Note 1 to
the financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the shares of common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits thereto. Statements contained in this prospectus as to the contents of
any contract or other document that is filed as an exhibit to the registration
statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document.
You may read and copy all or any portion of the registration statement and
the exhibits at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents, upon payment of a duplication fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the SEC's public reference rooms. Also, the SEC 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 that file
electronically with the SEC.
As a result of this offering, we will become subject to the information and
periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy and information statements and
other information with the SEC. These periodic reports, proxy and information
statements and other information will be available for inspection and copying at
the public reference facilities, regional offices and SEC's Web site referred to
above.
90
<PAGE>
HEALTHGATE DATA CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1997 and 1998
and as of September 30, 1999 (unaudited).................. F-3
Consolidated Statement of Operations for the years ended
December 31, 1996, 1997 and 1998 and the nine months ended
September 30, 1998 and September 30, 1999 (unaudited)..... F-4
Consolidated Statement of Changes in Common Stock and Other
Stockholders' Deficit for the years ended December 31,
1996, 1997 and 1998 and the nine months ended
September 30, 1999 (unaudited)............................ F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 and the nine months ended
September 30, 1998 and September 30, 1999 (unaudited)..... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of HealthGate Data Corp.
The common stock split described in Note 1 to the financial statements has not
been consummated at November 23, 1999. When it has been consummated, we will be
in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in common stock and other
stockholders' deficit and of cash flows present fairly, in all material
respects, the financial position of HealthGate Data Corp. and its subsidiary 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. 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 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses and negative cash flows
from operations since inception, which raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty."
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 2, 1999, except as to Note 11,
which is as of November 9, 1999
F-2
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------- -------------
1997 1998 1999 1999
---------- ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 29,045 $ 960,831 $ 807,742 $ 807,742
Accounts receivable, including receivables
from related parties of $0 and $160,000 at
December 31, 1997 and 1998, respectively,
and net of allowance for doubtful accounts
of $3,500 and $20,000 at December 31, 1997
and 1998, respectively, and $44,660 at
September 30, 1999 (unaudited).............. 291,828 362,189 682,946 682,946
Unbilled accounts receivable.................. -- 12,386 67,942 67,942
Prepaid expenses and other current assets..... 101,966 225,482 246,270 246,270
---------- ------------ ------------ ------------
Total current assets........................ 422,839 1,560,888 1,804,900 1,804,900
Fixed assets, net............................... 324,689 806,793 1,335,775 1,335,775
Marketing and distribution rights............... -- -- 7,359,000 11,859,000
Deferred offering costs......................... -- -- 1,461,859 1,461,859
Other assets.................................... 33,015 3,298 131,586 131,586
---------- ------------ ------------ ------------
Total assets................................ $ 780,543 $ 2,370,979 $ 12,093,120 $ 16,593,120
========== ============ ============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND COMMON STOCK AND OTHER STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease obligation... $ 85,541 $ 213,713 $ 370,619 $ 370,619
Accounts payable.............................. 610,495 572,687 1,974,144 1,974,144
Accrued payroll............................... 50,107 201,254 430,021 430,021
Customer deposits............................. -- -- 554,750 554,750
Other accrued expenses........................ 81,349 228,880 631,446 631,446
Deferred revenue.............................. 462,029 344,820 931,511 931,511
---------- ------------ ------------ ------------
Total current liabilities................... 1,289,521 1,561,354 4,892,491 4,892,491
Long-term portion of capital lease obligation... 16,927 226,401 362,145 362,145
Note payable to related party................... -- 2,000,000 -- --
Long-term note payable.......................... -- 1,429,087 1,493,264 1,493,264
---------- ------------ ------------ ------------
Total liabilities........................... 1,306,448 5,216,842 6,747,900 6,747,900
---------- ------------ ------------ ------------
Redeemable convertible preferred stock (Note
4)............................................ 6,294,602 6,889,431 15,282,692 --
---------- ------------ ------------ ------------
Common stock and other stockholders' equity
(deficit):
Common stock, $.01 par value;
Authorized: 20,000,000 shares
Issued and outstanding: 4,543,447 and
4,548,503 shares at December 31, 1997 and
1998, respectively and 4,568,412 shares at
September 30, 1999 (unaudited) actual;
12,598,968 shares at September 30, 1999
pro forma (unaudited)..................... 45,434 45,485 45,684 125,990
Additional paid-in capital...................... 123,205 680,725 21,135,729 40,838,115
Accumulated deficit............................. (6,989,146) (10,461,504) (29,320,470) (29,320,470)
Deferred compensation........................... -- -- (1,798,415) (1,798,415)
---------- ------------ ------------ ------------
Total common stock and other stockholders'
equity (deficit).......................... (6,820,507) (9,735,294) (9,937,472) 9,845,220
---------- ------------ ------------ ------------
Commitments and contingencies (Note 9)..........
---------- ------------ ------------ ------------
Total liabilities, redeemable convertible
preferred stock and common stock and other
stockholders' equity (deficit)............ $ 780,543 $ 2,370,979 $ 12,093,120 $ 16,593,120
========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue, including revenue
from related parties of $0,
$240,400, and $1,070,500, in
1996, 1997 and 1998,
respectively, and $805,600
(unaudited) and $575,700
(unaudited) in the nine
months ended September 30,
1998 and 1999,
respectively................ $ 408,244 $ 1,284,636 $ 2,434,124 $ 1,844,628 $ 1,735,925
----------- ----------- ----------- ----------- ------------
Cost and expenses:
Cost of revenue............. 491,550 911,765 1,181,012 821,981 1,445,377
Research and development.... 980,373 890,577 1,450,106 896,666 3,053,095
Sales and marketing......... 1,080,187 1,496,356 1,414,179 1,033,310 5,718,247
General and
administrative............ 567,822 521,323 929,479 671,830 1,667,014
----------- ----------- ----------- ----------- ------------
Total costs and
expenses................ 3,119,932 3,820,021 4,974,776 3,423,787 11,883,733
----------- ----------- ----------- ----------- ------------
Loss from operations........ (2,711,688) (2,535,385) (2,540,652) (1,579,159) (10,147,808)
----------- ----------- ----------- ----------- ------------
Interest expense, net......... (14,497) (5,773) (327,100) (181,737) (323,162)
Other income (expense)........ -- -- (9,777) -- 5,265
----------- ----------- ----------- ----------- ------------
Net loss.................. (2,726,185) (2,541,158) (2,877,529) (1,760,896) (10,465,705)
Preferred stock dividends and
accretion of preferred stock
to redemption value......... (263,641) (539,644) (594,829) (446,121) (8,393,261)
----------- ----------- ----------- ----------- ------------
Net loss attributable to
common stockholders..... $(2,989,826) $(3,080,802) $(3,472,358) $(2,207,017) $(18,858,966)
=========== =========== =========== =========== ============
Basic and diluted net loss per
share attributable to common
stockholders................ $ (.66) $ (.68) $ (.76) $ (.49) $ (4.14)
Shares used in computing basic
and diluted net loss per
share attributable to common
stockholders................ 4,543,399 4,543,447 4,547,559 4,546,916 4,558,567
Unaudited pro forma basic and
diluted net loss per
share....................... $ (.31) $ (.95)
Shares used in computing
unaudited pro forma basic
and diluted net loss per
share....................... 9,219,587 10,967,845
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK AND
OTHER STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK ADDITIONAL STOCK AND OTHER
--------------------- PAID-IN ACCUMULATED DEFERRED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT COMPENSATION DEFICIT
--------- --------- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995......... 4,543,249 $45,432 $ 123,055 $ (918,518) $ (6,524) $ (756,555)
Compensation relating to grants
of stock options............... 6,524 6,524
Exercise of common stock
options........................ 198 2 150 152
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value............ (263,641) (263,641)
Net loss......................... (2,726,185) (2,726,185)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1996......... 4,543,447 45,434 123,205 (3,908,344) -- (3,739,705)
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value............ (539,644) (539,644)
Net loss......................... (2,541,158) (2,541,158)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1997......... 4,543,447 45,434 123,205 (6,989,146) -- (6,820,507)
Exercise of common stock
options........................ 5,056 51 3,520 3,571
Issuance of common stock
warrants....................... 554,000 554,000
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value............ (594,829) (594,829)
Net loss......................... (2,877,529) (2,877,529)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1998......... 4,548,503 45,485 680,725 (10,461,504) -- (9,735,294)
Deferred compensation relating to
grants of stock options
(unaudited).................... 2,307,246 (2,307,246) --
Compensation relating to grants
of stock options (unaudited)... 508,831 508,831
Exercise of common stock options
(unaudited).................... 19,909 199 9,184 9,383
Series E preferred stock
beneficial conversion feature
(Note 4) (unaudited)........... 7,638,574 7,638,574
Issuance of common stock warrants
(unaudited).................... 10,500,000 10,500,000
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value
(unaudited).................... (8,393,261) (8,393,261)
Net loss (unaudited)............. (10,465,705) (10,465,705)
--------- ------- ----------- ------------ ----------- ------------
Balance, September 30, 1999
(unaudited)...................... 4,568,412 $45,684 $21,135,729 $(29,320,470) $(1,798,415) $ (9,937,472)
========= ======= =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(2,726,185) $(2,541,158) $(2,877,529) $(1,760,896) $(10,465,705)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization..... 197,900 356,791 416,897 288,523 3,407,569
Compensation expense related to
stock options................... 6,524 -- -- -- 508,831
Other............................. -- -- 9,777 -- 1,270
Changes in assets and liabilities:
Accounts receivable............. (63,144) (228,010) (70,361) (77,256) (320,757)
Unbilled accounts receivable.... -- -- (12,386) -- (55,556)
Prepaid expenses and other
current assets................ (24,684) (47,349) (123,516) (55,693) (20,788)
Deferred offering costs......... -- -- -- -- (1,461,859)
Other assets.................... 1,870 (1,357) 29,717 16,894 (128,288)
Accounts payable................ 321,066 186,801 (37,808) (240,440) 1,401,457
Accrued payroll................. (12,895) 35,091 151,147 169,592 228,767
Customer deposits............... -- -- -- -- 554,750
Other accrued expenses.......... (1,433) 36,722 147,531 (2,277) 402,566
Deferred revenue................ 16,603 445,426 (117,209) (151,176) 586,691
----------- ----------- ----------- ----------- ------------
Net cash used in operating
activities................. (2,284,378) (1,757,043) (2,483,740) (1,812,729) (5,361,052)
----------- ----------- ----------- ----------- ------------
Cash flows from investing activities:
Purchases of fixed assets........... (152,824) (124,801) (277,538) (235,486) (410,429)
----------- ----------- ----------- ----------- ------------
Net cash used in investing
activities.......................... (152,824) (124,801) (277,538) (235,486) (410,429)
Cash flows from financing activities:
Proceeds (payments) of capital lease
obligations....................... (165,793) (237,190) (239,785) (176,883) (229,565)
Proceeds from issuance of preferred
and common stock, net of issuance
costs............................. 3,653,901 992,353 3,571 -- 5,847,957
Proceeds from notes payable and
warrants.......................... -- -- 3,929,278 3,929,278 --
----------- ----------- ----------- ----------- ------------
Net cash provided by financing
activities................. 3,488,108 755,163 3,693,064 3,752,395 5,618,392
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents.................... 1,050,906 (1,126,681) 931,786 1,704,180 (153,089)
Cash and cash equivalents, beginning
of period........................... 104,820 1,155,726 29,045 29,045 960,831
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents, end of
period.............................. $ 1,155,726 $ 29,045 $ 960,831 $ 1,733,225 $ 807,742
=========== =========== =========== =========== ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
HealthGate paid cash for interest of approximately $24,000, $28,000 and $242,000
for the years ended December 31, 1996, 1997 and 1998, respectively, and $152,000
(unaudited) and $439,000 (unaudited) for the nine months ended September 30,
1998 and 1999, respectively.
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
HealthGate entered into capital leases for certain computer equipment totaling
approximately $87,000, $71,000 and $577,000 during the years ended December 31,
1996, 1997 and 1998, respectively, and $503,000 (unaudited) and $523,000
(unaudited) during the nine months ended September 30, 1998 and 1999,
respectively.
In connection with the issuance of the Series E redeemable convertible preferred
stock in April 1999, HealthGate issued a placement agent a warrant to purchase
up to 21,654 shares of HealthGate common stock at an exercise price of $2.89 per
share. A value of $200,000 was ascribed to the warrant. Also in April 1999, a
$2,000,000 convertible note payable to a related party was converted into
174,729 shares of HealthGate's Series E redeemable convertible preferred stock
(Note 3).
In June 1999, HealthGate issued a warrant to a related party in connection with
a development and distribution agreement. The fair value of the warrant of
$10,300,000 was recorded as marketing and distribution rights, and will be
amortized as a sales and marketing expense on a straight-line basis over the one
year contractual term of the related development and distribution agreement.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HealthGate Data Corp. ("HealthGate") is an Internet provider of healthcare
information designed to help physicians and other healthcare professionals,
patients and health-conscious consumers make better-informed healthcare
decisions. HealthGate was incorporated in the State of Delaware on February 8,
1994.
HealthGate is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological developments, reliance
on continued development and acceptance of the Internet, intense competition and
a limited operating history.
The Company intends to declare a 3.966 for 1 stock split, subject to
shareholder approval. All share and per share amounts presented have been
restated to reflect the stock split.
HealthGate has sustained losses and negative cash flows from its operations
since inception. These matters raise substantial doubt about HealthGate's
ability to continue as a going concern for at least the next twelve months.
Management currently intends to raise financing through a firm commitment
underwritten initial public offering, the proceeds of which are expected to
exceed cash requirements for the next twelve months. If the initial public
offering is not successfully completed, management intends to obtain alternative
financing through the private placement of debt or equity, and reduce
expenditures so as to minimize requirements for additional financial resources.
Management believes that, if this offering is not completed, HealthGate will be
able to successfully execute its alternative plans. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Significant accounting polices followed in the preparation of the financial
statements are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of HealthGate and
its wholly-owned subsidiary, HealthGate Europe Limited. All material
intercompany balances and transactions have been eliminated.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of HealthGate's foreign subsidiary is the local
currency. Adjustments resulting from the translation of the financial statements
of HealthGate's subsidiary into U.S. dollars, and foreign currency transaction
gains and losses included in the results of operations, have not been
significant.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
HealthGate considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. HealthGate
invests its excess cash in money market funds backed by U.S. Government
securities, U.S. Treasury securities and commercial paper which are subject to
minimal credit and market risk. HealthGate's cash equivalents are classified as
available for sale and recorded at amortized cost, which approximates fair
value. HealthGate's marketable securities are classified as held-to-maturity and
recorded at amortized cost, which approximates fair value.
F-7
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
HealthGate derives revenue primarily from user subscriptions and transaction
based fees, Web site development and hosting arrangements, content syndication
arrangements and the sale of advertising and sponsorships under short-term
contracts. Revenue from user subscriptions is recognized ratably over the
subscription period, and revenue from usage fees is recognized when the service
is provided. Revenue from Web site development and hosting arrangements and
content syndication arrangements is recognized ratably over the terms of the
underlying agreements between HealthGate, the customer and, if applicable,
HealthGate's authorized reseller, which generally range from one to three years.
For any arrangement in which HealthGate guarantees advertising commissions to
the customer, HealthGate records fees paid by the customer as a customer
deposit, up to the amount of the applicable guarantee. Payments made to
customers under these guarantees are recorded as reductions of the related
customer deposit. The excess of the fee paid by the customer to HealthGate over
guaranteed advertising and sponsorship commissions, if any, is recognized as
revenue ratably over the term of the underlying agreement. For those
arrangements in which HealthGate guarantees advertising and sponsorship
commissions in excess of the fees paid by the customer, the excess is recorded
as expense upon signing the agreement. For arrangements in which HealthGate
sells through a reseller, HealthGate does not recognize any revenue until an
agreement has been finalized between HealthGate, its customer and its authorized
reseller and Web site has been delivered.
Advertising revenue is derived principally from short-term advertising
contracts, in which HealthGate typically guarantees a minimum number of
impressions to be delivered to users over a specified period of time for a fixed
fee. Advertising revenue is recognized in the period in which the advertisement
is displayed, at the lesser of the ratio of impressions delivered over total
guaranteed impressions or a straight line basis over the term of the contract,
provided that no significant HealthGate obligations remain. To the extent that
minimum guaranteed impressions are not met, HealthGate defers recognition of the
corresponding revenue until the guaranteed impressions are delivered.
Sponsorship revenue is recognized ratably over the terms of the applicable
agreements, which generally range from one to six months.
Advertising and sponsorship revenue also includes barter revenue, which
represents an exchange by HealthGate of advertising space on HealthGate's Web
sites for reciprocal advertising space on other Web sites. Revenue from
advertising barter transactions is recognized during the period in which the
advertisements are displayed by HealthGate. Barter transactions are recorded at
the estimated fair value of the advertisements provided, unless the fair value
of the advertisments received is more evident. Barter expenses are recognized
when HealthGate's advertisements are run on the reciprocal Web sites, which is
typically in the same period as when the advertisements are run on HealthGate's
Web sites. Barter expenses are included in sales and marketing expenses. During
the years ended December 31, 1996, 1997 and 1998, revenue from barter
transactions was $125,000, $607,196 and $435,889, respectively. During the nine
months ended September 30, 1998 and 1999, revenue from barter transactions was
$350,192 and $72,538, respectively.
Revenue from a research arrangement was recognized pursuant to the agreement
as the related work was performed. During the year ended December 31, 1996,
total revenue recognized and costs incurred under this arrangement were $87,171
and $81,442, respectively.
F-8
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of HealthGate's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses and
notes payable, approximate their fair values at December 31, 1997 and 1998.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially expose HealthGate to concentrations
of credit risk consist primarily of trade accounts receivable. To minimize risk,
ongoing credit evaluations of customers' financial condition are performed,
although collateral generally is not required. At December 31, 1997, one
customer accounted for 63% of gross accounts receivable. At December 31, 1998,
two customers accounted for 20% and 11% of gross accounts receivable, and a
related party accounted for 42% of gross accounts receivable. At September 30,
1999, one customer accounted for 37% of gross accounts receivable. For the year
ended December 31, 1996, two customers accounted for 15% and 11% of total
revenue, and revenue from a research arrangement accounted for 21% of total
revenue. For the year ended December 31, 1997, one customer accounted for 19% of
total revenue, and a related party accounted for 18% of total revenue. For the
year ended December 31, 1998, one customer accounted for 18% of total revenue
and a related party accounted for 44% of total revenue. For the nine months
ended September 30, 1998, one customer accounted for 18% of total revenue and a
related party accounted for 44% of total revenue. For the nine months ended
September 30, 1999, one customer accounted for 12% of total revenue and a
related party accounted for 33% of total revenue.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Costs incurred in the research and development of HealthGate's products are
expensed as incurred, except for certain software development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility (as defined by Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed") and capitalized thereafter
if material to HealthGate's financial position or results of operations. Costs
eligible for capitalization have been insignificant to date and, accordingly, no
amounts have been capitalized.
FIXED ASSETS
Fixed assets are recorded at cost and depreciated over their estimated
useful lives, generally one to three years, using the straight-line method.
Fixed assets held under capital leases which involve a transfer of ownership are
amortized over the estimated useful life of the asset. Other fixed assets held
under capital leases are amortized over the shorter of the lease term or the
estimated useful life of the related asset. Repairs and maintenance costs are
expensed as incurred.
ACCOUNTING FOR STOCK-BASED COMPENSATION
HealthGate accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market
F-9
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
value of HealthGate's common stock at the date of grant. HealthGate has adopted
the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," for
disclosure purposes only (Note 5). All stock-based awards to non-employees are
accounted for at their fair value in accordance with SFAS No. 123 and related
interpretations.
ADVERTISING COSTS
Advertising costs are charged to operations as incurred. Advertising costs
were approximately $410,000, $790,000, $456,000, $370,000, and $223,000 in the
years ended December 31, 1996, 1997 and 1998 and nine months ended
September 30, 1998 and 1999, respectively, of which approximately $115,000,
$617,000, $418,000, $332,000 and $73,000, respectively, related to barter
transactions.
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.
UNAUDITED PRO FORMA BALANCE SHEET
The unaudited pro forma balance sheet at September 30, 1999 gives effect to
the issuance of 500,000 shares of common stock to Snap in November 1999 (Note
11). Upon the closing of HealthGate's anticipated initial public offering, all
shares of redeemable convertible preferred stock outstanding at September 30,
1999 (Note 4) will automatically convert into 7,530,556 shares of common stock.
This conversion has been reflected in the unaudited pro forma balance sheet as
of September 30, 1999.
UNAUDITED INTERIM FINANCIAL DATA AND RESTATEMENT OF THE THREE MONTHS ENDED
MARCH 31, 1999
The interim financial data for the nine months ended September 30, 1998 and
1999 have been derived from unaudited financial statements of HealthGate.
Management believes HealthGate's unaudited financial statements have been
prepared on the same basis as the audited financial statements.
During the three months ended March 31, 1999, HealthGate recognized services
revenue of $82,000 related to two Web site development and hosting arrangements.
During the second quarter of 1999, it was learned that certain material terms
related to advertising and sponsorship commissions guaranteed to the customers
of these sites had not been finalized at March 31, 1999. Accordingly, HealthGate
has restated its results of operations for the three months ended March 31, 1999
to reverse the $82,000 of services revenue related to these sites. These amounts
were recorded as customer deposits. In the opinion of management, all
adjustments necessary to revise the quarterly financial
F-10
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statements have been recorded. Below is a summary of HealthGate's results of
operations for the three months ended March 31, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
------------------
(UNAUDITED)
<S> <C>
As previously reported:
Revenue................................................... $ 614,805
Loss from operations...................................... (1,462,147)
Net loss.................................................. (1,620,193)
Net loss attributable to common stockholders.............. (1,768,900)
Basic and diluted net loss per share attributable to
common stockholders..................................... $ (.39)
Pro forma basic and diluted net loss per share............ $ (.18)
As restated:
Revenue................................................... $ 532,805
Loss from operations...................................... (1,544,147)
Net loss.................................................. (1,702,193)
Net loss attributable to common stockholders.............. (1,850,900)
Basic and diluted net loss per share attributable to
common stockholders..................................... $ (.41)
Pro forma basic and diluted net loss per share............ $ (.18)
</TABLE>
ACTUAL AND UNAUDITED PRO FORMA NET LOSS PER SHARE
Net loss per share is computed in accordance with SFAS No. 128, "Earnings
Per Share." Basic net loss per share is computed by dividing net loss
attributable to common stockholders by the weighted average number of shares of
common stock outstanding. Diluted net loss per share does not differ from basic
net loss per share since potential common shares from conversion of preferred
stock and exercise of stock options and warrants are anti-dilutive for all
periods presented. Unaudited pro forma basic and diluted net loss per share have
been calculated assuming the conversion of all outstanding shares of preferred
stock into common shares, as if the shares had converted immediately upon their
issuance.
COMPREHENSIVE INCOME
HealthGate adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. This statement requires a full set of general purpose financial
statements to be expanded to include the reporting of "comprehensive income."
Comprehensive income is comprised of two components, net income and other
comprehensive income. During the years ended December 31, 1996, 1997 and 1998
and the nine months ended September 30, 1998 and 1999, HealthGate had no items
qualifying as other comprehensive income; accordingly, the adoption of SFAS No.
130 had no impact on HealthGate's financial statements.
F-11
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." This statement changes the way
public business enterprises report segment information, including financial and
descriptive information about their selected segment information in interim and
annual financial statements. Under SFAS No. 131, operating segments are defined
as revenue-producing components of the enterprise which are generally used
internally for evaluating segment performance. SFAS No. 131 became effective for
HealthGate's fiscal year ended December 31, 1998 and had no effect on
HealthGate's financial position or results of operations. HealthGate operates in
one segment, which is providing healthcare information and related information
to institutions and individuals through the Internet.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. HealthGate does
not expect SFAS No. 133 to have a material effect on its financial position or
results of operations.
2. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES -----------------------
IN YEARS 1997 1998
------------ ---------- ----------
<S> <C> <C> <C>
Computer equipment and software........... 3 $ 295,384 $ 473,842
Office equipment and fixtures............. 3 80,592 127,349
Computer equipment under capital lease.... 1-3 549,228 1,126,659
---------- ----------
925,204 1,727,850
---------- ----------
Less--Accumulated depreciation and
amortization............................ (600,515) (921,057)
---------- ----------
$ 324,689 $ 806,793
========== ==========
</TABLE>
Depreciation and amortization expense on fixed assets was $197,900, $356,791
and $363,088 in 1996, 1997 and 1998, respectively, of which $132,055, $248,217
and $186,475 in 1996, 1997, and 1998, respectively, related to amortization of
assets held under capital lease. Accumulated amortization on assets under
capital lease was $417,961 and $604,436 at December 31, 1997 and 1998,
respectively.
F-12
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. NOTES PAYABLE
On March 26, 1998, HealthGate issued a $2,000,000 subordinated note payable
(the "Note") with detachable warrants, for net cash proceeds of approximately
$1,929,000. The Note bears interest at an annual rate of 13.0%, payable monthly.
The principal amount is due on March 26, 2003, but may be prepaid without
penalty. The Note is secured by substantially all of HealthGate's tangible and
intangible assets, and limits HealthGate's ability to issue additional debt.
In connection with the Note, HealthGate issued warrants to purchase 341,076
shares of its common stock at an exercise price per share of $.00005. Further,
on December 31, 1998, HealthGate issued warrants to purchase an additional
114,816 shares at an exercise price of $.00005 per share, as HealthGate did not
achieve a minimum 1998 revenue target defined in the agreement. Under the terms
of the Note agreement, HealthGate will be required to issue warrants to purchase
an additional 178,470 shares, 184,221 shares and 190,170 shares at an exercise
price of $.00005 per share if the Note is outstanding on March 26, 2000, 2001
and 2002, respectively. The number of shares and exercise price of the issued
and contingently issuable warrants are to be adjusted for certain dilutive and
anti-dilutive events. The warrants are exercisable for a period of ten years
from March 26, 1998. The terms of the warrant agreement place certain
restrictions on the number of options, warrants and other convertible securities
which HealthGate may issue. These restrictions will expire upon an initial
public offering of HealthGate's common stock. HealthGate ascribed a value of
$261,000 to the warrants issued in March 1998 and $293,000 to the warrants
issued in December 1998, based on the fair value at the time of issuance. The
amount which was ascribed to the warrants was recorded as additional paid-in
capital and a discount from the face value of the Note. The discount is being
amortized to interest expense over the life of the note using the effective
interest method.
On September 29, 1998, the Company issued a convertible note (the
"Convertible Note") in the principal amount of $2,000,000 to an existing
preferred stockholder. The Convertible Note bore interest at an annual rate of
12%, and was due on March 31, 1999. In April 1999, the Convertible Note was
converted into 174,729 shares of the HealthGate's Series E redeemable
convertible preferred stock (Note 4). Since the Convertible Note was converted
into preferred stock in April 1999, it has been classified as long-term in
HealthGate's balance sheet at December 31, 1998.
F-13
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK
A summary of redeemable convertible preferred stock activity for the years
ended December 31, 1996, 1997 and 1998 and the nine months ended September 30,
1999 is as follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
------------------- --------------------- --------------------- ---------------------
CARRYING CARRYING CARRYING CARRYING
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
-------- -------- -------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995........... 1,000 $454,310 250 $ 390,905 -- $ -- -- $ --
Issuance of Series B................. 750 1,200,000
Issuance of Series C, net of issuance
costs of $22,009................. 1,000 977,991
Issuance of Series D, net of issuance
costs of $24,242................. 1,000 1,475,758
Accrual of cumulative dividends and
accretion to redemption value.... 70,265 136,971 43,501 12,904
----- -------- ----- ---------- ----- ---------- ----- ----------
Balance, December 31, 1996........... 1,000 524,575 1,000 1,727,876 1,000 1,021,492 1,000 1,488,662
Issuance of Series D, net of issuance
costs of $8,147.................. 667 992,353
Accrual of cumulative dividends and
accretion to redemption value.... 70,262 163,637 104,402 201,343
----- -------- ----- ---------- ----- ---------- ----- ----------
Balance, December 31, 1997........... 1,000 594,837 1,000 1,891,513 1,000 1,125,894 1,667 2,682,358
Accrual of cumulative dividends and
accretion to redemption value.... 70,262 163,637 104,402 256,528
----- -------- ----- ---------- ----- ---------- ----- ----------
Balance, December 31, 1998........... 1,000 665,099 1,000 2,055,150 1,000 1,230,296 1,667 2,938,886
Issuance of Series E, net of issuance
costs of $611,426 and of a
beneficial conversion feature of
$7,638,574.......................
Accrual of cumulative dividends and
accretion to redemption value.... 52,701 122,726 78,300 192,397
----- -------- ----- ---------- ----- ---------- ----- ----------
Balance at September 30, 1999........ 1,000 $717,800 1,000 $2,177,876 1,000 $1,308,596 1,667 $3,131,283
===== ======== ===== ========== ===== ========== ===== ==========
<CAPTION>
SERIES E
--------------------- TOTAL
CARRYING CARRYING
SHARES VALUE VALUE
-------- ---------- -----------
<S> <C> <C> <C>
Balance, December 31, 1995........... -- $ -- $ 845,215
Issuance of Series B................. 1,200,000
Issuance of Series C, net of issuance
costs of $22,009................. 977,991
Issuance of Series D, net of issuance
costs of $24,242................. 1,475,758
Accrual of cumulative dividends and
accretion to redemption value.... 263,641
------- ---------- -----------
Balance, December 31, 1996........... -- -- 4,762,605
Issuance of Series D, net of issuance
costs of $8,147.................. 992,353
Accrual of cumulative dividends and
accretion to redemption value.... 539,644
------- ---------- -----------
Balance, December 31, 1997........... -- -- 6,294,602
Accrual of cumulative dividends and
accretion to redemption value.... 594,829
------- ---------- -----------
Balance, December 31, 1998........... -- -- 6,889,431
Issuance of Series E, net of issuance
costs of $611,426 and of a
beneficial conversion feature of
$7,638,574....................... 720,757 -- --
Accrual of cumulative dividends and
accretion to redemption value.... 7,947,137 8,393,261
------- ---------- -----------
Balance at September 30, 1999........ 720,757 $7,947,137 $15,282,692
======= ========== ===========
</TABLE>
CONVERSION
Each preferred share is convertible into common stock at the option of the
preferred stockholder or automatically upon the closing of an initial public
offering of HealthGate's common stock in which proceeds from the public equal or
exceed $10,000,000. The number of common shares to which a holder of the
preferred stock is entitled upon conversion is based upon the conversion rates
defined by HealthGate's Amended and Restated Certificate of Incorporation,
(approximately 1,209.15 for 1, 1,584.02 for 1, 549.89 for 1 and 797.24 for 1 for
holders of Series A, B, C and D preferred stock, respectively, at December 31,
1998). At December 31, 1998, the outstanding preferred stock is convertible into
a total of 4,672,034 common shares. The conversion rates are to be adjusted for
certain dilutive and anti-dilutive events. HealthGate has reserved approximately
1,209,200, 1,584,100, 549,900 and 1,329,000 shares of common stock for the
conversion of Series A, B, C and D preferred stock, respectively.
LIQUIDATION, DISSOLUTION OR WINDING UP OF HEALTHGATE
In the event of any liquidation, dissolution or winding up of HealthGate,
the holders of Series A, B, C and D preferred stock are entitled to receive, on
a pro-rata basis, $500, $1,600, $1,000 and $1,500 per share, respectively, plus
all accrued and unpaid dividends.
F-14
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
VOTING, REGISTRATION AND OTHER RIGHTS
The holders of the preferred stock are entitled to vote, together with the
holders of common stock, on all matters submitted to stockholders for a vote.
Each preferred stockholder is entitled to the number of votes equal to the
number of shares of common stock into which each Series A, B, C and D share is
convertible at the time of such vote.
DIVIDENDS
The holders of the Series A, B, C and D preferred stock are entitled to
receive cumulative annual dividends in the amount of $50, $160, $100 and $150
per share, respectively, whether or not declared by the Board of Directors.
These dividends are payable upon liquidation, dissolution or winding-up of
HealthGate, or upon redemption of the respective preferred stock.
REDEMPTION
On each of the fifth, sixth and seventh anniversaries of the applicable
series closing date, HealthGate is required to redeem 33-1/3 percent of the
Series A, B, C, D and E preferred stock at a redemption price equal to $500,
$1,600, $1,000 and $1,500 per share, respectively, plus accrued and unpaid
dividends through the redemption date.
Required redemption amounts for each of the five years following
December 31, 1998, for the preferred stock, excluding any cumulative and unpaid
dividends, are as follows:
<TABLE>
<CAPTION>
REDEMPTION
AMOUNT
-----------
<S> <C>
1999........................................................ $ --
2000........................................................ 700,000
2001........................................................ 1,866,833
2002........................................................ 1,866,834
2003........................................................ 1,166,833
Thereafter.................................................. 8,250,000
-----------
$13,850,500
===========
</TABLE>
ISSUANCE OF PREFERRED STOCK
In April 1999, HealthGate issued 546,028 shares of newly authorized Series E
redeemable convertible preferred stock to GE Capital Equity Investments, Inc.,
an affiliate of General Electric Company (Note 5), for gross proceeds of
$6,250,000. In connection with the issuance of the Series E preferred stock,
HealthGate paid $300,000 of fees to a placement agent, paid other issue costs of
$111,426, and issued the placement agent a warrant to purchase up to 21,654
shares of HealthGate common stock at an exercise price of $2.89 per share. The
Company has ascribed a value to the warrant of $200,000. The placement fee,
other issue costs and warrant value have been reflected as a reduction of the
proceeds from the Series E preferred stock issuance. An additional 174,729
shares of Series E preferred stock were issued upon conversion of a convertible
note (Note 3). The Series E preferred stock ranks senior in liquidation to other
classes of preferred stock, and has certain veto rights. The Series E preferred
stock accrues cumulative annual dividends at 7% of its liquidation value
F-15
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
(initially $8,250,000). The dividends are compounded annually and, unless paid,
are added to the Series E preferred stock liquidation value. The Series E
preferred stock is convertible into a number of shares of common stock
determined by dividing the liquidation value by a conversion price per share of
$2.89. The conversion price is to be adjusted for certain dilutive events.
When issued, each share of Series E preferred stock was convertible into
3.966 shares of common stock, which represents a discount from the fair value of
common stock on the date of the Series E issuance. The value attributable to
this conversion right represents an incremental yield, or a beneficial
conversion feature, which will be recognized as a return to the preferred
stockholders. This amount, equal to the net proceeds from the Series E offering
of approximately $7,639,000, which includes conversion of the convertible note,
has been recorded as accretion of preferred stock to redemption value in the
consolidated statement of operations in the period ended September 30, 1999, and
represents a non-cash charge in the determination of net loss attributable to
common stockholders.
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT
COMMON STOCK
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of HealthGate's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to any preferential dividend rights of the preferred
stockholders.
A 50-for-1 split of HealthGate's common stock became effective on January
23, 1998. All shares of common stock, options, and warrants and per share
amounts included in the accompanying financial statements have been adjusted to
give retroactive effect to the stock split for all periods presented.
STOCK OPTION PLANS
In June 1994, HealthGate adopted the HealthGate Data Corp. 1994 Stock Option
Plan (the "1994 Plan") which provides for the granting of both incentive stock
options and nonqualified options to employees, directors and consultants. The
1994 Plan, as amended, allows for a maximum of 2,577,900 options to purchase
shares of common stock to be issued prior to December 2004. The exercise price
of any incentive stock option granted under the 1994 Plan shall not be less than
the fair market value of the stock on the date of grant, as determined in good
faith by the Board of Directors, or less than 110% of the fair value in the case
of optionees holding more than 10% of the total combined voting power of all
classes of HealthGate's stock. Options granted under the 1994 Plan are
exercisable for a period of not longer than ten years from the date of grant, or
five years in the case of optionees holding more than 10% of the combined voting
power of all classes of HealthGate's stock.
HealthGate applies APB 25 and related interpretations in accounting for
employee and director options granted under the 1994 Plan. Since inception
(February 8, 1994) through December 31, 1998, no compensation expense has been
recognized for options granted to employees under this plan. During 1996 and
1997, HealthGate granted options to purchase 29,745 and 9,915 shares of common
stock, respectively, to a member of its Board of Directors for consulting
services rendered. The options vested during 1997 and 1998 as the consulting
services were provided. The compensation expense related to these options was
not significant. Had compensation cost attributable to the 1994 Plan and other
options been determined based on the fair value of the options at the grant
date, consistent with
F-16
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT (CONTINUED)
the provisions of FAS 123, HealthGate's net loss and net loss per share would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net loss
As reported.......................................... $(2,726,185) $(2,541,158) $(2,877,529)
Pro forma............................................ (2,749,727) (2,580,033) (2,904,547)
Basic and diluted net loss per share attributable
to common stockholders
As reported.......................................... $ (.66) $ (.68) $ (.76)
Pro forma............................................ (.66) (.69) (.77)
</TABLE>
Because the determination of the fair value of all options granted after
HealthGate becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1998, and most options vest over several years, the above pro forma effects are
not necessarily indicative of the pro forma effects on future years.
Under SFAS No. 123, the fair value of each employee option grant is
estimated on the date of grant using the Black-Scholes option pricing model to
apply the minimum value method with the following weighted-average assumptions
used for grants made during the following periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Expected option term (years)................................ 4 4 4
Risk-free interest rate..................................... 5.70% 6.16% 5.29%
Expected volatility......................................... 0.0% 0.0% 0.0%
Dividend yield.............................................. 0.0% 0.0% 0.0%
</TABLE>
A summary of the status of HealthGate's options as of December 31, 1996,
1997 and 1998 and changes during the periods then ended are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1996 1997 1998
-------------------------- -------------------------- --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period................................... 593,313 $ .23 921,500 $ .58 1,310,564 $ .45
Granted.................................... 525,495 1.16 611,755 .47 826,911 1.46
Exercised.................................. (198) .70 -- -- (5,056) .70
Canceled................................... (197,110) 1.08 (222,691) 1.02 (418,314) .31
--------- ------ --------- ----- --------- -----
Outstanding at end of period............... 921,500 $ .58 1,310,564 $ .45 1,714,105 $ .97
========= ====== ========= ===== ========= =====
Options available for grant at end of
period................................... 488,611 496,147 87,550
========= ========= =========
Options granted at fair value:
Weighted average exercise price.......... $ 1.16 $ .47 $ 1.46
========= ========= =========
Weighted average fair value.............. $ .23 $ .10 $ .05
========= ========= =========
</TABLE>
F-17
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ------------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
under $.25................. 220,510 2.88 $ .03 220,510 $ .03
$.25--$.50................. 523,512 3.18 .48 311,133 .47
$.71--$.88................. 240,340 4.17 .76 22,210 .71
$1.16...................... 194,334 3.68 1.16 186,402 1.16
$1.88...................... 535,409 4.06 1.88 39,660 1.88
--------- ---------
1,714,105 779,915
========= =========
</TABLE>
DEFERRED COMPENSATION
During the nine months ended September 30, 1999, HealthGate granted stock
options to purchase 382,806 shares of its common stock with exercise prices
ranging from $.88 to $9.49 per share. HealthGate recorded compensation expense
and deferred compensation relating to these options totaling approximately
$509,000 and $2,307,000, respectively, representing the differences between the
estimated fair market value of the common stock on the date of grant and the
exercise price. Compensation related to options which vest over three years was
recorded as a component of stockholders' deficit and is being amortized over the
vesting periods of the related options.
ISSUANCE OF WARRANT TO RELATED PARTY
On June 11, 1999, HealthGate entered into a development and distribution
agreement with GE Medical Systems ("GEMS"), an operating division of General
Electric Company and an affiliate of a Series E preferred stock investor
(Note 4). HealthGate believes that this agreement will benefit it through the
association of the GE Medical Systems name with HealthGate in general, and its
CHOICE product in particular, and through the efforts of GE Medical Systems to
distribute both its standard CHOICE product and the GE Medical Systems enhanced
versions of its CHOICE product. Therefore, in connection with this agreement,
HealthGate issued to General Electric Company a warrant to purchase up to
1,189,800 shares of HealthGate's common stock at an exercise price per share of
$9.49. The warrant is immediately exercisable, and has a term of five years. In
the event HealthGate issues common stock or other equity or debt instruments
which are convertible into common stock for an amount less than the current
exercise price of this warrant, then the exercise price and number of shares of
this warrant will be adjusted accordingly. These adjustment provisions terminate
upon the completion of a qualifying initial public offering, as described in the
agreement. However, if HealthGate fails to complete an initial public offering,
a private placement of securities, or a sale of HealthGate by December 31, 1999,
the exercise price will be adjusted to $3.46 per share on January 1, 2000. The
fair value of this warrant was determined to be $10,300,000 using the
Black-Scholes option pricing model, based on the following assumptions: 100%
volatility, a term of 5 years, and an interest rate of 5.6%. In the event the
exercise price of this warrant is adjusted, its fair value will increase. The
value of the warrant has been recorded as marketing and distribution rights, and
will be amortized as a sales and marketing expense on a straight-line basis over
the one year contractual term of the related
F-18
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT (CONTINUED)
development and distribution agreement. During the nine months ended
September 30, 1999, amortization expense totaled $2,941,000.
6. INCOME TAXES
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $2,303,707 $3,506,205
Deferred compensation..................................... -- --
Marketing and distribution rights......................... -- --
Other..................................................... 247,946 259,980
---------- ----------
Deferred tax assets......................................... 2,551,653 3,766,185
---------- ----------
Deferred tax asset valuation allowance...................... (2,551,653) (3,766,185)
---------- ----------
$ -- $ --
========== ==========
</TABLE>
Realization of total deferred tax assets is dependent upon the generation of
future taxable income. HealthGate has provided a valuation allowance for the
full amount of its deferred tax assets, since realization of these future
benefits is not sufficiently assured.
Income taxes computed using the federal statutory income tax rate differs
from HealthGate's effective tax primarily due to the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
1996 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
Income tax benefit at U.S. federal statutory tax rate..... $(954,165) $(889,405) $(1,007,135)
State taxes, net of federal tax impact.................... (166,591) (152,211) (170,165)
Other..................................................... (5,688) (32,083) (37,232)
Change in valuation allowance............................. 1,126,444 1,073,699 1,214,532
--------- --------- -----------
Provision for income taxes.............................. $ -- $ -- $ --
========= ========= ===========
</TABLE>
At December 31, 1998, HealthGate has net operating loss carryforwards and
research and development tax credit carryforwards of approximately $8,492,000
and $82,000, respectively, available for federal and foreign purposes to reduce
future taxable income and future tax liabilities, respectively. If not utilized,
these carryforwards will expire at various dates ranging from 2010 to 2018.
Under the provisions of the Internal Revenue Code, certain substantial changes
in HealthGate's ownership may have limited, or may limit in the future, the
amount of net operating loss and research and development tax credit
carryforwards which could be used annually to offset future taxable income and
income tax liability. The amount of any annual limitation is determined based
upon HealthGate's value prior to an ownership change.
F-19
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. 401(K) PLAN
During 1996, HealthGate established a defined contribution savings plan
under Section 401(k) of the Internal Revenue Code. This plan covers
substantially all employees who meet minimum age and service requirements and
allows participants to defer a portion of their annual compensation on a pre-
tax basis. Company contributions to the plan may be made at the discretion of
the Board of Directors. There were no contributions made to the plan by
HealthGate during the years ended December 31, 1996, 1997 or 1998 or during the
nine months ended September 30, 1998 or 1999.
8. OTHER RELATED PARTY TRANSACTIONS
Through December 1998, a stockholder of HealthGate was a partial owner of
the building in which HealthGate leased office space. HealthGate incurred rental
costs of approximately $58,000, $84,000 and $89,000 under this lease agreement
during the years ended December 31, 1996, 1997 and 1998, respectively.
In connection with the Series B preferred stock purchase agreement,
HealthGate was required to use the services of the sole Series B investor for
certain consulting work. During 1996, HealthGate incurred consulting costs with
this investor totaling approximately $203,000. HealthGate also leases certain
computer equipment from this investor under a noncancelable capital lease
arrangement. Payments under this lease during the years ended December 31, 1996,
1997 and 1998 totaled approximately $90,900, $1,500 and $7,500, respectively.
In May 1998, HealthGate purchased certain fixed assets from an employee in
connection with total consideration of $70,000.
In addition, during the nine months ended September 30, 1999, HealthGate
paid a referral fee of $68,000 to a related party in connection with the
addition of certain content sources.
9. COMMITMENTS AND CONTINGENCIES
HealthGate leases all facilities under operating lease agreements and
certain equipment under noncancelable capital lease agreements. Total rent
expense under noncancelable operating leases was approximately $58,800, $84,100
and $89,900 for the years ended December 31, 1996, 1997 and 1998, respectively.
The future minimum lease commitments under all noncancelable leases at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- --------
<S> <C> <C>
1999.................................................... $390,112 $257,106
2000.................................................... 265,083 214,298
2001.................................................... -- 29,880
-------- --------
Total future payments................................... $655,195 501,284
========
Less--amount representing interest...................... (61,170)
--------
Present value of minimum lease payments................. $440,114
========
</TABLE>
F-20
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
As of September 30, 1999, HealthGate had outstanding commitments under
capital leases of $890,000 and under operating leases for equipment and office
space of $568,000.
HealthGate has entered into agreements to license content for its services
from various unrelated third parties. Future minimum license payments under
these agreements as of September 30, 1999 totaled approximately $1,609,000,
which includes annual payments of $500,000 for two years for a content
development and distribution agreement with the New England Journal of Medicine.
On July 27, 1999, HealthGate received a letter alleging that HealthGate's
Web site induces users to infringe a patent held by a company (the "Holder"). In
lieu of pursuing a patent infringement claim against HealthGate, the Holder
offered to provide HealthGate with a license for unlimited use of the patent for
a one-time payment of between $50,000 and $150,000. HealthGate is currently
investigating this matter. At this time, HealthGate is unable to predict its
outcome.
10. GEOGRAPHIC AND SEGMENT INFORMATION
HealthGate operates in one segment, which is providing healthcare and
related information to institutions and individuals through the Internet.
HealthGate's revenue from external customers was derived from the following:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- -------------
1996 1997 1998 1999
-------- ---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
United States.................. $408,244 $1,259,886 $1,665,718 $1,107,793
Europe......................... -- 24,750 768,406 628,132
-------- ---------- ---------- ----------
Total.......................... $408,244 $1,284,636 $2,434,124 $1,735,925
======== ========== ========== ==========
</TABLE>
Substantially all of HealthGate's long-lived assets were located in the
United States for all periods presented.
11. SUBSEQUENT EVENTS
In November 1999, HealthGate entered a marketing and reseller agreement with
Columbia Information Systems. HealthGate believes that this agreement will
benefit it through the general association of the Columbia Information Systems
and Columbia/HCA names with HealthGate, through the right to make a first offer
to provide services for adding additional content to the Columbia Information
Systems health portal site and any Web sites owned or operated by Columbia/HCA
or their controlled affiliates, and, among other things, through the efforts of
Columbia Information Systems to distribute HealthGate products. In connection
with this agreement, HealthGate issued a warrant to CIS Holdings, Inc., a
related party, for the purchase of up to 1,941,035 shares of HealthGate's common
stock. CIS Holdings, Inc. is an indirect, wholly-owned subsidiary Columbia/HCA
Healthcare Corporation and an affiliate of Columbia Information Systems. The
warrant has a term of three years, and will be exercisable on the earlier to
occur of the consummation of HealthGate's initial public offering, a qualifying
earlier private placement of securities or sale of HealthGate, or March 31,
2000. The exercise price per share will be equal to our initial public offering
price. If an initial public
F-21
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (CONTINUED)
offering is not completed by March 31, 2000, the exercise price per share will
be the common equivalent price per share received by HealthGate in its next
qualifying private placement, as defined in the warrant agreement. If neither an
initial public offering nor a qualifying private placement occur before March
31, 2000, the exercise price per share will be adjusted to $3.46 on March 31,
2000. In the event HealthGate issues common stock or other equity or debt
instruments which are convertible into common stock for an amount less than the
current exercise price, then the exercise price and number of shares of this
warrant will be adjusted accordingly. These adjustment provisions will terminate
upon the completion of an initial public offering. If HealthGate is sold prior
to the consummation of its initial public offering or a qualifying private
placement, the exercise price will be adjusted to $3.46 per share, effective
with such sale. The value of this warrant will be recorded as marketing and
distribution rights, and will be amortized as a sales and marketing expense on a
straight-line basis over the three year contractual term of the related
marketing and reseller agreement.
In October 1999, HealthGate entered into a three-year strategic alliance
agreement with Snap! LLC and Xoom.com, Inc. Under this agreement, Snap will
provide various services to promote HealthGate's name, its www.healthgate.com
Web site, its co-branded CHOICE Web sites and the products and services
HealthGate offers. In exchange for the services provided to HealthGate by Snap
during the first year of the agreement, HealthGate has agreed to pay Snap a
minimum fee of $10,000,000 in cash and has issued 500,000 shares of HealthGate
common stock, plus a $250,000 production and content integration fee. The value
of these shares was determined to be $4,500,000 on the date issued. HealthGate
has agreed to pay Snap minimum fees of $15,000,000 in cash in each of the second
and third years of the agreement for the services provided to HealthGate by Snap
in those years. HealthGate has also agreed to pay Snap up to an additional
$5,000,000 in the first year, $10,000,000 in the second year and $15,000,000 in
the third year of the agreement if Snap delivers more than certain minimum
click-throughs to the co-branded Snap/HealthGate Web site in the respective
years. Either Snap or HealthGate may terminate this agreement if the other party
commits a material breach. If Snap terminates the agreement based on certain
material breaches caused by HealthGate, HealthGate has agreed to continue to pay
Snap 55% of all fees payable by HealthGate under the agreement for the remaining
term of the agreement. If Snap terminates the agreement because HealthGate's
registration statement filed with the Securities and Exchange Commission in
connection with its contemplated initial public offering is not effective on or
before February 28, 2000 or because HealthGate fails to issue to Snap the shares
of common stock as provided in the agreement, HealthGate has agreed to enter
into an agreement with Snap to purchase $450,000 of advertising impressions from
Snap. If Snap and Xoom have not combined with certain assets of NBC to form NBC
Internet on or before March 31, 2000, HealthGate may terminate the agreement and
Snap must return to HealthGate all payments, including the common stock
HealthGate has issued to them as partial payment for the first year minimum fee,
made prior to the termination. National Broadcasting Company, Inc., a subsidiary
of General Electric, owns a majority interest in Snap.
F-22
<PAGE>
[THE INSIDE BACK COVER CONTAINS A DIAGRAM ENTITLED
"HEALTHGATE-REGISTERED TRADEMARK-: THE GATEWAY TO HEALTH INFORMATION" SHOWING
CONTENT SOURCES, THE HEALTHGATE NETWORK AND PROFESSIONALS, PATIENTS AND
CONSUMERS.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,750,000 Shares
[LOGO]
Common Stock
------------------------
PROSPECTUS
------------------
SG COWEN
VOLPE BROWN WHELAN & COMPANY
WARBURG DILLON READ LLC
, 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 payable by HealthGate
in connection with the sale of the common stock being registered hereby. All the
amounts shown are estimates, except the SEC registration fee and the NASD filing
fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 17,648
NASD filing fee............................................. 6,000
Nasdaq listing fee.......................................... 94,000
Blue Sky fee and expenses................................... 5,000
Printing and engraving expenses............................. 450,000
Legal fees and expenses..................................... 900,000
Auditors' accounting fees and expenses...................... 600,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous expenses...................................... 304,852
----------
Total................................................... $2,387,500
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of HealthGate's Restated Charter provides as follows:
To the maximum extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or to any of its
stockholders for monetary damages arising out of such director's breach of
fiduciary duty as a director of the Corporation. No amendment to or repeal of
the provisions of this paragraph shall apply to or have any effect on the
liability or the alleged liability of any director of the Corporation with
respect to any act or failure to act of such director occurring prior to such
amendment or repeal.
Section 10 of HealthGate's Restated Bylaws provides as follows:
Section 10. INDEMNIFICATION
10.1 Officers, Directors and Others. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he or she is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in Section 10.2 hereof, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors. The right to indemnification conferred
in this Section 10 shall be a contract right and, subject to Sections 10.2 and
10.5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of the board of directors, provide
II-1
<PAGE>
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
10.2 Procedure; Timing. Any indemnification of a director or officer of the
corporation under Section 10.1 or advance of expenses under Section 10.5 shall
be made promptly, and in any event within thirty days, upon the written request
of the director or officer. If a determination by the corporation that the
director or officer is entitled to indemnification pursuant to this Section 10
is required, and the corporation fails to respond within sixty days to a written
request for indemnity, the corporation shall be deemed to have approved the
request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty days, the right to indemnification or
advances as granted by this Section 10 shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the corporation (including its board, independent legal counsel
or its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
10.3 Rights Not Exclusive. The rights to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final disposition
conferred in this Section 10 shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Restated Certificate, bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
10.4 Insurance. The corporation may purchase and maintain insurance on its
own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the corporation or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Section 10.
10.5 Expenses. Expenses incurred by any person described in Section 10.1 in
defending a proceeding shall be paid by the corporation in advance of such
proceeding's final disposition unless otherwise determined by the board in the
specific case upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the corporation. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the board deems appropriate.
10.6 Other Persons. Persons who are not covered by the foregoing provisions
of this Section 10 and who are or were employees or agents of the corporation,
or who are or were serving at the request of the corporation as employees or
agents of another corporation, partnership, joint venture, trust or other
enterprise, may be indemnified to the extent authorized at any time or from time
to time by the board.
10.7 Contract Right. The provisions of this Section 10 shall be deemed to be
a contract right between the corporation and each director or officer who serves
in any such capacity at any time while
II-2
<PAGE>
this Section 10 and the relevant provisions of the General Corporation Law of
the State of Delaware or other applicable law are in effect, and any repeal or
modification of this Section 10 or any such law shall not affect any rights or
obligations then existing with respect to any state of facts or proceeding then
existing.
10.8 Use of "corporation". For purposes of this Section 10, references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, member, manager, employee
or agent of another corporation, limited liability company, partnership, joint
venture, trust or other enterprise, shall stand in the same position under this
Section 10 with respect to the resulting or surviving corporation as he or she
would have with respect to such constituent corporation if its separate
existence had continued.
OTHER INDEMNIFICATION PROVISIONS
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 6(b) of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of Underwriting Agreement filed as
Exhibit 1.1 hereto.
The Registrant intends to obtain insurance which insures the officers and
directors of the Registrant against certain losses and which insures the
Registrant against certain of its obligations to indemnify such officers and
directors.
The Registrant has entered into indemnification agreements with each of its
directors and officers, pursuant to which the Registrant has agreed to indemnify
such directors to the fullest extent permitted by law for amounts paid and
expenses incurred in connection with an action or proceeding to which he or she
is or is threatened to be made a party by reason of such position.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any director or officer.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, we
have sold the following securities in transactions exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) or Rule 701
promulgated under Section 3(b) thereof:
On December 20, 1996, we issued and sold 1,000 shares of our Series D
Convertible Preferred Stock to Blackwell Science, Ltd. for an aggregate
consideration of $1,500,000 in cash.
II-3
<PAGE>
On April 29, 1997, we issued and sold 333 shares of our Series D Convertible
Preferred Stock to Blackwell Science, Ltd. for an aggregate consideration of
$499,500 in cash.
On September 19, 1997, we issued and sold 334 shares of our Series D
Convertible Preferred Stock to Blackwell Wissenschafts-Verlag GmbH for an
aggregate consideration of $501,000 in cash.
On March 26, 1998, we issued a warrant to purchase an initial 341,076 shares
of our common stock to Petra Capital, LLC as additional consideration for
Petra's $2,000,000 loan to us. Pursuant to the terms of this warrant, on
December 31, 1998, an additional 114,816 shares of our common stock became
issuable thereunder.
On July 14, 1998, we issued and sold 198 shares of our common stock for an
aggregate consideration of $140 in cash to a former employee who exercised an
outstanding stock option.
On October 20, 1998, we issued and sold 4,858 shares of our common stock for
an aggregate consideration of $3,430 in cash to a former employee who exercised
an outstanding stock option.
On February 3, 1999, we issued and sold 79 shares of our common stock for an
aggregate consideration of $56.80 in cash to a former employee who exercised an
outstanding stock option.
On April 7, 1999, we issued and sold 87,364 shares of our Series E
Convertible Preferred Stock to GE Capital Equity Investments, Inc. for an
aggregate consideration of $999,994.55 in cash and 174,729 shares of our
Series E Convertible Preferred Stock to Blackwell Science, Ltd. for an aggregate
consideration of $2,000,000, paid by means of Blackwell's conversion of the
principal amount due under a convertible promissory note issued by us to
Blackwell on September 29, 1998 in the principal amount of $2,000,000. In
connection with our sale of our Series E Convertible Preferred Stock to GE
Capital Equity Investments, we paid Dain Rauscher Wessels a placement agent
commission of $40,000 in cash.
On April 21, 1999, we issued and sold 458,664 shares of our Series E
Convertible Preferred Stock to GE Capital Equity Investments for an aggregate
consideration of $5,250,005.74 in cash. In connection with this sale, we paid
Dain Rauscher Wessels a placement agent commission of $210,000 in cash. In
addition, in connection with this sale and the April 7, 1999 sale of Series E
Convertible Preferred Stock to GE Capital Equity Investments, we issued Dain
Rauscher Wessels a warrant to purchase 21,654 shares of our common stock for
$2.89 per share and reimbursed them $50,000 in cash for their out of pocket
expenses. In addition, we incurred $110,000 in other issuance-related expenses.
On May 14, 1999, we issued and sold 19,830 shares of our common stock for an
aggregate consideration of $9,328 in cash to an executive officer who exercised
an outstanding stock option.
On June 17, 1999, we issued a warrant to purchase 1,189,800 shares of our
common stock to General Electric Company in connection with a development and
distribution agreement we entered into with GE Medical Systems.
On October 27, 1999, we issued and sold 96,504 shares of our common stock
for an aggregate consideration of $81,565.50 in cash to a director who exercised
outstanding stock options.
On November 2, 1999 we issued a warrant to purchase 1,941,035 shares of our
common stock to CIS Holdings, Inc. in connection with a marketing and reseller
agreement we entered into with Columbia Information Systems, an affiliate of CIS
Holdings, Inc.
On November 3, 1999, we issued and sold 500,000 shares of our common stock
to Snap! LLC in exchange for services to be performed by Snap under a strategic
alliance agreement.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the
Registrant, dated March 14, 1995, as further amended by a
Certificate of Amendment of Amended and Restated Certificate
of Incorporation, dated May 23, 1995, as further amended by
a Certificate of Amendment of Amended and Restated
Certificate of Incorporation, dated October 17, 1995, as
further amended by a Certificate of Amendment of Amended and
Restated Certificate of Incorporation, dated August 19,
1996, as further amended by a Certificate of Amendment of
Amended and Restated Certificate of Incorporation, dated
December 19, 1996, as further amended by a Certificate of
Amendment of Amended and Restated Certificate of
Incorporation, dated June 20, 1997, as further amended by a
Certificate of Amendment of Amended and Restated Certificate
of Incorporation, dated March 26, 1998, as further amended
by a Certificate of Amendment of Amended and Restated
Certificate of Incorporation, dated May 22, 1998, as further
amended by a Certificate of Amendment of Amended and
Restated Certificate of Incorporation, dated April 2, 1999.
3.2# Certificate of Amendment of Amended and Restated Certificate
of Incorporation, in the form to be filed prior to the
offering, which supersedes and replaces Exhibit Number 3.2
filed with the Registrant's Amendment No. 2 to Registration
Statement on Form S-1 filed on June 14, 1999.
3.3*** Amended and Restated Certificate of Incorporation of the
Registrant, in the form to be filed immediately prior to the
offering.
3.4* Amended and Restated Bylaws of the Registrant.
3.5*** Second Amended and Restated Bylaws of the Registrant, in the
form to be effective upon the consummation of the offering.
4.1*** Specimen Common Stock certificate.
4.2* Registration Agreement dated March 16, 1995 by and between
the Registrant, David Friend and William Nelson.
4.3* Registration Agreement dated October 18, 1995 by and between
the Registrant and Nichols Research Corporation.
4.4* Registration Agreement dated August 21, 1996 by and between
the Registrant and certain investor signatories thereto.
4.5* Registration Agreement dated December 20, 1996 by and
between the Registrant and Blackwell Science, Ltd.
4.6* Registration Agreement dated March 26, 1998 by and between
the Registrant and Petra Capital, LLC.
4.7* Registration Agreement dated April 7, 1999 by and between
the Registrant, GE Capital Equity Investments, Inc.,
Blackwell Science, Ltd. and Blackwell Wissenschafts-Verlag
GmbH.
4.8* Amendment to Purchase Agreements and Registrations
Agreements dated as of March 23, 1998 by and among the
Registrant and certain stockholder signatories thereto.
4.9* Amended and Restated Stockholders Agreement dated April 7,
1999 by and among the Registrant and certain stockholder
signatories thereto.
4.10**** Registration Agreement dated as of June 17, 1999 by and
between the Registrant and General Electric Company.
4.11# Registration Rights Agreement dated November 2, 1999 by and
between the Registrant and CIS Holdings, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
4.12# Registration Rights Agreement dated November 3, 1999 by and
between the Registrant and Snap! LLC.
5.1 Opinion of Rich, May, Bilodeau & Flaherty, P.C., as to the
legality of the shares being registered.
10.1 Electronic Journal Software Development, Hosting and
Management Agreement dated as of March 20, 1998 by and
between Blackwell Science Limited, Munksgaard International
Publishers Ltd. and the Registrant.
10.2* activePress Journal Hosting and Delivery Agreement dated
April 20, 1999 by and between Massachusetts Medical Society
and the Registrant.
10.3 Content License Agreement dated as of October 1, 1998 by and
between Clinical Reference Systems, a division of Access
Health, Inc. and the Registrant.
10.4* Electronic Media License Agreement dated as of June 16, 1998
by and between Western Adventist Health Services, d/b/a
Cinahl Information Systems, and the Registrant.
10.5* Agreement dated as of January 1997 by and between Physicians
World Communications Group and the Registrant.
10.6 Agreement dated as of June 18, 1998 by and between Data
General Corporation and the Registrant.
10.7 Sub-Lease Agreement dated March 1, 1999 by and between
Synopsys, Inc. and the Registrant.
10.8* Internet Data Center Services Agreement dated as of December
30, 1998 by and between Exodus Communications, Inc. and the
Registrant.
10.9* 1994 Stock Option Plan of the Registrant, as amended.
10.10* Form of Incentive Stock Option Agreement granted under 1994
Stock Option Plan of the Registrant.
10.11* Form of Non-Employee Director Option Agreement granted under
1994 Stock Option Plan of the Registrant.
10.12* Stock Option Agreement dated as of December 9, 1996 by and
between the Registrant and Edson D. de Castro.
10.13* Stock Option Agreement dated as of November 12, 1997 by and
between the Registrant and Edson D. de Castro.
10.14* Employment Agreement dated as of October 1, 1995 by and
between the Registrant and William S. Reece.
10.15* Loan and Security Agreement dated as of March 26, 1998 by
and between the Registrant and Petra Capital, LLC.
10.16* First Amendment to Loan and Security Agreement and Stock
Purchase Warrant dated as of April 7, 1999 by and between
the Registrant and Petra Capital, LLC.
10.17* $2,000,000 Secured Promissory Note of the Registrant dated
March 26, 1998 and payable to the order of Petra Capital,
LLC.
10.18* Stock Purchase Warrant dated as of March 26, 1998 issued by
the Registrant in favor of Petra Capital, LLC.
10.19 Stock Purchase Agreement dated as of April 5, 1999 by and
between the Registrant, GE Capital Equity Investments, Inc.
and Blackwell Science, Ltd.
10.20** Stock Purchase Warrant dated as of April 21, 1999 issued by
the Registrant in favor of Dain Rauscher Wessels.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
10.21* Standard Distribution Agreement dated as of July 28, 1998 by
and between the Registrant and Inteli-Health, Inc.
10.22* Standard Distribution Agreement dated July 15, 1998 by and
between the Registrant and AHN Partners, L.P. d/b/a
America's Health Network.
10.23* Hyperlink Agreement dated May 29, 1996 by and between the
Registrant and the American Medical Association.
10.24* Standard Distribution Agreement dated June 3, 1998 by and
between the Registrant and Greenberg News Networks, Inc.
10.25* Web Site Hosting Agreement dated October 30, 1998 by and
between the Registrant and Endeavor Technologies, Inc.
10.26* Continuing Medical Education Programs License Agreement
dated as of April 1, 1996 between the Registrant and the
Trustees of Boston University.
10.27 Development and Distribution Agreement dated as of June 11,
1999 between Registrant and GE Medical Systems.
10.28 Content Development and Distribution Agreement dated as of
June 15, 1999 by and between the Registrant and
Massachusetts Medical Society.
10.29**** Amendment to Standard Distribution Agreement, Value Added
Reseller dated June 11, 1999 by and between the Registrant
and Data General Corporation.
10.30 Warrant Purchase Agreement dated as of June 11, 1999 by and
between the Registrant and General Electric Company.
10.31**** Warrant to Purchase Common Stock of the Registrant dated
June 17, 1999 issued to General Electric Company.
10.32# Master Lease of Terms and Conditions for Lease dated as of
August 3, 1999 between TLP Leasing Programs, Inc. and
Registrant.
10.33 activePress Journal Hosting and Delivery Agreement effective
as of January 1, 2000 by and between Registrant, Blackwell
Science Limited and Munksgaard International Publishers
Limited.
10.34 Continuing Education Services Agreement effective
September 15, 1999 by and between Registrant and
HealthStream, Inc.
10.35# Marketing Services Agreement effective September 29, 1999 by
and between Registrant and HealthStream, Inc.
10.36 Co-branded CHOICE Web Site Agreement dated as of
November 2, 1999 by and between the Registrant and Columbia
Information Systems, Inc.
10.37# Marketing and Reseller Agreement dated as of November 2,
1999 by and between the Registrant and Columbia Information
Systems, Inc.
10.38# Warrant to purchase Common Stock of the Registrant dated
November 2, 1999 issued to CIS Holdings, Inc.
10.39 Strategic Alliance Agreement dated as of October 29, 1999 by
and between Snap! LLC, Xoom.com, Inc. and the Registrant.
10.40 Common Stock Purchase Agreement dated November 3, 1999 by
and between the Registrant and Snap! LLC.
21.1* List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.2 Consent of Rich, May, Bilodeau & Flaherty, P.C. (included in
Exhibit 5.1)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
24.1* Power of Attorney contained on signature page of
Registration Statement on Form S-1 filed on April 23, 1999.
27.1 Financial Data Schedule.
99.1** Schedule II--Valuation and Qualifying Accounts.
</TABLE>
- ------------------------
* Previously filed with the Registrant's Registration Statement on Form S-1,
filed with the Securities and Exchange Commission on April 23, 1999.
** Previously filed with the Registrant's Amendment No. 1 to Registration
Statement on Form S-1 filed on May 21, 1999.
*** Previously filed with the Registrant's Amendment No. 2 to Registration
Statement on Form S-1 filed on June 14, 1999.
**** Previously filed with the Registrant's Amendment No. 3 to Registration
Statement on Form S-1 filed on July 16, 1999.
***** Previously filed with the Registrant's Amendment No. 4 to Registration
Statement on Form S-1 filed on August 4, 1999.
# Previously filed with Registrant's Amendment No. 6 to Registration
Statement on Form S-1 filed on November 10, 1999.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts (See Exhibit 99.1)
All other schedules have been intentionally omitted because they are either
not required or the information has been included in the Notes to the
Consolidated Financial Statements included as part of this Registration
Statement.
ITEM 17. UNDERTAKINGS
(a) 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 provisions described under "Item
14--Indemnification of Directors and Officers" above, 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 such 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 such
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 such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) 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
II-8
<PAGE>
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Burlington,
Massachusetts, on this 24th day of November, 1999.
<TABLE>
<S> <C> <C>
HEALTHGATE DATA CORP.
By: /s/ WILLIAM S. REECE
--------------------------------------------
William S. Reece
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY AND SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman of the Board of
/s/ WILLIAM S. REECE Directors, Chief Executive
---------------------------------------- Officer and President November 24, 1999
William S. Reece (Principal executive
officer)
Chief Financial Officer and
/s/ MARY B. MILLER Treasurer (Principal
---------------------------------------- financial and accounting November 24, 1999
Mary B. Miller officer)
* /s/ TINA M. H. BLAIR Director
---------------------------------------- November 24, 1999
Tina M. H. Blair, M.D.
* /s/ JONATHAN J. G. CONIBEAR Director
---------------------------------------- November 24, 1999
Jonathan J. G. Conibear
* /s/ EDSON D. DE CASTRO Director
---------------------------------------- November 24, 1999
Edson D. de Castro
* /s/ DAVID FRIEND Director
---------------------------------------- November 24, 1999
David Friend
* /s/ CHRIS H. HORGEN Director
---------------------------------------- November 24, 1999
Chris H. Horgen
</TABLE>
<TABLE>
<S> <C> <C>
/s/ WILLIAM S. REECE
----------------------------------------
William S. Reece
*By ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the
Registrant, dated March 14, 1995, as further amended by a
Certificate of Amendment of Amended and Restated Certificate
of Incorporation, dated May 23, 1995, as further amended by
a Certificate of Amendment of Amended and Restated
Certificate of Incorporation, dated October 17, 1995, as
further amended by a Certificate of Amendment of Amended and
Restated Certificate of Incorporation, dated August 19,
1996, as further amended by a Certificate of Amendment of
Amended and Restated Certificate of Incorporation, dated
December 19, 1996, as further amended by a Certificate of
Amendment of Amended and Restated Certificate of
Incorporation, dated June 20, 1997, as further amended by a
Certificate of Amendment of Amended and Restated Certificate
of Incorporation, dated March 26, 1998, as further amended
by a Certificate of Amendment of Amended and Restated
Certificate of Incorporation, dated May 22, 1998, as further
amended by a Certificate of Amendment of Amended and
Restated Certificate of Incorporation, dated April 2, 1999.
3.2# Certificate of Amendment of Amended and Restated Certificate
of Incorporation, in the form to be filed prior to the
offering, which supersedes and replaces Exhibit Number 3.2
filed with the Registrant's Amendment No. 2 to Registration
Statement on Form S-1 filed on June 14, 1999.
3.3*** Amended and Restated Certificate of Incorporation of the
Registrant, in the form to be filed immediately prior to the
offering.
3.4* Amended and Restated Bylaws of the Registrant.
3.5*** Second Amended and Restated Bylaws of the Registrant, in the
form to be effective upon the consummation of the offering.
4.1*** Specimen Common Stock certificate.
4.2* Registration Agreement dated March 16, 1995 by and between
the Registrant, David Friend and William Nelson.
4.3* Registration Agreement dated October 18, 1995 by and between
the Registrant and Nichols Research Corporation.
4.4* Registration Agreement dated August 21, 1996 by and between
the Registrant and certain investor signatories thereto.
4.5* Registration Agreement dated December 20, 1996 by and
between the Registrant and Blackwell Science, Ltd.
4.6* Registration Agreement dated March 26, 1998 by and between
the Registrant and Petra Capital, LLC.
4.7* Registration Agreement dated April 7, 1999 by and between
the Registrant, GE Capital Equity Investments, Inc.,
Blackwell Science, Ltd. and Blackwell Wissenschafts-Verlag
GmbH.
4.8* Amendment to Purchase Agreements and Registrations
Agreements dated as of March 23, 1998 by and among the
Registrant and certain stockholder signatories thereto.
4.9* Amended and Restated Stockholders Agreement dated April 7,
1999 by and among the Registrant and certain stockholder
signatories thereto.
4.10**** Registration Agreement dated as of June 17, 1999 by and
between the Registrant and General Electric Company.
4.11# Registration Rights Agreement dated November 2, 1999 by and
between the Registrant and CIS Holdings, Inc.
4.12# Registration Rights Agreement dated November 3, 1999 by and
between the Registrant and Snap! LLC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
5.1 Opinion of Rich, May, Bilodeau & Flaherty, P.C., as to the
legality of the shares being registered.
10.1 Electronic Journal Software Development, Hosting and
Management Agreement dated as of March 20, 1998 by and
between Blackwell Science Limited, Munksgaard International
Publishers Ltd. and the Registrant.
10.2* activePress Journal Hosting and Delivery Agreement dated
April 20, 1999 by and between Massachusetts Medical Society
and the Registrant.
10.3 Content License Agreement dated as of October 1, 1998 by and
between Clinical Reference Systems, a division of Access
Health, Inc. and the Registrant.
10.4* Electronic Media License Agreement dated as of June 16, 1998
by and between Western Adventist Health Services, d/b/a
Cinahl Information Systems, and the Registrant.
10.5* Agreement dated as of January 1997 by and between Physicians
World Communications Group and the Registrant.
10.6 Agreement dated as of June 18, 1998 by and between Data
General Corporation and the Registrant.
10.7 Sub-Lease Agreement dated March 1, 1999 by and between
Synopsys, Inc. and the Registrant.
10.8* Internet Data Center Services Agreement dated as of December
30, 1998 by and between Exodus Communications, Inc. and the
Registrant.
10.9* 1994 Stock Option Plan of the Registrant, as amended.
10.10* Form of Incentive Stock Option Agreement granted under 1994
Stock Option Plan of the Registrant.
10.11* Form of Non-Employee Director Option Agreement granted under
1994 Stock Option Plan of the Registrant.
10.12* Stock Option Agreement dated as of December 9, 1996 by and
between the Registrant and Edson D. de Castro.
10.13* Stock Option Agreement dated as of November 12, 1997 by and
between the Registrant and Edson D. de Castro.
10.14* Employment Agreement dated as of October 1, 1995 by and
between the Registrant and William S. Reece.
10.15* Loan and Security Agreement dated as of March 26, 1998 by
and between the Registrant and Petra Capital, LLC.
10.16* First Amendment to Loan and Security Agreement and Stock
Purchase Warrant dated as of April 7, 1999 by and between
the Registrant and Petra Capital, LLC.
10.17* $2,000,000 Secured Promissory Note of the Registrant dated
March 26, 1998 and payable to the order of Petra Capital,
LLC.
10.18* Stock Purchase Warrant dated as of March 26, 1998 issued by
the Registrant in favor of Petra Capital, LLC.
10.19 Stock Purchase Agreement dated as of April 5, 1999 by and
between the Registrant, GE Capital Equity Investments, Inc.
and Blackwell Science, Ltd.
10.20** Stock Purchase Warrant dated as of April 21, 1999 issued by
the Registrant in favor of Dain Rauscher Wessels.
10.21* Standard Distribution Agreement dated as of July 28, 1998 by
and between the Registrant and Inteli-Health, Inc.
10.22* Standard Distribution Agreement dated July 15, 1998 by and
between the Registrant and AHN Partners, L.P. d/b/a
America's Health Network.
10.23* Hyperlink Agreement dated May 29, 1996 by and between the
Registrant and the American Medical Association.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
10.24* Standard Distribution Agreement dated June 3, 1998 by and
between the Registrant and Greenberg News Networks, Inc.
10.25* Web Site Hosting Agreement dated October 30, 1998 by and
between the Registrant and Endeavor Technologies, Inc.
10.26* Continuing Medical Education Programs License Agreement
dated as of April 1, 1996 between the Registrant and the
Trustees of Boston University.
10.27 Development and Distribution Agreement dated as of June 11,
1999 between Registrant and GE Medical Systems.
10.28 Content Development and Distribution Agreement dated as of
June 15, 1999 by and between the Registrant and
Massachusetts Medical Society.
10.29**** Amendment to Standard Distribution Agreement, Value Added
Reseller dated June 11, 1999 by and between the Registrant
and Data General Corporation.
10.30 Warrant Purchase Agreement dated as of June 11, 1999 by and
between the Registrant and General Electric Company.
10.31**** Warrant to Purchase Common Stock of the Registrant dated
June 17, 1999 issued to General Electric Company.
10.32# Master Lease of Terms and Conditions for Lease dated as of
August 3, 1999 between TLP Leasing Programs, Inc. and
Registrant.
10.33 activePress Journal Hosting and Delivery Agreement effective
as of January 1, 2000 by and between Registrant, Blackwell
Science Limited and Munksgaard International Publishers
Limited.
10.34 Continuing Education Services Agreement effective
September 15, 1999 by and between Registrant and
HealthStream, Inc.
10.35# Marketing Services Agreement effective September 29, 1999 by
and between Registrant and HealthStream, Inc.
10.36 Co-branded CHOICE Web Site Agreement dated as of
November 2, 1999 by and between the Registrant and Columbia
Information Systems, Inc.
10.37# Marketing and Reseller Agreement dated as of November 2,
1999 by and between the Registrant and Columbia Information
Systems, Inc.
10.38# Warrant to purchase Common Stock of the Registrant dated
November 2, 1999 issued to CIS Holdings, Inc.
10.39 Strategic Alliance Agreement dated as of October 29, 1999 by
and between Snap! LLC, Xoom.com, Inc. and the Registrant.
10.40 Common Stock Purchase Agreement dated November 3, 1999 by
and between the Registrant and Snap! LLC.
21.1* List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.2 Consent of Rich, May, Bilodeau & Flaherty, P.C. (included in
Exhibit 5.1)
24.1* Power of Attorney contained on signature page of
Registration Statement on Form S-1 filed on April 23, 1999.
27.1 Financial Data Schedule.
99.1** Schedule II--Valuation and Qualifying Accounts.
</TABLE>
- ------------------------
* Previously filed with the Registrant's Registration Statement on Form S-1,
filed with the Securities and Exchange Commission on April 23, 1999.
** Previously filed with the Registrant's Amendment No. 1 to Registration
Statement on Form S-1 filed on May 21, 1999.
<PAGE>
*** Previously filed with the Registrant's Amendment No. 2 to Registration
Statement on Form S-1 filed on June 14, 1999.
**** Previously filed with the Registrant's Amendment No. 3 to Registration
Statement on Form S-1 filed on July 16, 1999.
***** Previously filed with the Registrant's Amendment No. 4 to Registration
Statement on Form S-1 filed on August 4, 1999.
# Previously filed with Registrant's Amendment No. 6 to Registration
Statement on Form S-1 filed on November 10, 1999.
<PAGE>
EXHIBIT 1.1
3,750,000 SHARES
HEALTHGATE DATA CORP.
COMMON STOCK
UNDERWRITING AGREEMENT
November __, 1999
SG COWEN SECURITIES CORPORATION
VOLPE BROWN WHELAN & COMPANY, LLC
WARBURG DILLON READ LLC
As Representatives of the several Underwriters named in Schedule A
c/o SG Cowen
Financial Square
New York, New York 10005
Dear Sirs:
1. INTRODUCTORY. HealthGate Data Corp., a Delaware corporation (the
"Company"), proposes to issue and sell, pursuant to the terms of this Agreement,
to the several Underwriters named in Schedule A hereto (the "Underwriters")
3,750,000 shares of Common Stock, $0.01 par value (the "Firm Stock") of the
Company. SG Cowen Securities Corporation ("SG Cowen"), Volpe Brown Whelan &
Company and Warburg Dillon Read LLC shall act as representatives (the
"Representatives") of the several Underwriters.
The Company also proposes to issue and sell to the several
Underwriters up to an additional 562,500 shares of Common Stock (the "Optional
Stock"), if and to the extent that the Representatives shall have determined to
exercise on behalf of the Underwriters, the right to purchase such shares of
common stock upon the terms and conditions set forth in Section 3 hereof. The
Firm Stock and the Optional Stock are hereinafter collectively referred to as
the "Common Stock".
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a prospectus,
relating to the Common Stock. The registration statement on Form S-1 (File
No. 333-76899) as amended at the time it becomes effective, including the
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the
<PAGE>
"Securities Act") and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder, is
hereinafter referred to as the Registration Statement. The term "Registration
Statement" as used in this Agreement shall also include any registration
statement relating to the Common Stock that is filed and declared effective
pursuant to Rule 462(b) under the Securities Act. The prospectus in the
respective form first used to confirm sales of the Common Stock is hereinafter
referred to as the "Prospectus". The term "Prospectus" as used in this Agreement
means the prospectus in the form included in the Registration Statement, or, if
prospectuses that meet the requirements of Section 10(a) of the Securities Act
are delivered pursuant to Rule 434 under the Securities Act, then (i) the term
"Prospectus" as used in this Agreement means the "prospectus subject to
completion" (as such term is defined in Rule 434(g) under the Securities Act) as
supplemented by (a) the addition of Rule 430A information or other information
contained in the form of prospectus delivered pursuant to Rule 434(b)(2) under
the Securities Act or (b) the information contained in the term sheets described
in Rule 434(b)(3) under the Securities Act, and (ii) the date of such
prospectuses shall be deemed to be the date of the term sheets. The term
"Pre-effective Prospectus" as used in this Agreement means the prospectus
subject to completion in the form included in the Registration Statement at the
time of the initial filing of the Registration Statement with the Commission,
and as such prospectus shall have been amended from time to time prior to the
date of the Prospectus.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) The Registration Statement with respect to the Common
Stock, including any Pre-effective Prospectus, copies of which have heretofore
been delivered to you, has been carefully prepared by the Company in conformity
with the requirements of the Securities Act and has been filed with the
Commission under the Securities Act.
(b) The Commission has not issued or threatened to issue any
order preventing or suspending the use of any Pre-effective Prospectus, and no
proceedings for such purpose are pending before or threatened by the Commission;
(c) At its date of issue, each Pre-effective Prospectus
conformed in all material respects with the requirements of the Securities Act
and did not include any 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, in light of the circumstances under which they were made, not
misleading and, when the Registration Statement becomes effective and at all
times subsequent thereto up to and including each of the Closing Dates (as
hereinafter defined), the Registration Statement and the Prospectus and any
amendments or supplements thereto contained and will contain all material
statements and information required to be included therein by the Securities Act
and conformed and will conform in all material respects to the requirements of
the Securities Act; the Registration Statement and any amendment thereto, did
not include or will not include any
2
<PAGE>
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, not
misleading, and the Prospectus, and any amendment or supplement thereto, did not
include or will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing representations,
warranties and agreements shall not apply to information contained in or omitted
from any Pre-effective Prospectus or the Registration Statement or the
Prospectus or any such amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter, directly or through you, specifically for use in the
preparation thereof; there is no license, lease, contract, agreement or document
required to be described in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which is not described or
filed therein as required; and all descriptions of any such licenses, leases,
contracts, agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material respects.
(d) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, and except as set forth
or contemplated in the Prospectus, neither the Company nor any of its
subsidiaries has sustained material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree, nor
incurred any liabilities or obligations, direct or contingent, nor entered into
any transactions not in the ordinary course of business, and there has not been
any material adverse change, or any development involving a prospective material
adverse change in or affecting the condition (financial or otherwise), earnings,
business, management, prospects, net worth or results of operations of the
Company and its subsidiaries considered as a whole, or any change in the capital
stock, short-term or long-term debt of the Company and its subsidiaries
considered as a whole.
(e) The financial statements, together with the related notes
and schedules, set forth in the Prospectus and elsewhere in the Registration
Statement fairly present, on the basis stated in the Registration Statement, the
financial position and the results of operations and changes in financial
position of the Company at the respective dates or for the respective periods
therein specified. Such statements and related notes and schedules have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis except as may be set forth in the Prospectus. The selected
financial and statistical data set forth in the Prospectus fairly present, on
the basis stated in the Registration Statement, the information set forth
therein.
(f) The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present fairly
the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(g) PricewaterhouseCoopers LLP, who have expressed their
opinion on the
3
<PAGE>
audited financial statements and related schedules included in the Registration
Statement and the Prospectus, are independent public accountants as required by
the Securities Act and the Rules and Regulations.
(h) The Company and each of its subsidiaries have been duly
organized and are validly existing and in good standing as corporations under
the laws of their respective jurisdictions of organization, with power and
authority (corporate and other) to own or lease their properties and to conduct
their business as described in the Prospectus; the Company and each of its
subsidiaries are in possession of and operating in compliance with all grants,
authorizations, licenses, permits, easements, consents, certificates and orders
required for the conduct of its business, all of which are valid and in full
force and effect; and the Company and each of such subsidiaries are duly
qualified to do business and in good standing as foreign corporations in all
other jurisdictions where their ownership or leasing of properties or the
conduct of their business requires such qualification. The Company and each of
its subsidiaries have all requisite power and authority, and all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public regulatory or governmental agencies
and bodies to own, lease and operate its properties and conduct its business as
now being conducted and as described in the Registration Statement and the
Prospectus, and no such consent, approval, authorization, order, registration,
qualification, license or permit contains a materially burdensome restriction
not adequately disclosed in the Registration Statement and the Prospectus. The
Company owns or controls, directly or indirectly, only the following
corporations: HealthGate Europe Limited and HealthGate Acquisition Corp.
(i) The Company's authorized and outstanding capital stock is
on the date hereof, and will be on the Closing Date, as set forth under the
heading "Capitalization" in the Prospectus; the outstanding shares of common
stock of the Company conform to the description thereof in the Prospectus and
have been duly authorized and validly issued and are fully paid and
nonassessable and have been issued in compliance with all federal and state
securities laws and were not issued in violation of or subject to any preemptive
rights or similar rights to subscribe for or purchase securities and conform to
the description thereof contained in the Prospectus. Except as disclosed in and
or contemplated by the Prospectus and the financial statements of the Company
and related notes thereto included in the Prospectus, the Company does not have
outstanding any options or warrants to purchase, or any preemptive rights or
other rights to subscribe for or to purchase any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations, except for options granted subsequent to the date of information
provided in the Prospectus pursuant to the Company's employee and stock option
plans as disclosed in the Prospectus. The description of the Company's stock
option and other stock plans or arrangements, and the options or other rights
granted or exercised thereunder, as set forth in the Prospectus, accurately and
fairly presents the information required to be shown with respect to such plans,
arrangements, options and rights. All outstanding shares of capital stock of
each subsidiary have been duly authorized and validly issued, and are fully
paid and nonassessable and are owned directly by the Company free and clear of
any liens, encumbrances, equities or claims.
4
<PAGE>
(j) The Common Stock to be issued and sold by the Company to
the Underwriters hereunder has been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights and will conform to the description thereof in the Prospectus.
(k) Except as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
subsidiary is subject, which, if determined adversely to the Company or any such
subsidiary, might individually or in the aggregate (i) prevent or adversely
affect the transactions contemplated by this Agreement, (ii) suspend the
effectiveness of the Registration Statement, (iii) prevent or suspend the use of
the Pre-effective Prospectus in any jurisdiction or (iv) result in a material
adverse change in the current or future condition (financial or otherwise),
properties, business, management prospects, net worth or results of operations
of the Company and its subsidiaries considered as a whole and there is no valid
basis for any such legal or governmental proceeding; and to the best of the
Company's knowledge no such proceedings are threatened or contemplated against
the Company or any subsidiary by governmental authorities or others. The Company
is not a party nor subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body or other governmental
agency or body. The description of the Company's litigation under the heading
"Legal Matters" in the Prospectus is true and correct and complies with the
Rules and Regulations.
(l) The execution, delivery and performance of this Agreement
and the consummation of the transactions herein contemplated (A) will not result
in any violation of the provisions of the certificate of incorporation, by-laws
or other organizational documents of the Company or its subsidiaries, or any
law, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its subsidiaries or any of their
properties or assets, (B) will not conflict with or result in a breach or
violation of any of the terms or provisions of or constitute a default under any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which it or any of its properties is or may be bound, the Certificate of
Incorporation, By-laws or other organizational documents of the Company or any
of its subsidiaries, or any law, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or will result in the creation of a
lien.
(m) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby, except such as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") or under the Securities Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act") or the
securities or "Blue Sky" laws of any jurisdiction in connection with the
purchase and distribution of the Common Stock by the Underwriters.
(n) The Company has the full corporate power and authority to
enter into this
5
<PAGE>
Agreement and to perform its obligations hereunder (including to issue, sell and
deliver the Common Stock), and this Agreement has been duly and validly
authorized, executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or the public
policy underlying such laws.
(o) The Company and its subsidiaries are in all material
respects in compliance with, and conduct their business in conformity with, all
applicable federal, state, local and foreign laws, rules and regulations of any
court or governmental agency or body; to the knowledge of the Company, otherwise
than as set forth in the Registration Statement and the Prospectus, no
prospective change in any of such federal or state laws, rules or regulations
has been adopted which, when made effective, would have a material adverse
effect on the operations of the Company and its subsidiaries.
(p) Except for an amendment to the Company's 1997 federal tax
return which the Company plans to file, the Company and its subsidiaries have
filed all necessary federal, state, local and foreign income, payroll, franchise
and other tax returns and have paid all taxes shown as due thereon or with
respect to any of their properties, and there is no tax deficiency that has
been, or to the knowledge of the Company is likely to be, asserted against the
Company or any of its subsidiaries or any of their respective properties or
assets that would adversely affect the financial position, business or
operations of the Company and its subsidiaries.
(q) No person or entity has the right to require registration
of shares of Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement or otherwise, except for
persons and entities who have expressly waived such right or who have been given
proper notice and have failed to exercise such right within the time or times
required under the terms and conditions of such right.
(r) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.
(s) The Company has provided you with all financial statements
since 1994 to the date hereof that are available to the officers of the Company,
including financial statements for the months of January, February, March,
April, May, June, July, August and September of 1999.
(t) The Company and its subsidiaries own or possess the right
to use all patents, trademarks (including "ReADER"), trademark registrations,
service marks (including "HealthGate", "HealthGate Data" and "MedGate"), service
mark registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being
6
<PAGE>
owned by it or necessary for the conduct of their respective businesses (and the
Company has trademark registration applications pending for the trademarks
"CHOICE" and "activePress", and for the HealthGate logo design), and the Company
is not aware of any claim to the contrary or any challenge by any other person
to the rights of the Company and its subsidiaries with respect to the foregoing.
To the best of the Company's knowledge, the Company's business as now conducted
and as proposed to be conducted does not and will not infringe or conflict with
in any material respect patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other intellectual property or franchise
right of any person. Except as described in the Prospectus, no claim has been
made against the Company alleging the infringement by the Company of any patent,
trademark, service mark, trade name, copyright, trade secret, license in or
other intellectual property right or franchise right of any person.
(u) The Company and its subsidiaries have performed all
material obligations required to be performed by them under all contracts
required by Item 601(b)(10) of Regulation S-K under the Securities Act to be
filed as exhibits to the Registration Statement, and neither the Company nor any
of its subsidiaries nor any other party to such contract is in default under or
in breach of any such obligations. Neither the Company nor any of its
subsidiaries has received any notice of such default or breach.
(v) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of the
Company or any of its subsidiaries will be affected by the Year 2000 Problem
(that is, any significant risk that computer hardware or software applications
used by the Company and its subsidiaries will not, in the case of dates or time
periods occurring after December 31, 1999, function at least as effectively as
in the case of dates or time periods occurring prior to January 1, 2000); as a
result of such review, (i) the Company has no reason to believe, and does not
believe, that (A) there are any issues related to the Company's preparedness to
address the Year 2000 Problem that are of a character required by, described or
referred to in the Registration Statement or Prospectus which have not been
accurately described in the Registration Statement or Prospectus and (B) the
Year 2000 Problem will have any material adverse change, or any development
involving a prospective material adverse change in or affecting the condition
(financial or otherwise), earnings, business, management, prospects, net worth
or results of operations of the Company and its subsidiaries considered as a
whole, or result in any material loss or interference with the business or
operations of the Company and its subsidiaries, taken as a whole; and (ii) the
Company reasonably believes, after due inquiry, that the licensors, internet
service providers, suppliers, vendors, subscribers or other material third
parties used or served by the Company and such subsidiaries are addressing or
will address the Year 2000 Problem in a timely manner, except to the extent that
a failure to address the Year 2000 Problem by any licensor, internet service
provider, supplier, vendor, subscriber or material third party would not have
any material adverse change, or any development involving a prospective material
adverse change in or affecting the condition (financial or otherwise), earnings,
business, management, prospects, net worth or results of operations of the
Company and its subsidiaries considered as a whole.
(w) The Company is not involved in any labor dispute nor is
any such dispute
7
<PAGE>
threatened. The Company is not aware that (A) any executive, key employee or
significant group of employees of the Company or any subsidiary plans to
terminate employment with the Company or any such subsidiary or (B) any such
executive or key employee is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement that would be
violated by the present or proposed business activities of the Company and its
subsidiaries. Neither the Company nor any subsidiary has or expects to have any
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any subsidiary makes or ever
has made a contribution and in which any employee of the Company or any
subsidiary is or has ever been a participant. With respect to such plans, the
Company and each subsidiary is in compliance in all material respects with all
applicable provisions of ERISA.
(x) The Company has obtained the written agreement described
in Section 8(j) of this Agreement from each of its officers, directors,
principal stockholders and other existing holders of Common Stock as set forth
on Schedule B attached hereto.
(y) The Company and its subsidiaries have, and the Company and
its subsidiaries as of the Closing Date will have, good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned or proposed to be owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or such
as would not materially affect the value of such property and would not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries and would not have a material adverse effect on the
Company and its subsidiaries considered as a whole; and any real property and
buildings held under lease by the Company and its subsidiaries or proposed to be
held after giving effect to the transactions described in the Prospectus are, or
will be as of the Closing Date, held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, and as would not have a material adverse effect on
the Company and its subsidiaries considered as a whole, in each case except as
described in or contemplated by the Prospectus.
(z) The Company and its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are engaged
or propose to engage after giving effect to the transactions described in the
Prospectus; and neither the Company nor any subsidiary of the Company has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue their business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its subsidiaries
considered as a whole, except as described in or contemplated by the Prospectus.
(aa) Other than as contemplated by this Agreement, there is no
broker, finder
8
<PAGE>
or other party that is entitled to receive from the Company any brokerage or
finder's fee or other fee or commission as a result of any of the transactions
contemplated by this Agreement.
(bb) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) the Company has adequately addressed the material weaknesses
in the Company's internal accounting controls identified by
PricewaterhouseCoopers LLC in its letter to the Company dated June 30, 1999;
(ii) transactions are executed in accordance with management's general or
specific authorization; (iii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iv) access to
assets is permitted only in accordance with management's general or specific
authorization; and (v) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(cc) To the Company's knowledge, neither the Company nor any
of its subsidiaries nor any employee or agent of the Company or any of its
subsidiaries has made any payment of funds of the Company or any of its
subsidiaries or received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(dd) Neither the Company nor any of its subsidiaries is or,
after application of the net proceeds of this offering as described under the
caption "Use of Proceeds" in the Prospectus, will become an "investment company"
or an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
(ee) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters shall be deemed to
be a representation and warranty by the Company as to the matters covered
thereby.
3. PURCHASE BY, AND SALE AND DELIVERY TO, THE UNDERWRITERS.
The Company agrees to sell to the Underwriters, and each Underwriter, on the
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, agrees,
severally and not jointly, to purchase from the Company, the respective numbers
of Firm Stock set forth in Schedule A hereto opposite its names, subject to
adjustment in accordance with Section 12 hereof, at U.S.$ _______ per share (the
"Purchase Price").
The Company will deliver the Firm Stock to the Representatives
for the respective accounts of the several Underwriters in the form of
definitive certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York Time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as the
Representatives may designate (solely for the purpose of administrative
convenience) and in such denominations as the Representatives may determine,
against payment of the aggregate Purchase Price therefor in
9
<PAGE>
immediately available funds (same day funds), all at the offices of Shearman &
Sterling, 599 Lexington Avenue, New York, New York 10022. The time and date of
the delivery and closing shall be at 10:00 A.M., New York Time, on _________,
1999, in accordance with Rule 15c6-1 of the Exchange Act. The time and date of
such payment and delivery are herein referred to as the "First Closing Date".
The First Closing Date and the location of delivery of, and the form of payment
for, the Firm Stock may be varied by agreement among the Company and the
Representatives. The First Closing Date may be postponed pursuant to the
provisions of Section 12.
The Company shall make the certificates for the Firm Stock
available to the Representatives for examination on behalf of the Underwriters
not later than 10:00 A.M., New York Time, on the business day preceding the
First Closing Date at the offices of SG Cowen, Financial Square, New York, New
York 10005.
It is understood that SG Cowen, individually and not as a
Representative of the several Underwriters, may (but shall not be obligated to)
make payment to the Company on behalf of any Underwriter or Underwriters, for
the Common Stock to be purchased by such Underwriter or Underwriters. Any such
payment by SG Cowen shall not relieve such Underwriter or Underwriters from any
of its or their other obligations hereunder.
The several Underwriters agree to make an initial public
offering of the Firm Stock at the initial public offering price as soon after
the effectiveness of the Registration Statement as in their judgment is
advisable. The Representatives shall promptly advise the Company of the making
of the initial public offering. The Company is advised by you that the Firm
Stock is to be offered to the public initially at U.S.$ ______ a share (the
"Public Offering Price") and to certain dealers selected by you at a price that
represents a concession not in excess of U.S.$ ____ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of U.S.$ _____ a share, to any Underwriter
or to certain other dealers.
For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Stock as contemplated by the
Prospectus, the Company hereby grants to the Underwriters an option to purchase,
severally and not jointly, up to 562,500 shares of Optional Stock. The price per
share to be paid for the Optional Stock shall be the Purchase Price. The option
granted hereby may be exercised as to all or any part of the Optional Stock at
any time, and from time to time, not more than thirty (30) days subsequent to
the effective date of this Agreement. No Optional Stock shall be sold and
delivered unless the Firm Stock previously has been, or simultaneously is, sold
and delivered. The right to purchase the Optional Stock or any portion thereof
may be surrendered and terminated at any time upon notice by the Underwriters to
the Company.
The option granted hereby may be exercised by the Underwriters
by giving written notice from SG Cowen to the Company setting forth the number
of shares of the Optional Stock to be purchased by the Underwriters and the date
and time for delivery of and payment for
10
<PAGE>
the Optional Stock. Each date and time for delivery of and payment for the
Optional Stock (which may be the First Closing Date, but not earlier) is herein
called the "Option Closing Date" and shall in no event be earlier than two (2)
business days nor later than ten (10) business days after written notice is
given. (The Option Closing Date and the First Closing Date are herein called the
"Closing Dates".) Optional Stock shall be purchased for the account of each
Underwriter in the same proportion as the number of shares of Firm Stock set
forth opposite such Underwriter's name in Schedule A hereto bears to the total
number of shares of Firm Stock (subject to adjustment by the Underwriters to
eliminate odd lots). Upon exercise of the option by the Underwriters, the
Company agrees to sell to the Underwriters the number of shares of Optional
Stock set forth in the written notice of exercise and the Underwriters agree,
severally and not jointly and subject to the terms and conditions herein set
forth, to purchase the number of such shares determined as aforesaid.
The Company will deliver the Optional Stock to the
Underwriters in the form of definitive certificates, issued in such names and in
such denominations as the Representatives may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York Time, on the second full
business day preceding the Option Closing Date or, if no such direction is
received, in the names of the respective Underwriters or in such other names as
SG Cowen may designate (solely for the purpose of administrative convenience)
and in such denominations as SG Cowen may determine, against payment of the
aggregate Purchase Price therefor in immediately available funds, at the offices
of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022. The
Company shall make the certificates for the Optional Stock available to the
Underwriters for examination not later than 10:00 A.M., New York Time, on the
business day preceding the Option Closing Date at the offices of SG Cowen,
Financial Square, New York, New York 10005. The Option Closing Date and the
location of delivery of, and the form of payment for, the Option Stock may be
varied by agreement between among the Company and SG Cowen. The Option Closing
Date may be postponed pursuant to the provisions of Section 12.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company
covenants and agrees with the several Underwriters that:
(a) The Company will (i) if the Company and the
Representatives have determined not to proceed pursuant to Rule 430A of the
Rules and Regulations, use its best efforts to cause the Registration Statement
to become effective, (ii) if the Company and the Representatives have determined
to proceed pursuant to Rule 430A of the Rules and Regulations, use its best
efforts to comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A and Rule 424 of the Rules and Regulations and
(iii) if the Company and the Representatives have determined to deliver a
Prospectus pursuant to Rule 434 of the Rules and Regulations, to use its best
efforts to comply with all the applicable provisions thereof. The Company will
advise the Representatives promptly as to the time at which the Registration
Statement becomes effective, will advise the Representatives promptly of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible the lifting thereof, if
11
<PAGE>
issued. The Company will advise the Representatives promptly of the receipt of
any comments of the Commission or any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for additional information and will not at any time file any amendment to the
Registration Statement or supplement to the Prospectus which shall not
previously have been submitted to the Representatives a reasonable time prior to
the proposed filing thereof or to which the Representatives shall reasonably
object in writing or which is not in compliance with the Securities Act and the
Rules and Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon the request of the Representatives, any amendments or supplements
to the Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to continue
the distribution of the Common Stock and will use its best efforts to cause the
same to become effective as promptly as possible.
(c) If at any time after the effective date of the
Registration Statement when a prospectus relating to the Common Stock is
required to be delivered under the Securities Act any event relating to or
affecting the Company or any of its subsidiaries occurs as a result of which the
Prospectus would include an untrue statement of a material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary at any time to amend or
supplement the Prospectus to comply with applicable law, the Company will
promptly notify the Representatives thereof and will prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to the
dealers (whose names and addresses you will furnish to the Company) to which
Common Stock may have been sold by you on behalf of the Underwriters and to any
other dealers upon request, either amendments or supplements to the Prospectus
so that the statements in the Prospectus as so amended or supplemented will not,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or supplemented,
will comply with applicable law.
(d) The Company will deliver to the Representatives, at or
before the Closing Dates, signed copies of the Registration Statement, as
originally filed with the Commission, and all amendments thereto including all
financial statements and exhibits thereto, and will deliver to the
Representatives such number of copies of the Registration Statement, including
such financial statements but without exhibits, and all amendments thereto, as
the Representatives may reasonably request. The Company will deliver or mail to,
upon the order of the Representatives, from time to time until the effective
date of the Registration Statement, as many copies of the Pre-effective
Prospectus as the Representatives may reasonably request. The Company will
deliver or mail to, upon the order of the Representatives, on the date of the
initial public offering, and thereafter from time to time during the period when
delivery of a prospectus relating to the Common Stock is required under the
Securities Act, as many copies of the Prospectus, in final form or as thereafter
amended or supplemented as the Representatives may reasonably request; provided,
however, that the expense of the preparation and delivery of any prospectus
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to deliver
such prospectus.
12
<PAGE>
(e) The Company will make generally available to its
shareholders as soon as practicable, but not later than fifteen (15) months
after the effective date of the Registration Statement, an earning statement
which will be in reasonable detail (but which need not be audited) and which
will comply with Section 11(a) of the Securities Act, covering a period of at
least twelve (12) months beginning after the "effective date" (as defined in
Rule 158 under the Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to
enable the Common Stock to be registered or qualified for offering and sale by
the Underwriters and by dealers under the securities laws of such jurisdictions
as the Representatives may designate and at the request of the Representatives
will make such applications and furnish such consents to service of process or
other documents as may be required of it as the issuer of the Common Stock for
that purpose; provided, however, that the Company shall not be required to
qualify to do business or to file a general consent (other than that arising out
of the offering or sale of the Common Stock) to service of process in any such
jurisdiction where it is not now so subject. The Company will, from time to
time, prepare and file such statements and reports as are or may be required of
it as the issuer of the Common Stock to continue such qualifications in effect
for so long a period as the Representatives may reasonably request for the
distribution of the Common Stock. The Company will advise the Representatives
promptly after the Company becomes aware of the suspension of the qualifications
or registration of (or any such exception relating to) the Common Stock of the
Company for offering, sale or trading in any jurisdiction or of any initiation
or threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Representatives use its
best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its shareholders as soon as
practicable after the end of each fiscal year an annual report containing
financial statements certified by independent public accountants, will furnish
to its shareholders as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration Statement) consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail.
(h) During the period of three (3) years from the date hereof,
the Company will deliver to the Representatives and, upon request, to each of
the other Underwriters, as soon as they are available, copies of each annual
report of the Company, including the opinion thereon of the Company's
independent public accountants, and each other report furnished by the Company
to its shareholders and will deliver to the Representatives, (i) as soon as they
are available, copies of any other reports (financial or other) or
communications which the Company shall publish or otherwise make available to
any of its shareholders as such, (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Report on Form 8-K or other report and financial statements
filed by the Company with the Commission, or the NASD or any securities exchange
and (iii) from time to time such other information concerning the Company as you
may request. So long as the Company has active subsidiaries, such financial
statements will be on a consolidated basis
13
<PAGE>
to the extent the accounts of the Company and its subsidiaries are consolidated
in reports furnished to its shareholders generally. Separate financial
statements shall be furnished for all subsidiaries whose accounts are not
consolidated but which at the time are significant subsidiaries as defined in
the Rules and Regulations.
(i) The Company will use its best efforts to list the Common
Stock, subject to official notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the Registration Statement.
(j) The Company will maintain a transfer agent and registrar
for its Common Stock.
(k) Prior to filing its quarterly statements on Form 10-Q, the
Company will have its independent auditors perform a limited quarterly review of
its quarterly numbers.
(l) The Company will not, for a period of 180 days following
the date of the final prospectus filed by the Company with the Securities and
Exchange Commission in connection with such public offering without the prior
written consent of SG Cowen, on behalf of the several Underwriters, (1) directly
or indirectly, offer, sell, assign, transfer, encumber, pledge, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
dispose of, other than by operation of law, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act) or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of Common Stock whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise, other than the Company's
sale of Common Stock hereunder, the Company's issuance of stock options under
the Company's 1994 Stock Option Plan, and the Company's issuance of Common Stock
upon the exercise of warrants and stock options which are presently outstanding
and described in the Prospectus.
(m) The Company will apply the net proceeds from the sale of
the Common Stock as set forth in the description under "Use of Proceeds" in the
Prospectus, which description complies in all respects with the requirements of
Item 504 of Regulation S-K.
(n) The Company will supply you with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Common Stock under the Securities
Act.
(o) Prior to each of the Closing Dates the Company will
furnish to you, as soon as they have been prepared, copies of any unaudited
interim consolidated financial statements of the Company and its subsidiaries
for any periods subsequent to the periods covered
14
<PAGE>
by the financial statements appearing in the Registration Statement and the
Prospectus.
(p) Prior to each of the Closing Dates the Company will issue
no press release or other communications directly or indirectly and hold no
press conference with respect to the Company or any of its subsidiaries, the
financial condition, results of operations, business, prospects, assets or
liabilities of any of them, or the offering of the Common Stock, without your
prior written consent. For a period of twelve (12) months following the first
Closing Date, the Company will use its best efforts to provide to you copies of
each press release or other public communications with respect to the financial
condition, results of operations, business, prospects, assets or liabilities of
the Company at least twenty-four (24) hours prior to the public issuance thereof
or such longer advance period as may reasonably be practicable.
5. PAYMENT OF EXPENSES. (a) The Company will pay (directly or
by reimbursement) all costs, fees and expenses incurred in connection with
expenses incident to the performance of the obligations of the Company under
this Agreement and in connection with the transactions contemplated hereby,
including but not limited to (i) all expenses and taxes incident to the issuance
and delivery of the Common Stock to the Representatives; (ii) all expenses
incident to the registration of the Common Stock under the Securities Act; (iii)
the costs of preparing stock certificates (including printing and engraving
costs); (iv) all fees and expenses of the registrar and transfer agent of the
Common Stock; (v) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Common Stock to the Underwriters;
(vi) fees and expenses of the Company's counsel and the Company's independent
accountants; (vii) all costs and expenses incurred in connection with the
preparation, printing filing, shipping and distribution of the Registration
Statement, each Pre-effective Prospectus and the Prospectus (including all
exhibits and financial statements) and all amendments and supplements provided
for herein, the "Agreement Among Underwriters" between the Representatives and
the Underwriters, the Master Selected Dealers' Agreement, the Underwriters'
Questionnaire and the Blue Sky memoranda (including related fees and expenses of
counsel to the Underwriters) and this Agreement; (viii) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection with exemptions from the qualifying or registering (or obtaining
qualification or registration of) all or any part of the Common Stock for offer
and sale under the Blue Sky or other securities laws of such jurisdictions as
the Representatives may designate; (ix) all fees and expenses paid or incurred
in connection with filings made with the NASD; (x) all fees and expenses paid or
incurred in connection with listing the Common Stock on Nasdaq; (xi) the
Company's expenses incurred in connection with the roadshow; and (xii) all other
costs and expenses incident to the performance of their obligations hereunder
which are not otherwise specifically provided for in this Section.
(b) In addition to its other obligations under Section 6(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon (i) any statement or omission or any alleged statement or omission,
(ii) any act or failure to act or any alleged act or failure to act or (iii) any
breach or inaccuracy in their representations and warranties, it will reimburse
each Underwriter (and to the extent applicable, each officer, director, or
controlling person) on a
15
<PAGE>
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company, together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by _______, New York, New
York (the "Prime Rate"). Any such interim reimbursement payments which are not
made to an Underwriter in a timely manner as provided below shall bear interest
at the Prime Rate from the due date for such reimbursement. This expense
reimbursement agreement will be in addition to any other liability which the
Company may otherwise have. The request for reimbursement will be sent to the
Company.
(c) In addition to its other obligations under Section 6(b)
hereof, each Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in Section 6(d) hereof which relates to information
furnished to the Company pursuant to Section __ hereof, it will reimburse the
Company (and, to the extent applicable, each officer, director, or controlling
person) on a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director, or controlling person) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within thirty (30) days of a request
for reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(d) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in paragraph (b)
and/or (c) of this Section 5, including the amounts of any requested
reimbursement payments and the method of determining such amounts, shall be
settled by arbitration conducted under the provisions of the Constitution and
Rules of the Board of Governors of the New York Stock Exchange, Inc. or pursuant
to the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the event
the party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Such an arbitration would be limited to the
operation of the interim reimbursement provisions contained in paragraph (b) of
this Section 5 and would not resolve the
16
<PAGE>
ultimate propriety or enforceability of the obligation to reimburse expenses
which is created by the provisions of Section 6.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of the Securities Act and the
respective officers, directors, partners, employees, representatives and agents
of each of such Underwriter (collectively, the "Underwriter Indemnified Parties"
and, each, an "Underwriter Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (including the reasonable cost of investigating
and defending against any claims therefor and counsel fees incurred in
connection therewith), joint or several, which may be based upon the Securities
Act, or any other statute or at common law, (i) on the ground or alleged ground
that any Pre-effective Prospectus, the Registration Statement or the Prospectus
(or any Pre-effective Prospectus, the Registration Statement or the Prospectus
as from time to time amended or supplemented) includes or allegedly includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, unless
such statement or omission was made in reliance upon, and in conformity with,
written information furnished to the Company by any Underwriter, directly or
through the Representatives, specifically for use in the preparation thereof or
(ii) for any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Common Stock
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or expense arising out of or
based upon matters covered by clause (i) above (provided that the Company shall
not be liable under this clause (ii) to the extent that it is determined in a
final judgment by a court of competent jurisdiction that such loss, claim,
damage, or liability or expense resulted directly from any such acts or failures
to act undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct). The Company will be entitled to participate
at its own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Company elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
reasonably acceptable to the Underwriters. In the event the Company elects to
assume the defense of any such suit and retain such counsel, any Underwriter
Indemnified Parties, defendant or defendants in the suit, may retain additional
counsel but shall bear the fees and expenses of such counsel unless (i) the
Company shall have specifically authorized the retaining of such counsel or (ii)
the parties to such suit include any such Underwriter Indemnified Parties, and
the Company and such Underwriter Indemnified Parties at law or in equity have
been advised by counsel to the Underwriters that one or more legal defenses may
be available to it or them which may not be available to the Company, in which
case the Company shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such counsel,
provided that the Company shall not, in connection with any proceeding or
related proceeding in the same jurisdiction, be liable for the fees and expenses
of more than one separate firm representing the Underwriter; provided, further,
that in no case is the Company to be liable with respect to any claims made
against the Underwriter unless the Underwriter shall have notified the Company
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon the Underwriter, but failure to notify the Company of such
17
<PAGE>
claim shall not relieve it from any liability which it may have to the
Underwriter otherwise than on account of its indemnity agreement contained in
this paragraph. This indemnity agreement is not exclusive and will be in
addition to any liability which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party.
(b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act (collectively, the
"Company Indemnified Parties"), against any losses, claims, damages, liabilities
or expenses (including, unless the Underwriter or Underwriters elect to assume
the defense, the reasonable cost of investigating and defending against any
claims therefor and counsel fees incurred in connection therewith), joint or
several, which arise out of or are based in whole or in part upon the Securities
Act, the Exchange Act or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any
Pre-effective Prospectus, the Registration Statement or the Prospectus (or any
Pre-effective Prospectus, the Registration Statement or the Prospectus, as from
time to time amended and supplemented) includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by such Underwriter, directly or through
the Representatives, specifically for use in the preparation thereof; provided,
however, that in no case is such Underwriter to be liable with respect to any
claims made against any Company Indemnified Party against whom the action is
brought unless such Company Indemnified Party shall have notified such
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Company Indemnified Party, but failure to notify such
Underwriter of such claim shall not relieve it from any liability which it may
have to any Company Indemnified Party otherwise than on account of its indemnity
agreement contained in this paragraph. Such Underwriter shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but, if such
Underwriter elects to assume the defense, such defense shall be conducted by
counsel chosen by it. In the event that any Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties and any other Underwriter or Underwriters or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, respectively. The Underwriter
against whom indemnity may be sought shall not be liable to indemnify any person
for any settlement of any such claim effected without such Underwriter's
consent. This indemnity agreement is not exclusive and will be in addition to
any liability which such Underwriter might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity to
any Company Indemnified Party;
(c) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to
18
<PAGE>
herein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Common Stock.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating,
defending, settling or compromising any such claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the shares of the Common Stock underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC.
The respective indemnities, covenants, agreements, representations, warranties
and other statements of the Company, and the several Underwriters, as set forth
in this Agreement or made by them respectively, pursuant to this Agreement,
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter, the Company or any of its officers or directors
or any controlling person, and shall survive delivery of and payment for the
Common Stock.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the
19
<PAGE>
several Underwriters hereunder shall be subject to the accuracy, at and (except
as otherwise stated herein) as of the date hereof and at and as of each of the
Closing Dates, of the representations and warranties made herein by the Company,
to compliance at and as of each of the Closing Dates by the Company with its
covenants and agreements herein contained and other provisions hereof to be
satisfied at or prior to each of the Closing Dates, and to the following
additional conditions:
(a) The Registration Statement shall have become effective and
no stop order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or the Representatives, shall be threatened by the Commission, and
any request for additional information on the part of the Commission (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Representative.
Any filings of the Prospectus, or any supplement thereto, required pursuant to
Rule 424(b) or Rule 434 of the Rules and Regulations, shall have been made in
the manner and within the time period required by Rule 424(b) and Rule 434 of
the Rules and Regulations, as the case may be.
(b) The Representatives shall have been satisfied that there
shall not have occurred any change, on a consolidated basis, prior to each of
the Closing Dates in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of the
Company and its subsidiaries considered as a whole, or any change in the capital
stock, short-term or long-term debt of the Company and its subsidiaries
considered as a whole, such that (i) the Registration Statement or the
Prospectus, or any amendment or supplement thereto, contains an untrue statement
of fact which, in the opinion of the Representatives, is material, or omits to
state a fact which, in the opinion of the Representatives, is required to be
stated therein or is necessary to make the statements therein not misleading, or
(ii) it is unpracticable in the reasonable judgment of the Representatives to
proceed with the public offering or purchase the Common Stock as contemplated
hereby.
(c) The Representatives shall be satisfied that no legal or
governmental action, suit or proceeding affecting the Company which is material
and adverse to the Company or which affects or may affect the Company's ability
to perform their respective obligations under this Agreement shall have been
instituted or threatened and there shall have occurred no material adverse
development in any existing such action, suit or proceeding.
(d) At the time of execution of this Agreement, the
Representatives shall have received from PricewaterhouseCoopers LLP, independent
certified public accountants, a letter, dated the date hereof, in form and
substance satisfactory to the Underwriters.
(e) The Representatives shall have received from
PricewaterhouseCoopers LLP, independent certified public accountants, letters,
dated each of the Closing Dates, to the effect that such accountants reaffirm,
as of each of the Closing Dates, and as though made on each of the Closing
Dates, the statements made in the letter furnished by such accountants pursuant
to paragraph (d) of this Section 8.
20
<PAGE>
(f) The Representatives shall have received from Rich, May,
Bilodeau & Flaherty, P.C., counsel for the Company, opinions, dated each of the
Closing Dates, to the effect set forth in Exhibit I hereto.
(g) The Representatives shall have received from Shearman &
Sterling, counsel for the Underwriters, their opinions dated each of the Closing
Dates with respect to the incorporation of the Company, the validity of the
Common Stock, the Registration Statement and the Prospectus and such other
related matters as it may reasonably request, and the Company shall have
furnished to such counsel such documents as they may request for the purpose of
enabling them to pass upon such matters.
(h) The Representatives shall have received certificates,
dated each of the Closing Dates, of the Chief Executive Officer or the President
of the Company to the effect that:
(i) The representations and warranties of the Company
in this Agreement are true and correct at and as of each of the Closing Dates,
and the Company has complied with all the agreements and performed or satisfied
all the conditions on its part to be performed or satisfied at or prior to the
Closing Dates; and
(ii) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, (i) there has not been
any material adverse change or a development involving a material adverse change
in the condition (financial or otherwise), properties, business, management,
prospects, net worth or results of operations of the Company and its
subsidiaries considered as a whole; (ii) the business and operations conducted
by the Company and its subsidiaries have not sustained a loss by strike, fire,
flood, accident or other calamity (whether or not insured) of such a character
as to interfere materially with the conduct of the business and operations of
the Company and its subsidiaries considered as a whole; (iii) no legal or
governmental action, suit or proceeding is pending or threatened against the
Company which is material to the Company, whether or not arising from
transactions in the ordinary course of business, or which may materially and
adversely affect the transactions contemplated by this Agreement; (iv) since
such dates and except as so disclosed, the Company has not incurred any material
liability or obligation, direct, contingent or indirect, made any change in its
capital stock (except pursuant to its stock plans), made any material change in
its short-term or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and (v) except for dividends on the Series E Preferred
Stock as described in the Prospectus, the Company has not declared or paid any
dividend, or made any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the Closing Date.
(i) The Company shall have furnished to the Representatives
such additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of each of the Closing Dates, of the
representations and warranties made herein by it and as to compliance at and as
of each of the Closing Dates by it with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to each of the
Closing Dates, and as to satisfaction of the other conditions to the obligations
of the Underwriters hereunder.
21
<PAGE>
(j) SG Cowen shall have received the written agreements,
substantially in the form of Exhibit II hereto, of the officers, directors,
principal stockholders and other existing holders of Common Stock as set forth
on Schedule B attached hereto, that each will not offer, sell, assign, transfer,
encumber, contract to sell, grant an option to purchase or otherwise dispose of
any shares of Common Stock (including, without limitation, Common Stock which
may be deemed to be beneficially owned by such officer, director or holder in
accordance with the Rules and Regulations) during the 180 days following the
date of the final Prospectus.
(k) The Nasdaq National Market shall have approved the Common
Stock for listing, subject only to official notice of issuance.
(l) All opinions, certificates, letters and other documents
will be in compliance with the provisions hereunder only if they are
satisfactory in form and substance to the Representatives. The Company will
furnish to the Representatives conformed copies of such opinions, certificates,
letters and other documents as the Representatives shall reasonably request. If
any of the conditions hereinabove provided for in this Section shall not have
been satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representatives by notifying the Company of such termination
in writing or by telegram at or prior to each of the Closing Dates, but SG Cowen
shall be entitled to waive any of such conditions.
9. EFFECTIVE DATE. This Agreement shall become effective
immediately as to Sections 5, 6, 8, 9 and 10, and, as to all other provisions,
at 11:00 a.m. New York City time on the first full business day following the
effectiveness of the Registration Statement or at such earlier time after the
Registration Statement becomes effective as the Representatives may determine on
and by notice to the Company or by release of any of the Common Stock for sale
to the public. For the purposes of this Section 9, the Common Stock shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Common Stock or upon the release by you
of telegrams (i) advising the Underwriters that the shares of Common Stock are
released for public offering or (ii) offering the Common Stock for sale to
securities dealers, whichever may occur first.
10. TERMINATION. This Agreement (except for the provisions of
Section 5) may be terminated by the Company at any time before it becomes
effective in accordance with Section 9 by notice to the Representatives and may
be terminated by the Representatives at any time before it becomes effective in
accordance with Section 9 by notice to the Company. In the event of any
termination of this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this Agreement to any
other party, other than as provided in Sections 5, 6 and 11 and other than as
provided in Section 12 as to the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by
the Representatives by notice to the Company (i) if at or prior to the First
Closing Date trading in securities on any of the New York Stock Exchange or the
Nasdaq National Market System shall
22
<PAGE>
have been suspended or minimum or maximum prices shall have been established on
any such exchange or market, or a banking moratorium shall have been declared by
New York or United States authorities; (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) if at or prior to the First Closing Date there shall have been (A)
an outbreak or escalation of hostilities between the United States and any
foreign power or of any other insurrection or armed conflict involving the
United States or (B) any change in financial markets or any calamity or crisis
which, in the judgment of the Representatives, makes it impractical or
inadvisable to offer or sell the Common Stock on the terms contemplated by the
Prospectus; (iv) if there shall have been any development or prospective
development involving particularly the business or properties or securities of
the Company or any of its subsidiaries or the transactions contemplated by this
Agreement, which, in the judgment of the Representatives, makes it impracticable
or inadvisable to offer or deliver the Common Stock on the terms contemplated by
the Prospectus; (v) if there shall be any litigation or proceeding, pending or
threatened, which, in the judgment of the Representatives, makes it
impracticable or inadvisable to offer or deliver the Common Stock on the terms
contemplated by the Prospectus; or (vi) if there shall have occurred any of the
events specified in the immediately preceding clauses (i) - (v) together with
any other such event that makes it, in the judgment of the Representatives,
impractical or inadvisable to offer or deliver the Common Stock on the terms
contemplated by the Prospectus.
11. REIMBURSEMENT OF UNDERWRITERS. Notwithstanding any other
provisions hereof, if this Agreement shall not become effective by reason of any
election of the Company pursuant to the first paragraph of Section 10 or shall
be terminated by the Representatives under Section 8 or Section 10, the Company
will bear and pay the expenses specified in Section 5 hereof and, in addition to
the obligations pursuant to Section 6 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase of the Common Stock,
and promptly upon demand the Company will pay such amounts to you as
Representatives.
12. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or
Underwriters shall default in its or their obligations to purchase shares of
Stock hereunder and the aggregate number of shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed ten
percent (10%) of the total number of shares underwritten, the other Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
shall so default and the aggregate number of shares with respect to which such
default or defaults occur is more than ten percent (10%) of the total number of
shares underwritten and arrangements satisfactory to the Representatives and the
Company for the purchase of such shares by other persons are not made within
forty-eight (48) hours after such default, this Agreement shall terminate.
If the remaining Underwriters or substituted Underwriters are
required hereby or agree to take up all or part of the shares of Stock of a
defaulting Underwriter or Underwriters as provided in this Section 12, (i) the
Company shall have the right to postpone the Closing Dates
23
<PAGE>
for a period of not more than five (5) full business days in order that the
Company may effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees promptly to file any amendments to the
Registration Statement or supplements to the Prospectus which may thereby be
made necessary, and (ii) the respective numbers of shares to be purchased by the
remaining Underwriters or substituted Underwriters shall be taken as the basis
of their underwriting obligation for all purposes of this Agreement. Nothing
herein contained shall relieve any defaulting Underwriter of its liability to
the Company or the other Underwriters for damages occasioned by its default
hereunder. Any termination of this Agreement pursuant to this Section 12 shall
be without liability on the part of any non-defaulting Underwriter or the
Company, except for expenses to be paid or reimbursed pursuant to Section 5 and
except for the provisions of Section 6.
13. NOTICES. All communications hereunder shall be in writing
and, if sent to the Underwriters shall be mailed, delivered or faxed and
confirmed to you, as their Representatives c/o SG Cowen at Financial Square, New
York, New York 10005 except that notices given to an Underwriter pursuant to
Section 6 hereof shall be sent to such Underwriter at the address furnished by
the Representatives or, if sent to the Company, shall be mailed, delivered or
faxed and confirmed c/o William S. Reece, 25 Corporate Drive, Suite 310,
Burlington, Massachusetts 01803, with a copy to Rich, May, Bilodeau & Flaherty,
P.C., 176 Federal Street, Boston, MA 02110, Attention Stephen M. Kane, Esq.
14. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the several Underwriters, the Company and its respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and the indemnities of the several
Underwriters shall also be for the benefit of each director of the Company, each
of its officers who has signed the Registration Statement and the person or
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.
15. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
16. AUTHORITY OF THE REPRESENTATIVES. In connection with this
Agreement, you will act for and on behalf of the several Underwriters, and any
action taken under this Agreement by SG Cowen, Volpe Brown Whelan & Company, LLC
and Warburg Dillon Read LLC, as Representatives, will be binding on all the
Underwriters.
24
<PAGE>
17. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
18. GENERAL. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section headings in
this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by the Company and the Representatives.
19. COUNTERPARTS. This Agreement may be signed in two (2) or
more counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
25
<PAGE>
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter and your acceptance shall constitute a binding
agreement between us.
Very truly yours,
HEALTHGATE DATA CORP.
By:
----------------------------------------
William S. Reece
Chairman and Chief Executive Officer
Accepted and delivered in
_________________as of
the date first above written.
SG COWEN SECURITIES CORPORATION
VOLPE BROWN WHELAN & COMPANY, LLC
WARBURG DILLON READ LLC
Acting on its own behalf
and as Representatives of the several Underwriters
referred to in the foregoing Agreement.
By: SG Cowen Securities Corporation
By:
-----------------------------
John P. Dunphy
Managing Director - Syndicate
By: Volpe Brown Whelan & Company, LLC
By:
-------------------------------
By: Warburg Dillon Read LLC
By:
-------------------------------
26
<PAGE>
SCHEDULE A
UNDERWRITERS FIRM STOCK
- ------------ ----------
SG Cowen Securities Corporation
Volpe Brown Whelan & Company, LLC
Warburg Dillon Read LLC
TOTAL
- -----
<PAGE>
DRAFT
[Form of Opinion of Issuer's Counsel] Exhibit I
- --------, -----
SG COWEN SECURITIES CORPORATION,
VOLPE BROWN WHELAN & COMPANY, LLC
WARBURG DILLON READ LLC
As Representatives of the several Underwriters named in Schedule A
c/o SG Cowen
Financial Square
New York, New York 10005
Re: HEALTHGATE DATA CORP.
3,750,000 Shares of Common Stock
Dear Sirs:
We have acted as counsel for HealthGate Data Corp., a Delaware
corporation (the "Company"), in connection with the sale by the Company and
purchase of 3,750,000 shares of Common Stock, par value $0.01 per share, of the
Company (the "Shares") by the several Underwriters listed in Schedule A to the
Underwriting Agreement, dated June ___, 1999, among the Company and SG Cowen,
Volpe Brown Whelan and Company, LLC and Warburg Dillon Read LLC, as
Representatives of the several Underwriters named therein (the "Underwriting
Agreement"). This opinion is being furnished pursuant to Section 8(f) of the
Underwriting Agreement. All defined terms not defined herein shall have the
meanings ascribed to them in the Underwriting Agreement.
We have examined and are familiar with originals or copies,
certified or otherwise authenticated to our satisfaction, of documents,
corporate records, legal materials and other writings which we consider relevant
for purposes of this opinion.
We are of the opinion that:
1. The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, except where
the failure to not qualify would not have a material adverse effect on the
Company and its subsidiaries taken
<PAGE>
as a whole, and have all power and authority necessary to own or hold their
respective properties and conduct the businesses in which they are engaged.
2. The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and all of the Shares to be issued and sold by the Company to the
Underwriters pursuant to the Underwriting Agreement have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
for in the Underwriting Agreement, shall be duly and validly issued, fully paid
and non-assessable; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued and
are fully paid, non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims.
3. There are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of, any of the
Shares pursuant to the Company's Certificate of Incorporation or By-Laws or any
agreement or other instrument.
4. Except as described in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company or any
of its Subsidiaries is the subject which, if determined adversely to the Company
or any of its subsidiaries, could have a material adverse effect on the Company
and its subsidiaries; and, to the best of our knowledge, no such proceedings are
threatened or contemplated by governmental authorities or other third parties.
5. The Company and each of its subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them, and,
except as described in the Prospectus, we are not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company or
any of its subsidiaries with respect to the foregoing.
6. The Company and each of its subsidiaries have, and the
Company and each of its subsidiaries as of the Closing Dates will have, good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned or proposed to be owned by them which is
material to the business of the Company or any of its subsidiaries, in each case
free and clear of all liens, encumbrances and defects, except such as are
described in the Prospectus or such as would not have a material adverse effect
on the Company and its subsidiaries taken as a whole; and any real property and
buildings held under lease by the Company and its subsidiaries or proposed to be
held after giving effect to the transactions described in the Prospectus are, or
will be as of the Closing Dates, held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a material adverse
effect on the Company and its subsidiaries considered as a whole.
I-2
<PAGE>
7. The Company has full corporate power and authority to enter
into the Underwriting Agreement and to perform its obligations thereunder
(including to issue, sell and deliver the Shares), and the Underwriting
Agreement has been duly and validly authorized, executed and delivered by the
Company and is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
rights to indemnification and contribution thereunder may be limited by federal
or state securities laws or the public policy underlying such laws.
8. The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions therein contemplated will not
result in a breach or violation of any of the terms or provisions of or
constitute a default under any material indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties is or
may be bound, the Certificate of Incorporation, Bylaws or other organizational
documents of the Company or any of its subsidiaries, or any law, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or result in
the creation of a lien.
9. No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by the Company
of the transactions contemplated by the Underwriting Agreement, except such as
may be required by the National Association of Securities Dealers, Inc. (the
"NASD") or under the Securities Act or the securities or "Blue Sky" laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters.
10. To the best of our knowledge after reasonable
investigation, the Company and each of its subsidiaries are in compliance with,
and conduct their businesses in conformity with, all applicable federal, state,
local and foreign laws, rules and regulations, including, but not limited to,
those of any governmental agency, court or tribunal; to the best of our
knowledge, no prospective change in any of such federal, state, local or foreign
laws, rules or regulations has been adopted which, when made effective, would
have a material adverse effect on the operations of the Company and its
subsidiaries.
11. The Registration Statement was declared effective under
the Securities Act as of __________, 1999, the Prospectus was filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations on __________,
1999 and no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose is pending or, to
the best of our knowledge, threatened by the Commission.
12. The Registration Statement and the Prospectus and any
amendments or supplements thereto comply as to form in all respects with the
requirements of the Securities Act and the Rules and Regulations and the
documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, complied as to
form in all respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the Rules and Regulations; and any amendment or
supplement to any such
I-3
<PAGE>
incorporated document, when they became effective or were filed with the
Commission, as the case may be, complied as to form in all respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and the
Rules and Regulations.
13. To the best of our knowledge, there are no contracts or
other documents which are required by the Securities Act or by the Rules and
Regulations to be described in the Prospectus or filed as exhibits to the
Registration Statement which have not been described in the Prospectus or filed
as exhibits to the Registration Statement or incorporated therein by reference
as permitted by the Rules and Regulations.
14. Other than as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right (other than rights which have been waived or
satisfied) to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to this Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
15. The descriptions in the Registration Statement and
Prospectus of statutes, rules, regulations, legal or governmental proceedings,
contracts and other documents are accurate and such descriptions fairly present
the information required to be disclosed; and to the best of our knowledge,
there are no legal or governmental proceedings, statutes, rules or regulations,
or any contracts or documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described and filed as required.
16. The statements under the captions "Risk Factors", and
"Government Regulation", to the extent they reflect matters of federal law
arising under the laws of the United States or legal conclusions relating to
such law, accurately summarize and fairly present the legal and regulatory
matters described therein.
17. The Company and each of its subsidiaries are not, nor will
they be immediately after receiving the proceeds from the sale of the Shares, an
"investment company" or an entity "controlled" by an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended.
The foregoing opinion is limited to matters governed by the
Federal laws of the United States of America, the general corporate law of the
State of Delaware and the laws of the Commonwealth of Massachusetts.
We have acted as counsel to the Company on a regular basis,
have acted as counsel to the Company in connection with previous financing
transactions and have acted as counsel to the Company in connection with the
preparation and filing of the Registration Statement and the Prospectus. The
Company has from time to time engaged other counsel for certain matters.
Although we have not undertaken to determine independently, and do not
I-4
<PAGE>
assume any responsibility for, the accuracy, completeness or fairness of the
statements in the Registration Statement except as set forth in paragraph 15 of
our opinion, based on the foregoing, no facts have come to our attention which
lead us to believe that (i) the Registration Statement or any amendment thereto,
as of the Effective Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or that the Prospectus
contains any untrue statement of a material fact or omits to state a material
fact Required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (ii) any document incorporated by reference in the Prospectus or
any amendment or supplement to any such incorporated document made by the
Company, when they became effective or were filed with the Commission, as the
case may be, contained, in the case of a registration statement which became
effective under the Securities Act, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or, in the case of
documents filed under the Exchange Act with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that we express no opinion
with respect to the financial statements and the notes thereto and the schedules
and other financial and statistical data included in the Registration Statement
or the Prospectus).
Our opinion is subject to the following qualifications:
(a) Insofar as this opinion relates to factual matters, we
have relied upon the certificates and documents described herein and upon
discussions with officers of the Company. Although nothing has come to our
attention leading us to question, or giving us reasonable grounds to question,
the accuracy of such certificates, documents and discussions, we have not made
any independent review or investigation.
(b) We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, the accuracy and completeness of all records made available to us by the
Company and the enforceability of the Underwriting Agreement against the
Underwriters to the extent such enforceability is necessary to render our
opinion.
(c) The enforceability of any provisions in the Underwriting
Agreement may be subject to and affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally, and the remedies of specific performance, injunction and other forms
of equitable relief may be subject to certain tests of equity jurisdiction,
equitable defenses and judicial discretion.
(d) In connection with opinions expressed herein as being made
"to our knowledge", our examination has been limited to discussions with the
officers of the Company and our knowledge of the affairs of the Company as their
counsel, and we have made no independent investigations as to the accuracy or
completeness of any representations, warranties,
I-5
<PAGE>
data or other information, written or oral, made or furnished by the Company to
us or to you.
This opinion is rendered only to you and solely for your
benefit in connection with the transactions contemplated by the Underwriting
Agreement and may not be relied upon by any other person for any purpose without
the prior written consent of the undersigned. We disclaim any obligation to
advise you of any developments in matters covered by this opinion that occur
after the date of this opinion.
Our opinions herein are limited to the laws of The
Commonwealth of Massachusetts and the general corporate law of the State of
Delaware and the Federal laws of the United States of America, and we express no
opinion as to any matter governed by the laws of any other jurisdiction.
Very truly yours,
RICH, MAY, BILODEAU & FLAHERTY, P.C.
I-6
<PAGE>
Exhibit II
___________, 1999
SG Cowen Securities Corporation
Financial Square, 27th Floor
New York, NY 10005
As representative of the
several Underwriters
Re: HealthGate Data Corp.
Dear Sirs:
In order to induce SG Cowen Securities Corporation ("SG
Cowen"),Volpe Brown Whelan & Company, LLC and Warburg Dillon Read LLC
(collectively, the "Underwriters") to enter into a certain underwriting
agreement with HealthGate Data Corp., a Delaware corporation (the "Company")
with respect to the public offering of shares of the Company's Common Stock, par
value $0.01 per share ("Common Stock"), the undersigned hereby agrees that for a
period of 180 days following the date of the final prospectus filed by the
Company with the Securities and Exchange Commission in connection with such
public offering, the undersigned will not, without the prior written consent of
SG Cowen, on behalf of the several Underwriters, (1) directly or indirectly,
offer, sell, assign, transfer, encumber, pledge, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise dispose of, other
than by operation of law, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (including,
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations promulgated under
the Securities Act of 1933, as the same may be amended or supplemented from time
to time (such shares, the "Beneficially Owned Shares")) or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise.
I-7
<PAGE>
Anything contained herein to the contrary notwithstanding, any
person to whom shares of Common Stock or Beneficially Owned Shares are
transferred from the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date
hereof until the expiration of the 180 day period following the date of the
Company's final Prospectus, any and all rights, if any, to request or demand
registration pursuant to the Securities Act of any shares of Common Stock that
are registered in the name of the undersigned or that are Beneficially Owned
Shares.
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the transfer agent of the Common Stock with respect to any shares of
Common Stock or Beneficially Owned Shares.
Whether or not the public offering actually occurs depends on
a number of factors, including market conditions. Any public offering will only
be made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
------------------------------
(Name)
(Address)
<PAGE>
EXHIBIT 5.1
Rich, May, Bilodeau & Flaherty, P.C.
176 Federal Street
Boston, MA 02110
(617) 482-1360
November 23, 1999
HealthGate Data Corp.
25 Corporate Drive
Burlington, MA 01803
Gentlemen and Ladies:
We have acted as counsel to HealthGate Data Corp., a Delaware
corporation (the "Company"), in connection with (a) the preparation of the
Company's Registration Statement on Form S-1, File No. 333-76899 (the
"Registration Statement"), initially filed on April 23, 1999 with the
Securities and Exchange Commission under the Securities Act of 1933, for the
registration of an aggregate of 4,312,500 shares of the Company's common
stock, par value $.01 per share (the "Shares"), and (b) the Underwriting
Agreement (the "Agreement"), to be entered into between the Company and SG
Cowen Securities Corporation, Volpe Brown Whelan & Company and Warburg Dillon
Read, as Representatives of the Underwriters, the form of which is attached
as Exhibit 1.1 to the Registration Statement.
Of the 4,312,500 Shares included in the Registration Statement,
3,750,000 Shares (the "Firm Shares") will be issued and sold by the Company
to the several Underwriters to be named in Schedule A to the Agreement (the
"Underwriters"); and, solely for the purpose of covering over-allotments, the
Company proposes to sell to the Underwriters up to an additional 562,500
shares (the "Additional Shares").
We have examined the originals, or certified, conformed or reproduction
copies, of all such records, agreements, instruments and documents as we have
deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to our opinion, we have relied
upon statements or certificates of public officials, officers or representatives
of the Company and others.
Based upon the foregoing, we are of the opinion that the Firm Shares
and the Additional Shares to be sold by the Company to the Underwriters, when
issued, delivered and paid for in accordance with the terms of the Agreement,
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ Rich, May, Bilodeau & Flaherty, P.C.
Rich, May, Bilodeau & Flaherty, P.C.
<PAGE>
EXHIBIT 10.1
ELECTRONIC JOURNAL SOFT WARE DEVELOPMENT,
HOSTING AND MANAGEMENT AGREEMENT
This AGREEMENT is made the 20 March day of 1998
BETWEEN
1. HealthGate Data Corp., a Delaware corporation ("HealthGate"), having an
address at 380 Pleasant Street, Malden, Massachusetts, 02148, USA
AND
2. Blackwell Science Limited a company registered in England
("Blackwell"), whose registered office is Osney Mead, Oxford OX2 OEL,
England, and Munksgaard A/S, a company registered in Denmark
("Munksgaard"), having an address at 35 Norre Sogade, Copenhagen DK-1016,
Denmark (together, Blackwell and Munksgaard shall be referred to as "the
Publishers")
WHEREAS:
A. Blackwell and Munksgaard, among other business activities, publish
journals;
B. HealthGate, among other business activities, creates, compiles and
distributes health and biomedical information through the Internet;
C. The Publishers desire to retain HealthGate to provide electronic
journal management services, including development of an on-line web site
for its journals, and other mutually agreed publications.
D. HealthGate will provide the Services.
E. HealthGate shall license to the Publishers the Proprietary Software and
provide appropriate operational documentation if the Publishers decide to
manage their own service from 28 February 2000.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. Definitions
In this Agreement, the following words and expressions shall have the
following meanings:
<PAGE>
"Acceptance" or "Accepted" Means acceptance of any part or the whole of the
System by the Publishers when the System
has successfully passed the acceptance
tests in accordance with Clause 9 below
but for the avoidance of doubt does not
refer to the continuing Services after the
Site goes live
"Agreement" means this document and its Schedules and any
documents expressly incorporated herein by
reference and shall include any amendments
subsequently agreed.
"Content" means up to 200 Journals and any other material
related to the Journals which the
Publishers include in printed or
electronic form, or any part thereof
the "Development Timetable" means the timetable upon which the Development
Work is proposed to take place which is in
the implementation plan
the "Development Work" means the development work required to produce
the System (but excluding the ongoing
services after the Site goes live) based
upon the Specification and technical
documentation sufficient for the system to
be developed and extended including but
not limited to any deviations from the
original specification agreed to be
necessary during the development.
"Escrow Agreement" means the agreement(s) between the Publishers,
the escrow agent and HealthGate the terms
of which are specified in the Fourth
Schedule
the "Hardware" means the equipment and hardware referred to in
Clause 8, as upgraded from time to time,
and including extra hardware as a
contingency.
"Journal" means a Journal which the Publishers intend to
include on the Site
the "Licence" means the Licence granted in Clause 10
the "Proprietary Software" means HealthGate's own software which has been
or will be developed
2
<PAGE>
the "Services" the services to be performed by HealthGate to be
set out in the Specification, to include
but not limited to (i) any ongoing work in
the design and development of the Site;
(ii) mounting the Content on HealthGate's
Hardware; (iii) hosting and making the
Content and portions thereof accessible in
an online interactive mode for searching,
access, review, displaying in a web
browser or on computer terminals,
downloading, and printing on paper and;
(iv) providing access to Publishers'
subscribers and other third parties to the
Site through telecommunications access via
the Internet.
the "Site" means the world wide web site to be prepared for
the Publishers comprising all pages
including graphics, audio-visual effects,
software and all the material in
compliance with the Specification and all
parts of the System used for the Site
the "Software" means the Proprietary Software and the Third
Party Software including any source code
and operator manuals relating thereto, to
be developed or used and/or licensed by
HealthGate in accordance with this
Agreement
the "Specification" means the detailed user scenarios and
implementation plan prepared by HealthGate
and approved by the Publishers and annexed
in the First Schedule
the "System" means the system comprising the hardware,
software, services and peripherals
specified in the Specification and
including the Software all as the same is
to be supplied by HealthGate to suit the
Publishers' requirements
"System Completion Date" means 14 December 1998
"Third Party Software" means all software to be included in the System
owned by a third party, which shall be
licensed for use and/or distribution by
HealthGate as part of the System, and by
the Publishers and/or third parties if the
Services cease to be provided by
HealthGate.
"Use Fees" are the fees as set out in clause 19.4
3
<PAGE>
2. Appointment of HealthGate
The Publishers hereby appoint HealthGate and HealthGate hereby accepts
such appointment upon the terms and subject to the conditions of this
Agreement:
2.1. to carry out the Development Work within the Development Timetable;
2.2. to provide the Services for the period in Clause 3; and
2.3. to hand over the System as provided in Clauses 10, 18, 33 and the
other provisions of this Agreement.
The Publishers grant HealthGate an exclusive right to carry out the
Services, with the exception that the Publishers shall honour current
contracts with third parties and Publisher may publish and licence content
themselves as long as it does not materially reduce HealthGate's revenue.
For the purpose of determining HealthGate's revenue, Use Fees and Article
Fees shall not be taken into account.
3. Duration
3.1. This Agreement shall commence on 1 January 1998. The initial term of
the Services, unless terminated as set out herein, shall continue up
to and including 28 February 2000 ("the Initial Term").
3.2. Right of Renewal
The Publishers shall have the right to renew the term of the
Services as provided in this Agreement.
4. Development and Specification
4.1. HealthGate shall carry out the Development Work in accordance with
the Development Timetable and in accordance with the Specification
by the System Completion Date.
4.2. HealthGate hereby assign all present and future copyright in the
Blackwell Specification to the Publishers.
4.3. Publishers grant to HealthGate a perpetual, royalty-free licence to
use the Specification.
4
<PAGE>
5. Milestones and Deliverables
5.1. If HealthGate fails to complete the System development by the System
Completion Date, unless such failure results from the Publishers'
default in performing its obligations under this Agreement or from
an extension of time agreed in writing, the Publishers may in their
discretion notify HealthGate accordingly, and if such failure is not
remedied within 28 calendar days, HealthGate, recognising the loss
caused to the Publishers, will on demand from the Publishers pay to
the Publishers a sum calculated at the rate of 1% of the value of
the contract in respect of every 28 days which elapse from the
System Completion Date to the actual date of completion of the
System. Such sums of money will be paid by HealthGate to the
Publishers not as a penalty but as and for the ascertained and
liquidated damages owing and payable by HealthGate to the Publishers
by reason of such failure to meet the System Completion Date.
5.2. If HealthGate fails to complete the System by the end of the tenth
week after the System Completion Date then the Publishers (unless
such failure demonstrably results from the Publishers' default in
the performance of its obligations under this Agreement) will be
entitled without prejudice to any other rights or remedies they may
have under this Agreement or at law or in equity to terminate this
Agreement immediately by written notice.
5.3. If any delay in meeting the System Completion Date is in any way due
to the Publishers' fault, HealthGate will nevertheless, if the
Publishers so requests, continue with the work on the Project with a
view to completing it as soon as reasonably possible in the
circumstances, and the Development Timetable will be adjusted
accordingly.
6. Project Management
6.1. HealthGate and the Publishers shall each designate the name,
address, telephone number, fax number, and e-mail address of a
Project Manager and a Deputy Project Manager. The Project Managers
shall be responsible for arranging all meetings, visits, and
consultations between the parties, and for the transmission and
receipt of technical information between the parties. The parties'
initial Project Manager and Deputy Project Manager is set forth on
the Third Schedule hereto.
6.2. If HealthGate has reason to believe that any estimate of any time is
likely to be exceeded or that it is likely that the Development
Timetable will not be complied with, HealthGate will immediately
inform the Publishers' Project Manager by written notice.
5
<PAGE>
7. Content
The Publishers, at their cost and expense, shall make available the
Content in loadable electronic format to HealthGate as specified in the
Specification. HealthGate shall remotely load the Content into a staging
area.
8. Procurement of Hardware
HealthGate shall maintain the Site on HealthGate's web server and/or other
servers through the term of this Agreement insofar as it relates to the
Services. HealthGate shall acquire and maintain all necessary equipment
and hardware (collectively the "Hardware") for Site. The Hardware shall be
capable of storing the Content, including future issues of the Journals
within the Content. HealthGate shall replace and upgrade such Hardware to
satisfy the requirements of the Specification. The Hardware for the Site
shall include redundancy so that the Site may remain operational despite
an equipment failure. The Hardware shall be located at HealthGate's
computer facilities in Malden, Massachusetts. The Hardware may be
relocated only with Publishers' written consent, which consent shall not
be unreasonably withheld. HealthGate, at its cost and expense, shall
maintain adequate access via telecommunications to the Site at service
levels that shall be maintained at the same extent as HealthGate provides
to its own users.
9. Testing, Acceptance and Delivery
9.1. Upon completion of the Development Work HealthGate and the
Publishers shall run acceptance tests to assure compliance with the
Specification. Load testing will be conducted at HealthGate. Such
period of acceptance testing shall not exceed 2 weeks from date of
delivery for testing.
9.2. Upon passing the acceptance tests, the System shall be deemed
Accepted
9.3. Upon Acceptance as provided in Clause 9.2 HealthGate shall deliver
into escrow the source code, source listings and information for the
Proprietary Software included in the System in accordance with the
terms of the Escrow Agreement.
9.4. In the event that the system fails to pass any of the prescribed
acceptance tests or fails to satisfy the Publishers' requirements,
the Publishers shall afford HealthGate the opportunity of
rectifying, replacing and retesting the System. In the event that
the System or any part thereof again fails to be accepted, such
acceptance shall not be unreasonably withheld, or to satisfy the
Publishers' requirements of which the Publishers shall be the sole
judge, the Publishers shall (as time is of the essence of this
Agreement) be entitled, in addition to any other rights it may have
under this Agreement or in law, to have HealthGate remove the
Content from the System (in whole or in part as the Publishers so
6
<PAGE>
instructs) and HealthGate shall be liable to refund forthwith any
moneys paid by the Publishers for such rejected System or part
thereof. Notwithstanding the foregoing, upon acceptance of System
launch, as noted in Clause 19.2.4, HealthGate shall be entitled to
retain all monies paid by Publishers to this point.
In such circumstances HealthGate shall be entitled to retain the
first $250,000 paid by the Publishers to develop the Specification.
10. Licence
10.1. Proprietary Software
HealthGate hereby grants to the Publishers a non-exclusive
non-transferable licence to use the Proprietary Software for the
purposes of this Agreement
Save in relation to the Publishers' logos, trademarks, and content,
HealthGate may use and/or licence the Proprietary Software for
itself or for others without any compensation or liability to the
Publishers.
All Proprietary Software and Source Code remain the property of
HealthGate. Publishers may not use either Proprietary Software or
Source Code held in escrow to develop a product that competes with
those services offered by HealthGate. HealthGate, in its sole
discretion, retains the right to determine if Publishers are
utilizing either the Proprietary Software or Source Code in
violation of this Agreement.
10.2. Option for Licence
10.2.1. On termination of the provision of the Services by
HealthGate to the Publishers for whatever reason, HealthGate
shall at the Publishers' option:
(i) grant to the Publishers a non-exclusive
non-transferable licence to use the Proprietary Software for
the purposes of using, developing, enhancing and maintaining
the Site and carrying out any or all of the activities
previously carried out by HealthGate or on its behalf under
this Agreement
(ii) exercise best endeavours to grant to the
Publishers a non-exclusive non-transferable licence to use
the Third Party Software for the Site when and to the extent
requested by the Publishers.
10.2.2. The annual fee for the licence in Clause 10.2.1 for the
Software, to include the Proprietary Software and the Third
Party Software, shall be $150,000 per annum, including
standard upgrades and maintenance, provided that if
HealthGate is not able to grant a licence of the Third Party
Software, then the Publishers shall be at liberty to licence
the Third Party Software from its owners and/or licensors
direct, and/or to
7
<PAGE>
license alternative software, and shall deduct the fees for
such licences from the $150,000 per annum for the Software.
10.2.3. The Publishers shall have the right to terminate the licence
referred to in Clause 10.2.1 by giving three months' notice
in writing to HealthGate.
11. Hosting
HealthGate will host the Site in accordance with the Specification for the
period for the Services in Clause 3.
12. Service Levels
12.1. HealthGate will provide the Services and shall meet the Service
Levels including but not limited to:
12.1.1. dealing promptly with queries or problems relating to the
use or performance of the Software and correcting or
procuring the correction of all material program errors;
12.1.2. identifying the location of any fault on the System,
ensuring the continuing satisfactory operation of the
System, taking all appropriate actions to ensure that the
System maintains its full functionality;
12.1.3. providing or procuring minor enhancements to the Software
including but not limited to updating data and formulae to
ensure that any changes in tax or other statutory
regulations or law are incorporated into the Software.
12.2. The Service Levels will be subject to review at any time by
agreement between the Project Managers and in any event will be
formally reviewed every 12 months during the term of this Agreement.
12.3. HealthGate will provide usage statistics relating to the Services as
described in the specification on a monthly basis, or such other
reasonable intervals as may be mutually agreed upon by the parties
from time to time.
12.4. HealthGate will perform the Services and meet the Specifications and
Service Levels set forth and referred to in this Agreement. In all
cases where HealthGate has not committed to a specific performance
standard, HealthGate will use reasonable care in providing the
Services.
13. Permitted Users, Pricing and Subscription Information
13.1. The Publishers shall have sole authority concerning determining
access to the Site. Except for the fees payable to HealthGate
described in Clause 14 hereof (document delivery), the Publishers
shall retain the sole and exclusive right to determine the prices
and fees payable and other terms and conditions applicable
8
<PAGE>
to the Publishers' subscribers and other third party users for
access to the Publishers' Content on the Site. The Site shall be
designed to permit automated loading and maintenance of subscription
data from the Publishers' fulfilment systems. The Specification
details the procedures for loading such subscription information
(including both bulk entry and single entry information) and timing
for access to the Site for users included on such updated
subscription data.
13.2. The Publishers grant to HealthGate a royalty-free licence for the
purpose of testing, demonstrating, and evaluating the Site.
13.3. For the avoidance of doubt the Publishers shall have the right to
permit third party intermediaries, (including but not limited to
Ovid, OCLC, Swets, B H Blackwell, Munksgaard Direct and Dawson) to
access the Site and to authorize access to users in terms within the
Publishers' sole discretion. The Use Fees as set out in Schedule 2
shall apply.
14. Document Delivery: Fees from Sales of Articles
14.1. The Site will include functions to facilitate the sale of individual
articles from the Journals and other items at the sole discretion of
the Publishers to non-subscribers and other third party users.
14.2. In relation to sales the Publishers make direct, the Publishers
shall establish copyright and other fees for such sales ("Article
Fees"). HealthGate shall collect the Article Fees established by
Publishers plus a service fee to be determined by HealthGate but in
any event the service fee may not exceed 30% of the Article Fee for
the particular article, or $US 4, whichever is the higher. Within 60
days of the end of each calendar month, HealthGate shall forward to
Publishers the net Article Fees actually collected (exclusive of
HealthGate's service fee).
14.3. The Publishers may also permit third party intermediaries to sell
individual articles and other items, on terms to be agreed between
the Publishers and such third party intermediaries. Neither the
Publishers nor the third party intermediaries shall be required to
pay a service fee or any other additional fee for this service, nor
shall HealthGate be permitted to collect a service fee, its
remuneration being as provided in Clause 19 and in Schedule 2 (Use
Fees).
15. Improvements
HealthGate shall replace and upgrade the Software to satisfy the
requirements of the Specification at no extra cost to the Publishers.
9
<PAGE>
16. Links
The Site shall support and include in-bound links, as may be mutually
agreed upon, to the Publishers' Content (including citations and
references within articles), from bibliographic databases, including
HealthGate, PubMed, ISI's Web of Science, and other sites, and as required
by the Publishers from time to time. HealthGate shall not be responsible
for setting up links from sites which it does not host. The Site shall
also support links with on-line content of other publishers, using
Document Object Identifier (DOI) and other standards, which may be
mutually agreed upon from time to time.
17. Right of Renewal
17.1 The Publishers shall have the right to renew the term of the
Services by notice in writing to HealthGate to be given on or before
30 September 1999. If the Publishers exercise their right to renew,
the term of the Services shall be extended by one further year, up
to and including 28 February 2001. The Use Fees shall remain the
same as in the Initial Period and the fee for the Services shall not
exceed $7000 for additional journals, $2000 maintenance fee on
existing journals and $2000 per Gigabyte.
17.2 If the Publishers exercise their right of renewal under Clause 17.1,
then the Publishers shall have a further right of renewal for each
of the subsequent three years, provided that the right to renew
shall be conditional upon the Publishers having exercised their
right in the previous year, and giving notice on or before the 30
September before the renewal is to take effect.
18. Assistance upon Termination
On termination of the provision of the Services by HealthGate to the
Publishers for any reason:
10
<PAGE>
18.1. HealthGate will liaise with the Publishers, making available for
such purposes such HealthGate liaison staff as the Publishers may
reasonably require, and acting in all good faith, to ensure a
mutually satisfactory license to the Publishers or, at the
Publishers' option, to a replacement contractor. The period of
liaison will commence as soon as notice has been given of
termination of this Agreement, and will continue for a maximum
period of 3 months after termination;
18.2. HealthGate agrees that at the time of termination of this Agreement,
it will render all assistance, provide all documentation and
undertake all actions to the extent necessary to effect an orderly
assumption of the Services by the Publishers or, at the Publishers'
option, by a replacement contractor;
18.3. If the Publishers so require, HealthGate will use its best
endeavours to procure the transfer at the Publishers' expense, to
the Publishers or to a third party nominated by the Publishers at
the Publishers' sole discretion, of any Third Party Software
licences HealthGate may have obtained in its own name in order to
provide the Services and used for that purpose exclusively; and
18.4. HealthGate will be obliged to satisfy the Publishers that it has
erased the Publishers Content and all copies, and that it has no
ability to reproduce the Publishers Content in any way.
The rights of the Publishers in this Clause 18 are in addition to
the rights in Clause 33.
19. Cost and Payment, Change Control Formula
19.1. The total price payable by the Publishers is set out in Clause 19.2
and the Use Fees in Clause 19.4, subject to the terms and conditions
in this Agreement, this price being a fixed price.
19.2. Subject to HealthGate performing its obligations hereunder,
HealthGate shall invoice the Publishers for payment as follows:
19.2.1. On 30 January 1998
$100,000
19.2.2. On 06 February 1998
$150,000
19.2.3. On acceptance of
Specification,
$150,000 or 27
February 1998
whichever is later
11
<PAGE>
19.2.4. On acceptance of
System launch
$150,000
19.2.5. On system completion
date $150,000
19.2.6. On 1 January 1999
$175,000
19.2.7. On 1 April 1999
$175,000
19.2.8. On 1 July 1999
$175,000
19.2.9. On 1 September 1999
$175,000
PROVIDED ALWAYS THAT if the Agreement is terminated in accordance with
Clause 9.4 then the financial provisions of that Clause will apply in
place of this Clause 19.
19.3. Invoices are payable within 60 days of receipt, with the exception
of payments due under Clause 19.2, which shall be payable on the due
date or on acceptance of the work, which ever is the later.
19.4. Use Fees
The Publishers shall make payments to HealthGate based upon "Use" of
the Content as set forth on the Second Schedule. For the purposes of
this Agreement, "Use" shall mean a retrieval or download by a
Publishers' subscriber of the full-text of an article. There shall
not be any additional use fees or charges for users' browsing of
table of contents or abstracts. Use Fees shall be billed by
HealthGate monthly and all payments are due by cheque by the end of
the following month after the date of the invoice.
19.5. Interest
Interest on late payment by either party shall be charged at 2%
above base rate for the time being of Barclays Bank plc in England.
This sub-Clause 19.5 shall survive termination under Clause 9.4.
12
<PAGE>
20. Advertising
20.1. The Site shall be designed to include space for advertising. All
specifications concerning advertising space shall be mutually agreed
upon from time to time and detailed in the Specification. The rate
structure for advertising shall be mutually agreed upon.
20.2. All advertising is subject to review and approval by the Publishers
and the Publishers reserve the right to refuse any proposed
advertisements. Revenues from advertisers utilizing the advertising
space shall be allocated between HealthGate and the Publishers. Each
party shall receive 30% of all advertising sales for advertising
sales originated by the other party (provided, in the event that
advertising is sold at rates less than fair market rates such 30%
figure shall be equitably increased to reflect the fair market value
of the advertising. Said fair market rates shall be determined by
mutual agreement of both parties). No deduction shall be made for
commissions payable to sales representatives or employees of any
party.
20.3. Within 60 days of the end of each calendar month, the parties shall
report to each other concerning revenues collected on advertising
sales and make appropriate payments to the other party for the
previous month's collections based on the foregoing formula.
20.4. In the event that any claim is made against either party in respect
of any advertisement. The expenses of dealing with any claim shall
be paid for in the same proportion as at Clause 20.2.
21. Support and Enhancement
HealthGate shall establish a telephone line for the purpose of providing
support to users of the Site, which support shall be free of charge to
such users. Such telephone line shall be answered pursuant to HealthGate's
standard protocol and shall be operational 5:00 A.M. to 10:00 P.M., US
Eastern Time, and be supported by voice mail at other times. Such
telephone line shall be operated at all times by one HealthGate employee.
HealthGate shall ensure that the employee is suitably qualified and
experienced for the purpose. If the parties determine that more than one
employee is necessary to handle all inquiries in a reasonably prompt,
professional and efficient manner, Publishers at their cost and expense
may request HealthGate to dedicate additional employees for such purpose.
13
<PAGE>
The Site shall include an e-mail function directly to HealthGate. All
e-mails received by HealthGate shall be answered within one business day.
The Site shall include a Frequently Asked Questions (FAQ) area and
detailed help screens as determined in the Specification. Both parties
agree to work together, through their duly appointed Project Managers, to
develop the FAQ area and the help screens.
22. HealthGate Responsibilities
22.1. HealthGate undertakes that in performing the Services it will use
commercially reasonable endeavours to comply with the Service Levels
including but not limited to System availability, specifications,
standards, functions and performance requirements.
22.2. HealthGate will provide all assistance that the Publishers may
reasonably require in accordance with this Agreement for the purpose
of evaluating Service Levels from time to time and resolving
operational problems in connection with the Services. All such
requests must come from either the Publishers Project Manager or
Deputy Project Manager.
22.3. HealthGate warrants that it owns or is authorised to use the
Computer Equipment for the purposes of supplying the Services.
22.4. Viruses
Each Party shall use its best efforts to ensure that no viruses,
worms or similar items ("Viruses") are introduced into any Software
System used under this Agreement. If a Virus is found in any such
Software System, HealthGate shall, promptly upon the discovery
thereof, use its best efforts to eliminate such Virus and
ameliorate the effect thereof. If such Virus causes a loss of
operational efficiency or data, HealthGate shall mitigate and
restore such loss as quickly as feasible.
22.5. Disabling Code
Save with the written consent of the Publishers, the Software and
System shall not include, nor shall HealthGate introduce into any
Software and/or the System, any code whose purpose is to disable or
reduce the efficiency of all or any portion of the Services.
23. Access to HealthGate
23.1. During the Term of this Agreement, HealthGate shall accommodate one
employee or representative of Publishers at HealthGate's office for
the purpose of reviewing and understanding the operation of the
Site. HealthGate and Publishers shall coordinate the schedule of
such employee so that he or she
14
<PAGE>
does not unduly interfere with HealthGate's operation of the Site or
HealthGate's other operations. The Publishers anticipate that such
employee will be at HealthGate's offices approximately 30 days per
year.
23.2. Audit Rights
23.2.1. The Publishers and/or their respective independent auditors,
at no expense to HealthGate, and upon twenty (20) Business
Days' written notice to HealthGate, shall have the right to
conduct an operational audit pertaining to the fees and the
Services rendered pursuant to this Agreement, including but
not limited to having HealthGate process through any system
test data supplied by the Publishers and/or their respective
auditors, operate audit software on any system or download
Publishers' Content and/or usage statistics to a computer
designated by the Publishers, and/or their respective
auditors. The operational audit will verify that HealthGate
is exercising reasonable data processing operational
procedures in its performance of the Services and confirm
that HealthGate is performing and observing its obligations
hereunder.
23.2.2. HealthGate shall make available for the Publishers and/or
the Publishers' auditors inspection all records relating to
the fees and to the Services provided pursuant to this
Agreement.
23.3. Regulatory Access (Eg HEFCE)
HealthGate and the Publishers acknowledge and agree that the
performance of the Services under this Agreement may be subject to
regulation and examination by the Publishers' regulatory agencies
and/or government and/or customer's contractors. The parties agree
that the records maintained and produced under this Agreement shall
at all times be available for examination and audit by governmental
agencies and/or governmental and/or customer's contractors having
rights in relation to and/or jurisdiction over the business of the
Publishers. Each party to this Agreement shall notify the other
party promptly of any formal request by an authorized agency or
contractor to examine records regarding the Publishers that are
maintained by HealthGate. Upon request, HealthGate shall provide any
relevant assurances to such agencies and shall subject itself to any
required examination or regulation. The Publishers shall reimburse
HealthGate for reasonable costs actually incurred due to any such
examination or regulation that is performed solely for the purpose
of examining data processing services performed by HealthGate for
the benefit of and at the request of the Publishers.
15
<PAGE>
24. Security and Disaster Recovery
24.1. HealthGate will ensure that all documents, data and Software are
kept under secure conditions with back up arrangements satisfactory
to the Publishers, to protect them effectively from unauthorised
access and so that they can be recovered from any malfunction of the
System.
24.2. Should the Publishers' Content and/or data be lost or destroyed,
HealthGate will be responsible for its prompt reconstruction as
quickly as possible with high priority allocation of time and
resources, having regard to the back-up frequency agreed with the
Publishers in the Specification.
24.3. HealthGate will not without the written consent of the Publishers
disclose any of the Publishers' data or Publishers' Content to any
third party.
24.4. HealthGate will take all reasonable precautions to minimise the
impact of any disaster relating to the Services.
24.5. Security for Facilities
HealthGate will perform all required security procedures at any
place where Services are performed by HealthGate. All personnel of
HealthGate will comply with the agreed security procedures with
respect to access to any facility, data and data files.
24.6. The Publishers and/or their auditors, at no expense to HealthGate,
and upon twenty (20)Business Days' written notice to HealthGate,
shall have the right to conduct a system backup and disaster
recovery audit with regard to the Services provided pursuant to this
Agreement. The system disaster and recovery audit will verify that
HealthGate is exercising reasonable procedures in the performance of
its system backup and disaster recovery obligations hereunder.
HealthGate shall allow the Publishers and/or their auditors access
to any site used by HealthGate as a backup facility, if HealthGate
can secure the rights for the Publishers and/or their auditors to
enter the backup facility.
24.7. Disaster Recovery
HealthGate shall maintain and continue to maintain throughout the
term of this Agreement, an off-site disaster recovery capability.
HealthGate shall present to the Publishers a disaster recovery plan
prior to the System Completion Date. HealthGate shall monitor each
such disaster recovery plan and keep it current.
16
<PAGE>
24.8. HealthGate shall use its best efforts to recover from a disaster and
to continue providing Services to the Publishers within a
commercially reasonable period. An executive summary of each such
disaster recovery plan, which may change from time to time, shall be
provided to the Publishers at no charge. HealthGate shall test each
disaster recovery plan annually and shall provide the Publishers
with a summary of its test results.
25. Third Party Software
25.1. HealthGate warrants that any Third Party Software is validly
licensed for running by HealthGate at the Site and for all the uses
permitted under this Agreement in fulfillment of the services for
the term of the Agreement and that it is authorised to grant the
rights to the Third Party Software licensed under this Agreement for
use on the Site.
25.2. HealthGate will fully indemnify the Publishers in respect of all
damages, costs and expenses incurred by the Publishers resulting
from any act or default of HealthGate in respect of the Third Party
Software.
26. Intellectual Property Rights
26.1. The copyright and any and all other intellectual property in any
report, financial specification documentation and information, and
usage statistics on whatever media, prepared or to be created by
HealthGate pursuant to this Agreement shall be the property of the
Publishers notwithstanding termination hereof unless otherwise
expressly agreed in writing by the Publishers. HealthGate hereby
assigns all right, title and interest in and to the same to the
Publishers.
26.2. Publishers' Content and Data
The parties hereto acknowledge and agree that the Publishers and/or
their licensors own and will continue to own all right, title and
interest in and to Publishers' Journals and other data, including
but not limited to usage statistics for the Services ("Publishers'
Data"). Upon the termination of this Agreement for any reason or,
with respect to any Publishers' Data, on such earlier date as the
Publishers shall determine that any of the same will no longer be
required by HealthGate in order to render Services to the
Publishers, Publishers' Data will be either erased from the data
files maintained by HealthGate. or if the Publishers so elect,
returned to the Publishers by HealthGate. The Publishers' Data may
not be utilized by HealthGate for any purpose except to provide
Services to the Publishers, nor may Publishers' Data or any part
thereof be disclosed, sold, assigned, leased or otherwise disposed
of to third parties by HealthGate or commercially exploited by or on
behalf of HealthGate, or any of its employees or agents.
17
<PAGE>
27. Warranty
HealthGate's warranty
27.1. HealthGate warrants to the Publishers that the Software on delivery
to the Publishers will conform substantially with the Specification.
27.2. HealthGate undertakes to correct by patch or new release (at its
option) that part of the Software which does not so comply PROVIDED
THAT such noncompliance has not been caused by any modification,
variation or addition to the Software not performed by HealthGate
27.3. Millennium Compliance
HealthGate warrants that (a) the occurrence in or use by the System
of dates on or after January 1, 2000 ("Millennial Dates") will not
adversely affect its performance at any level with respect to
date-dependent data, computation, output or other functions; and (b)
the System will create, store, receive, process and output
information related to or including Millennial Dates without error
or omissions.
Publisher's warranty
27.4. Each Publisher hereby represents and warrants that: (i) it has, and
will have throughout the term of this Agreement, all right, title
and interest in and to the Content, except for items that are in the
public domain or that are obtained under valid licenses, (ii) the
Publishers Content do not and will not infringe any tradename,
trademark or copyright, and (iii) there are not material suits,
claims or proceedings currently pending or threatened against any
Publisher based upon the Content and that Publishers will promptly
advise HealthGate of the pendency or threat of any such suits,
claims or proceedings relating to the Content or the Site arising
during the term of this Agreement.
27.5. HealthGate shall be solely responsible for the compliance by its
personnel with all laws and regulations of any pertinent countries
relating to data protection and privacy and/or transborder data
flow.
18
<PAGE>
28. Indemnities and Liability, Limitation of Liability
28.1. Indemnities and Liability
(a) Cross Indemnity - HealthGate and the Publishers each agree to
indemnify, defend and hold harmless the other from any and all
claims, actions, losses, damages, liabilities, costs and expenses,
including reasonable attorneys' fees and expenses, arising out of or
relating to the death or bodily injury of any agent, employee,
customer, business invitee or business visitor of the indemnitor, or
arising out of or relating to loss of or damage to tangible real or
tangible personal property, to the extent that such claim, action,
liability, loss, damage, cost or expense was proximately caused by
the indemnifying party's tortious act or omission, or by those of
its agents or employees.
(b) Patent Indemnity - HealthGate and the Publishers each agree to
indemnify, defend and hold harmless the other from any and all
claims, actions, damages, liabilities, costs and expenses, including
reasonable attorneys' fees and expenses, arising out of any claims
of infringement of any patent, or a trade secret, or any copyright,
trademark, service mark, trade name or similar proprietary rights
conferred by contract or by common law or by any law of any
applicable jurisdiction alleged to have occurred because of the
system including but not limited to hardware, software, and data
provided by the indemnitor under this Agreement.
(c) Indemnification Procedures - With respect to third-party claims
subject to the indemnities set forth in this Clause 28, the
indemnitee shall notify the indemnitor promptly of any matters in
respect of which the foregoing indemnity may apply and of which the
indemnitee has knowledge and shall give the indemnitor full
opportunity to control the response thereto and the defense thereof;
including, without limitation, any agreement relating to the
settlement thereof; provided that the indemnitee shall have the
right to approve any settlement or any decision not to defend. The
indemnitee's failure to promptly give notice shall affect the
indemnitor's obligation to indemnify the indemnitee only to the
extent that the indemnitor's rights are materially prejudiced
thereby. The indemnitee may participate, at its own expense, in any
defense and any settlement directly or through counsel of its
choice. If the indemnitor elects not to defend, the indemnitee shall
have the right to defend or settle the claim as it may deem
appropriate, at the cost and expense of the indemnitor, which shall
promptly reimburse the indemnitee for all such costs, expenses and
settlements amounts.
19
<PAGE>
28.2. Limitations of Liability--Except in respect of personal injury or
death caused by the negligence of either party (for which by law no
limit applies), in the event either party shall be liable to the
other party on account of the performance or nonperformance of its
respective obligations under this Agreement, whether arising by
negligence, wilful misconduct or otherwise, the amount recoverable
by the other party for all events, acts or omissions shall not
exceed, in the aggregate, an amount equal to payments made under
this Agreement.
29. Source Code and Escrow
29.1. HealthGate and the Publishers shall enter and maintain in force the
Escrow Agreement for such period as the Publishers require.
29.2. Whenever a new version of the Proprietary Software is used for the
Site, HealthGate will promptly deposit a new version of the source
code and the operational documentation for that version under the
same Escrow Agreement, and notify the Publishers in writing that the
deposit has been made.
29.3. If no new version has been deposited in any 6 month period,
HealthGate will deposit a replacement copy of the then current
version of the source code of the Proprietary Software under the
Escrow Agreement and will notify the Publishers in writing.
30. Confidential Information
Neither party shall, other than with the prior written consent of the
other party, during or after the termination, determination or expiry of
this Agreement disclose directly or indirectly to any person, firm,
company or third party and shall only use for the purposes of this
Agreement, any information relating to the Agreement, the other party, its
business, trade secrets, customers, suppliers or any other information of
whatever nature which the party whose information it is or its licensees
or nominee may deem to be confidential and which the other party has or
shall hereafter become possessed of. For the avoidance of doubt the usage
statistics relating to the Site shall be the Publishers' confidential
information.
The foregoing provisions shall not prevent the disclosure or use by either
party of any information which is or hereafter, through no fault of the
other party, become public knowledge or to the extent permitted by law.
Nor shall they prevent the use by the Publishers of information for the
purposes of handing over or considering handing over the System to
themselves or to another contractor, PROVIDED THAT if the information is
disclosed to a third party the Publishers shall first enter a
confidentiality agreement with the third party in similar terms to this
Clause.
20
<PAGE>
31. Data Protection
The parties agree to ensure that they will at all times comply with the
provisions and obligations imposed by the Data Protection Act 1984, the EU
Data Protection Directive 95/46 and any implementing legislation in the
United Kingdom. Both parties agree to indemnify each other in respect of
any unauthorised disclosure of data by them.
32. Termination, Change of Control of HealthGate
32.1. Notwithstanding any provisions herein contained this Agreement may
be terminated forthwith by either party by notice in writing from
the party not at fault if any of the following events shall occur,
namely:
(i) if the other party shall commit any act of bankruptcy,
shall have a receiving order made against it, shall make or
negotiate for any composition or arrangement with or
assignment for the benefit of its creditors or if the other
party, being a body corporate, shall present a petition or
have a petition presented by a creditor for its winding up or
shall enter into any liquidation (other than for the purposes
of reconstruction or amalgamation), shall call any meeting of
its creditors, shall have a receiver of all or any of its
undertakings or assets appointed, shall be deemed by virtue of
the relevant statutory provisions under the applicable law to
be unable to pay its debts, or shall cease to carry on
business;
(ii) if the other party shall at any time be in default under
this Agreement and shall fail to remedy such default within 30
days from receipt of notice in writing from the first party
specifying such default.
If any such event referred to in this sub-clause shall occur,
termination shall become effective forthwith or on the date
set forth in such notice.
32.2. Either party may by notice in writing to the other party
terminate this Agreement, if any of the following events shall
occur, namely:
32.2.1. if either party is in breach of any term, condition or
provision of this Agreement or required by law and
fails to remedy such breach (if capable of remedy)
within 14 days of receipt of notice from the other
party specifying such breach;
21
<PAGE>
32.2.2. Change in control
If there is a change in Control of the first party,
the second party may, entirely at their own option and
without thereby becoming liable for any costs or
losses which the first party or its holding company or
any company in which it may hold shares may suffer as
a result terminate the Agreement by notice in writing
to first party.
For the purpose of this clause, a person shall have
"Control" of a company if he holds, directly or
indirectly, shares which together with shares held by
any persons acting in concert with him carry 50% or
more of the voting rights of that company and "Change
in Control" shall be interpreted accordingly. Words
and phrases defined in the City Code on Take-overs and
Mergers shall have the same meaning here.
32.3. Termination, howsoever or whenever occasioned shall be subject to
any rights and remedies either party may have under this Agreement
or in Law.
32.4. the following Clauses shall survive termination for whatever cause
of this Agreement: Clauses 4.2, 5, 10.2, 20.4, 23.2, 25-28, 30-34
inclusive.
33. Rights Upon Termination
Upon termination of this Agreement and for a period of six (6) months
thereafter, the Publishers will have the following rights and obligations:
33.1. Commencing upon any notice of termination by the Publishers,
HealthGate will comply with the Publishers' reasonable directions,
and will provide to the Publishers any and all termination
assistance reasonably requested by the Publishers to allow the
Services to continue and to facilitate the orderly transfer of
responsibility for the Services to the Publishers or a successor
provider of Services designated by the Publishers. The termination
assistance to be provided to the Publishers by HealthGate may
include the following:
33.1.1. Continuing to perform, for a reasonable period (as
determined by the Publishers) of up to six (6) months
following the termination date, any or all of the Services
then being performed by HealthGate.
33.1.2. Developing, together with the Publishers, a plan for the
orderly transition of Services ("Transition Plan") then
being performed by HealthGate from HealthGate to the
Publishers or such successor provider of Services.
33.1.3. Providing reasonable training for personnel of the
Publishers in the performance of the Services then being
transitioned to the Publishers or such successor provider of
Services.
22
<PAGE>
33.2. If HealthGate is then using any Equipment leased or owned by the
Publishers to provide services to any third party, HealthGate may
continue to use that Equipment for that purpose until such time as
HealthGate can reasonably transition to other equipment.
33.3. Upon receipt of written notice from the Publishers that HealthGate
is in default under this Agreement by failing to comply with the
requirements of this Clause 33, or that HealthGate is in default
under any provision regarding rights upon termination of this
Agreement, HealthGate shall have ten (10) business days in which to
cure such default. HealthGate acknowledges that, in the event
HealthGate fails to cure such default within the specified time
period, the Publishers would suffer irreparable harm, and
HealthGate, hereby agrees that the Publishers would in such event be
entitled to obtain from a court of competent jurisdiction an order
of specific performance, in addition to such other rights and
remedies to which it may be entitled at law or in equity under this
Agreement.
33.4. Upon the termination of this Agreement or HealthGate's engagement
whichever shall be the earlier, HealthGate or its personal
representative as the case may be, shall immediately deliver up to
the Publishers all correspondence, reports, documents,
specifications, papers, information (on whatever media) and property
belonging to the Publishers which may be in his possession or under
his control together with all confidential information or copyright
works belonging to the Publishers specified in Clauses 27 and 31
above.
34. General
34.1. Waiver
Failure or neglect by either party to enforce at any time any of the
provisions hereof shall not be construed nor shall be deemed to be a
waiver of that party's rights hereunder nor in any way affect the
validity of the whole or any part of this Agreement nor prejudice
that party's rights to take subsequent action.
34.2. Entire Agreement
This Agreement constitutes the entire agreement between the parties.
Each party confirms that it has not relied upon any representation
not recorded in this document or in its Schedules inducing it to
enter this Agreement. No variation of these terms and conditions
will be valid unless confirmed in writing by authorized signatories
of both parties.
23
<PAGE>
34.3. Assignment
HealthGate shall not transfer or assign the whole or any part of
this Agreement without the prior written consent of the Publishers.
34.4. Headings
he headings of the terms and conditions herein contained are
inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of any of the
terms and conditions of this Agreement.
34.5. Severability
In the event that any of these terms, conditions or provisions shall
be determined by any competent authority to be invalid, unlawful or
unenforceable to any extent, such term, condition or provision shall
to that extent be severed from the remaining terms, conditions and
provisions which shall continue to be valid to the fullest extent
permitted by law.
34.6. Notices
Any notice to be given by either party to the other may be sent by
registered post or airmail to the address to the other party as
appearing herein and if so sent shall be deemed to be served 4 days
following the date of posting, or may be sent by courier and if so
shall be deemed to be received when actually received.
34.7. Injunctive Relief
All claims within the scope of this Agreement that any party may
have against the other for monetary damages must, subject to Clause
29 (Source Code and Escrow), be pursued through the procedures
established in this Agreement. However, nothing in this Clause 34.7
will prevent any party from immediately seeking injunctive or other
equitable relief from any court having competent jurisdiction.
24
<PAGE>
34.8. Law
The parties hereby agree that this Agreement shall be construed in
accordance with English law. Any and all disputes between the
parties arising under or in connection with this Agreement which
cannot be resolved amicably by the parties, shall be resolved in the
courts located in London, England, except with respect to any action
brought by the Publishers against HealthGate, in which case
jurisdiction and venue shall be in Boston Massachusetts.
25
<PAGE>
Signing Provisions
SIGNED for and on behalf of the Publishers
by:
/s/ Jonathan Conibear /s/ Joachim Malling
in the presence of:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
Date: 20.3.98 30.4.98
SIGNED for and on behalf of HealthGate
by:
By: /s/ William S. Reece
-----------------------------------
William S. Reece
in the presence of:
/s/ Maria Pace
Date:
4.7.98
Schedules
1 Specification
2 Use Fees
3 Project Managers
4 Escrow
26
<PAGE>
SCHEDULE 1
<PAGE>
HealthGate Data Corp [ILLEGIBLE]
Blackwell/Munksgaard Journal
Publishing
- --------------------------------------------------------------------------------
User Scenarios
<PAGE>
Chapter 1
- --------------------------------------------------------------------------------
Blackwell/Munksgaard Journal Publishing
User Scenarios
- --------------------------------------------------------------------------------
Overview
- --------------------------------------------------------------------------------
This document contains outlines, or "scenarios," of how users will access the
Blackwell/Munksgaard Journal Publishing system that HealthGate is currently
developing.
The goal of this project is to provide the high standards of
Blackwell/Munksgaard publications and services to existing readers online, as
well as develop an audience of new Internet users. Since the focus of this
project is to expand readership and usage, the design of this project will be
driven by user needs and interests.
The following scenarios illustrate how to optimally meet the needs and offer the
widest selection of services to Blackwell/Munksgaard users through a series of
chronological steps and options. A user is defined as any party (including
individuals or other systems) that will interface with the Blackwell/Munksgaard
Journal Publishing system.
- --------------------------------------------------------------------------------
List of Scenarios
- --------------------------------------------------------------------------------
Below is a list of the scenarios. The list will be ordered to contain the
building block scenarios first, followed by the more complex scenarios.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD PUBLISHING SYSTEM 1
<PAGE>
Overview 1
List of Scenarios 1
Registration 3
General Registration 3
Credit Card Subscription Registration 4
Society Member / Institutional
Subscriber Self Registration 4
Purchase Order or Deposit Account
for Institutional Subscribers 5
Transaction Registration / Single
Document Purchase by non registered
user 6
Purchases 7
Single Document Purchase
Registered User with CC Information 7
Single Document Purchase
Registered User without CC
Information 7
Single Document Purchase
Registered User using Purchase
Order 8
Additional Subscription Purchase 8
Linking 9
Bibliographic Linking within an Article 9
Related Information Links 10
Delivery Options Other than HTML 10
Downloading PDF 10
Fax Delivery 11
Subscriber Features 11
User Access to their Custom Page 11
Journal Features 12
Journal Page 12
Issue Listings 13
Table of Contents 13
Abstract 13
Full Text 14
Email version of Table of Contents 14
Text Email ........................................... 14
HTML Email ........................................... 15
Searching 15
Quick Search 15
Searching Full Text 15
Finding an Article Cited Elsewhere 16
Customer Help 16
Forgotten Password 16
Forgotten User Name and Password 17
Changing Password 17
Changing Email Address 17
Changing Credit Card Number 18
Changing Other Information 18
Content Management 18
Journal Setup 18
Set Journal Price 18
Set Document Price 19
Template Submission 19
Content Publishing 19
Issue Loading 19
Issue Review 20
Issue Release 20
Third Party Access 20
General 20
Abstracts Only (Headers) 21
Abstracts and PDF (Headers and PDF) 21
Full Text Blackwell/Munksgaard DTD 21
Full Text in Ovid's DTD 21
Delivery Options for Third Parties 21
Reporting 21
User 21
Content 22
Integration 22
HeathMill or Other Subscription
Systems to HealthGate Connection 22
HealthGate to HeathMill or Other
Subscription Systems 23
Integration to JPMS 23
Integration with Blackwell/Munksgaard
Web Site(s) 24
Future Items 24
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD PUBLISHING SYSTEM 2
<PAGE>
Chapter 2
User Scenarios
This chapter contains the Blackwell/Munksgaard Journal Publishing system
user scenarios.
- --------------------------------------------------------------------------------
Registration
- --------------------------------------------------------------------------------
General Registration
Users who access Blackwell/Munksgaard publications will fall into one of
three categories:
a) Non-registered users who are browsing Blackwell/Munksgaard content.
These users will have limited access to some free content, but will
not be able to access other areas or purchase products.
b) Registered users who have provided name, email and postal mailing
address, but have not provided credit card data. Users in this
category include those who have visited the site before and have
been assigned a user name and password, as well as Society members
who have previously registered.
c) Purchasing users who have registered, and provided credit card
information. These users may have bought subscriptions to
Blackwell/Munksgaard journals or other publications in the past.
For any but the most casual browser, general registration is encouraged,
and outlined below.
1. Registration procedure: If a non-registered user would like to
access certain areas or services, there will be a link provided to
the registration area.
Once the user has entered the registration area, s/he will be asked
to provide full name, email address, and postal address. After this
information has been entered, the user will be provided with a
dialog box to enter a self-selected user name and password.
2. Creating user name: The user name is checked for uniqueness against
all user names, then added to the database. If the name has already
been registered, the user will be provided with three suggested
names, or the option to create another user name of their own
choice.
3. Confirmation of registration: Once a unique user name and password
have been assigned, the user may choose to continue the purchase
process by linking to pages that will enable him/her to enter credit
card information (see "Credit Card Subscription Registration"
below). If no purchase is desired at this time, the user will end
the registration process at this point S/he will see a page that
confirms their registration. Shortly afterwards, the user will also
receive an email acknowledging their registration, and providing
instructions on what to do if they forget their user name and
password. This will also serve to ensure that the user's email
address as entered in the registration form is correct.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD PUBLISHING SYSTEM 3
<PAGE>
USER SCENARIOS REGISTRATION
- --------------------------------------------------------------------------------
Credit Card Subscription Registration
Users will now be able to order subscriptions to Blackwell/Munksgaard
journals and publications online via a simple registration and secure
payment process. In this scenario, the user chooses to pay with a credit
card.
1. Registration: When the user enters the registration area, s/he will
be asked to provide their user name and password. (See "General
Registration" above).
2. Tracking marketing efforts: A feature to track the efficacy of
marketing campaigns may also be incorporated. In addition to
entering the above subscriber information, the user will also be
asked to provide information pertaining to offer codes, or other
identifying characteristics of marketing offers.
3. Separating society memberships: Users are asked if they are a member
of a society participating in the online journals. If they select a
society, their registration information will be checked with an
updated automated listing of existing society members. Since a
society member is entitled to pre-defined journal subscriptions
under a separate agreement, this is done to ensure that a society
member is not charged. If the registering user is determined to be a
society member, follow the "Society Member Registration" scenario
instead.
4. Selecting a subscription plan: After entering the registration
information, the user will be prompted to select a subscription
plan.
5. Charging subscriptions: Once the subscription plan has been
selected, the user will then be shown a page that provides a secure
connection for credit card information. The user will be asked to
give the credit card number, type (VISA, MasterCard, AMEX,
Discover), and expiration date.
6. Transaction receipt: The credit card is then validated and the user
is shown the cost that has been charged to the credit card. A
receipt is displayed on the screen, as well as emailed to the user.
7. Thanks/Email notification of future publications: After the
registration process is completed, the user will see a page thanking
them for their subscription order. As an added feature, new users
will be offered the option of having the table of contents of each
new issue emailed to them upon publication.
8. Next destination: When the above information is provided, the user
will then be given access to the cover page of the journal that has
just been ordered.
Society Member / Institutional Subscriber Self Registration
If a user is determined to be a Society member or a paid subscriber not
know to the system (pre-subscribed by Blackwell/Munksgaard), the following
scenario applies:
1. Access from marketing efforts: Society membership benefits include
subscriptions to pre-defined print journals. In accordance with
marketing efforts, inserts promoting online journal registration and
the URL for the Blackwell/Munksgaard site will be provided in these
journals. Members may also find out about online service via other
marketing efforts, such as newsletters, leaflets, direct mail or
other web sites.
2. Registration info: Once the user accesses the site, he/she will be
provided with a form asking for basic registration information (see
"Credit Card Subscription Registration," steps 1-7).
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 4
<PAGE>
USER SCENARIOS REGISTRATION
- --------------------------------------------------------------------------------
3. Membership options: If the name has been matched and verified online
as a Society member, the user is presented with a listing of
publications and journals, etc. which they may access with existing
membership privileges.
If the user is not verified as a current Society member, the user
will be asked to provide standard registration information (see
"Credit Card Subscription Registration").
In addition to the publication listings, users will be given one of
three options as defined by the publisher to receive these
subscriptions:
a. Exclusive online access
b. Print subscription and optional online access
c. Full access via both print subscription and online
4. Content for purchase: Once users have selected their subscription
method, they will be shown additional content available for
purchase.
5. Creating identity code for user: When content for purchase has been
selected by the user, s/he will see a form that enables them to
create a user name and password. Once the information has been
entered, another dialog box will prompt them to confirm the
password.
6. Assuring uniqueness of code: The user name is checked for uniqueness
against all user names, and added to the list. If the user name has
already been registered, they will be provided with three suggested
names, or the option to create another user name of their own
choice.
7. Purchasing additional content: If the user chooses to purchase any
of the additional content, the purchase will be charged to the
credit card information previously provided. The credit card is
validated and charged. If the credit card is declined, the user is
prompted to try again.
8. Transaction receipt: Once the credit card has been validated, the
page shows the cost that has been charged to the credit card.
Receipt is presented on the screen, as well as emailed to the user.
9. Final step of purchasing process: As the final step in the
purchasing process, the user will see a page that thanks them for
their order, and shows a listing of all content purchased in the
last transaction.
After purchasing process has been completed, the user will then be
given access to their selected content. A confirmation email will be
sent welcoming the user to our service.
Purchase Order or Deposit Account for Institutional Subscribers
For those institutions that wish to order subscriptions to
Blackwell/Munksgaard journals, publications, and single full-text articles
on a consistent basis, an open purchase order or deposit account may be
established. The following scenario outlines how a customer would have
access via this method.
1. Initial set-up: The customer will make the initial contact to
Blackwell/Munksgaard to set up the account. Open purchase orders and
deposit accounts may be established through either
Blackwell/Munksgaard or HealthGate.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 5
<PAGE>
USER SCENARIOS REGISTRATION
- --------------------------------------------------------------------------------
2. Access code: After the account has been established, users will then
be given a special access code to access the Site. When registering
the user will be able to use the access code instead of providing us
with credit card information (Access to publications via IP address
verification is an option for institutional accounts).
3. Registration: When the user completes registration the same way as a
normal customer, except that they enter the access code rather than
provide billing information. Any charges or purchases will be
applied to their account.
4. Account expiration: If the account expires, or reaches the monetary
cap assigned, the user will be shown a page that prompts them to
contact Blackwell/Munksgaard to renew the account. This page will
also provide the option to continue and have purchases applied to a
credit card. A report will be available warning Blackwell/Munksgaard
of accounts that are close to expiring.
Transaction Registration /Single Document Purchase by non registered user
This scenario outlines the way in which a user would be able to purchase a
single article (document) while browsing the abstract of the article.
1. Promoting full text articles: Abstracts are available to all users
free of charge; registration is not required. However, if the user
would like to buy the full text of any given article, pricing
information for the article will be listed at the end of the
abstract, with a link to purchase the article.
2. Purchasing full text -- registered users: After selecting the link
to purchase the article, the user is given the option to log in,
using the previously assigned registration user name and password.
After logging in, a page showing full text articles and journal
subscriptions for purchase will be provided. The user will make
his/her selections, and the credit card information page will
appear. (Go to step #5)
3. Purchasing full text -- new users: If the user has never registered
before, they will be asked to register.
4. Registration: When the user enters the registration area, s/he will
be asked to provide basic identifying information (See "General
Registration" above).
5. Credit card info: The user will then be shown a page that provides a
secure connection for credit card information. The user will be
asked to give the credit card number, type (VISA, MasterCard, AMEX,
Discover), and expiration date.
6. Credit card validation: The credit card is validated, and the user
is given confirmation that they are about to be charged for the
requested full text article(s) and/or journal subscription(s).
7. Fax delivery/other purchase options: An option to have the article
faxed to them for an additional fee (to be determined) is also
offered.
8. Transaction confirmation: Once the user has completed the above
steps, a receipt listing all purchases is shown on the page; a copy
will also be emailed to them.
9. Transaction cancellation: If the user cancels the transaction, then
they are returned to the abstract of the article.
10. Content access: After the user confirms the charge, s/he is given
access to the content for a specified period of time (hours/days to
be determined.)
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 6
<PAGE>
USER SCENARIOS PURCHASES
- --------------------------------------------------------------------------------
Articles are provided to the user in both PDF and HTML format
- --------------------------------------------------------------------------------
Purchases
- --------------------------------------------------------------------------------
The scenarios below outline single document purchases. There also will be
a facility to purchase multiple documents in a shopping basked like
manner.
Single Document Purchase Registered User with CC Information
In this scenario, a registered user requests a document to which they do
not currently have access. For example, they may be viewing an abstract
from a journal that is not part of their subscription, or they may be
referencing a new document (full text) In this scenario we assume that the
user has a credit card on file or an open purchase order (PO).
1. Registration update: At the end of an abstract, a link is provided
which enables the user to purchase a related document or product
(i.e., full text article, journal subscription, book, etc.) The link
brings the user to a page that offers purchase options, lists the
price of the full text article and allows registered users to enter
their user name and password. Non-registered users would have to
register in order to enter credit card information.
2. Login: Registered users will log on, confirming registration. Then
they will be shown a price confirmation and delivery options.
3. Optional fax delivery: If the requested document is an article, the
user will be offered an option to have the article faxed for an
additional fee (to be determined).
4. Transaction confirmation: Once the user has completed the above
steps, a receipt listing all purchases is shown on the page; a copy
will also be emailed to them.
5. Transaction cancellation: If the user cancels the transaction, they
are returned to the abstract of the article.
6. Content access: After the user confirms the charge, s/he is given
access to the content for a specified period of time (hours/days to
be determined.)
Articles are provided to the user in both HTML and PDF formats.
Single Document Purchase Registered User without CC Information
In this scenario, a registered user requests to see a document to which
they do not currently have access. For example, they may be viewing an
abstract from a new journal and decide they would like to subscribe. In
this scenario, we assume that the user does not have a credit card on file
or an open PO.
1. Registration update: At the end of an abstract, a link is provided
which enables the user to purchase a related document or product
(i.e., full text article, journal subscription, book, etc.) The link
brings the user to a page that offers purchase options, and lists
the price of the full text article. The user will be asked to a)
register, or b) login.
2. Login. Registered users will login.
3. Credit card info: Then if they do not have credit card information
on file or if their credit card has expired, they will be shown a
page which provides a secure connection for credit card information.
The user will be asked to give the credit card number, type (VISA,
MasterCard, AMEX, Discover), and expiration date.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 7
<PAGE>
USER SCENARIOS PURCHASES
- --------------------------------------------------------------------------------
4. Credit card validation: The credit card is validated, and the user
is given confirmation that they are about to be charged for the
requested full text article(s) journal subscription(s), etc. (Any
relevant discounts will be shown on screen at this time.)
5. Optional fax delivery: If the requested document is an article, the
user will be offered an option to have the article faxed for an
additional fee (to be determined).
6. Transaction confirmation: Once the user has completed the above
steps, a receipt listing all purchases is shown on the page; a copy
will also be emailed to them.
7. Transaction cancellation: If the user cancels the transaction, they
are returned to the abstract of the article.
8. Content access: After the user confirms the charge, he/she is given
access to the content for a specified period of time (hours/days to
be determined).
Articles are provided to the user in both HTML and PDF formats.
Single Document Purchase Registered User using Purchase Order
In this scenario, a registered user requests a document to which they do
not currently have access and choose to pay via an existing purchase order
which they have set up with Blackwell/Munksgaard. If they do not have a
purchase order, they will be asked to contact Blackwell/Munksgaard.
1. Registration update: At the end of an abstract, a link is provided
which enables the user to purchase a related document or product
(i.e., full text article, journal subscription, book, etc.) The link
brings the user to a page that offers purchase options, and lists
the price of the full text article. The user will be asked to a)
register, or b) login.
2. Login. Registered users will login with an account that has been
tagged for all charges to be applied to an existing purchase order.
3. Purchase Order validation: The purchase order is validated to assure
that this charge will not go over the total amount on the purchase
order. The user is given confirmation that they are about to be
charged for the requested full text article(s). (Any relevant
discounts will be shown on screen at this time.)
4. Optional fax delivery: If the requested document is an article, the
user will be offered an option to have the article faxed for an
additional fee (to be determined).
5. Transaction confirmation: Once the user has completed the above
steps, a receipt listing all purchases is shown on the page; a copy
will also be emailed to them.
6. Transaction cancellation: If the user cancels the transaction, they
are returned to the abstract of the article.
7. Content access: After the user confirms the charge, he/she is given
access to the content for a specified period of time (hours/days to
be determined.)
Articles are provided to the user in both HTML and PDF formats.
Additional Subscription Purchase
Online users will be provided with several opportunities throughout the
site to subscribe to other journals; these purchase options will be
inserted in areas that contextually will promote the likelihood of a sale.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 8
<PAGE>
USER SCENARIOS LINKING
- --------------------------------------------------------------------------------
The following scenario provides an example of how the need for additional
full text articles and/or a journal subscription results in a sale.
1. Point of entry: A user reads an article in a journal to which they
subscribe. Searching for more information in this subject area, the
user clicks on the link to related articles.
2. Exposure to new journal: After viewing the list of related articles,
the user notes that the articles of the most interest are all in a
journal to which s/he does not currently subscribe. At this point
the user has a choice: s/he may either purchase the full text of
some or all the articles, or consider a subscription to the journal
itself, which will provide unlimited access to these and other
articles year-round. The user decides to find out more information
about the journal.
3. Journal description: All journal titles will be linked. When the
user clicks on a journal link, he/she will see a page that provides
a brief description of the journal, the frequency of publication,
and pricing information.
4. Purchasing procedure: The user decides to purchase the journal.
Since this user has already subscribed to at least one other
journal, his/her identification and credit card data are already
stored in the system.
The user is given the option of charging the subscription to the
existing account, or entering new credit card information. (See
"Credit Card Subscription Registration" above).
5. Confirmation of purchase: Once the user has indicated which credit
card is to be charged, the purchase is charged and validated. The
user will then be shown a page that provides a receipt for the
journal subscription purchase. Confirmation of the purchase will
also be sent to the user via email.
6. Other tie-ins to purchase: After confirmation, the user may link to
his/her own custom page to find that the new subscription has been
documented, and the custom page updated.
7. Next destination: At the end of the transaction, the user will be
shown the selected volume of the journal.
- --------------------------------------------------------------------------------
Linking
- --------------------------------------------------------------------------------
Bibliographic Linking within an Article
This scenario illustrates how a user would link to and from bibliographic
information contained within an article.
1. Reference links: Reference citations within all articles will be
linked to bibliographic references (or endnotes.) When the user
clicks on the citation in the article, a page showing the complete
listing of references for that article will be displayed.
2. Database links: When the user clicks on the MEDLINE link, s/he will
be shown the corresponding MEDLINE abstract for the cited article,
if the journal is indexed for inclusion in MEDLINE. (Similar
functionality will exist with ISI Web of Science).
3. Full text/Journal subscription purchase option: If full text is
available for the cited reference, it will be offered for purchase
at this point; journal subscription purchase may be offered as well.
Abstracts will also be available from the references. These purchase
options will be displayed along with pricing information. If the
user is not a subscriber to the cited journal, and chooses to
purchase the article, or subscribe to the journal, new pages
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 9
<PAGE>
USER SCENARIOS DELIVERY OPTIONS OTHER THAN HTML
- --------------------------------------------------------------------------------
leading them through the purchase process will automatically be
shown. (See "Single Document Purchase" and "Additional Subscription
Purchase" above.)
4. Subscription tracking: If the user is already a subscriber to the
journal that contains the selected article, the user will be
informed that they may access the article free.
5. Other reference options: All articles will also contain a side bar
which lists (and links to) other full text articles available within
the Blackwell/Munksgaard collection that references this article
(forward bibliographic references).
6. In Press Bibliographic Links: Links will not exist to bibliographic
references that are still in press. However, the system will check
regularly to link them once the article has been published.
7. Exit from abstract: The user will also be able to return to the
previous article from the abstract.
Related Information Links
When viewing an article, the user will be provided with a side bar that
outlines several related links pertaining to the article they are
currently reading. In this scenario, we highlight some of the different
types of links that may be offered.
1. Author listing: The names of all authors of the current article will
be provided as links. When the user clicks on the link of a selected
author, s/he will be presented with a listing of other articles
written by that author. These titles will be linked to the
corresponding abstract and/or full text. If available, full text
purchase and/or PDF versions of the selected article will be
offered.
2. Related articles by subject: A listing of related linked subject
areas will also be provided. When the user clicks on these areas,
s/he will receive a listing of related articles searched by MeSH
headings and keywords.
3. Related published information: Users interested in reading other
published information related to the chosen article will find that
the side bar provides them with links to:
a. Correspondence (letters, editorials, etc) pertaining to that
article
b. Errata (article addenda, corrections, etc.) pertaining to that
article
4. Services: The user will also be able to take advantage of certain
services. One service will be the ability to email the URL of a
chosen article to a colleague. When the user chooses this option,
s/he will be presented with a page to enter an email address, and a
"send" button.
- --------------------------------------------------------------------------------
Delivery Options Other than HTML
- --------------------------------------------------------------------------------
Downloading PDF
For those full text articles available in PDF format, the user will be
given the option of PDF downloading.
1. Linked PDF option: On the article page, a link offering the PDF
option will be found. The users will have the option to download the
PDF file or have it emailed to them. If the user choose to download
the document they will be prompted to save it.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 10
<PAGE>
USER SCENARIOS SUBSCRIBER FEATURES
- --------------------------------------------------------------------------------
2. Adobe instructions for downloading: If the user does not have
Acrobat installed, the download page will explain the need to
install the Acrobat plug-in. A link to Adobe for detailed
instructions on how to install the plug-in will be provided.
If the user does not wish to download Acrobat at that time, the user
will be prompted to download to their hard drive. They may open the
PDF document after Acrobat has been downloaded at their convenience.
Fax Delivery
Users who want the benefits of how an article appears in PDF, but
who do not wish to download the article in this format, can request
fax delivery of the article for an additional charge.
1. After confirming that the user wishes to purchase an article (or in
the case of subscriptions, displaying the record on screen), the
user selects the method of displaying the article: HTML, PDF, or
"Receive via Fax." Because this is a premium option, the user will
be asked to confirm the additional fees for fax delivery.
2. The user then supplies their fax number.
3. To keep costs low, the article is relayed to a commercial fax
service, such as FaxNet, which sends the information via Web-based
fax to the user.
- --------------------------------------------------------------------------------
Subscriber Features
- --------------------------------------------------------------------------------
User Access to their Custom Page
Another free feature offered to Blackwell/Munksgaard subscribers is a
custom-designed page which will provide them with information tailored to
their unique areas of interest, as well as accounting of their
subscription plans and other services. The following are highlights of
features that may be offered to subscribers.
1. Initial log-in: The user accesses the Blackwell/Munksgaard Journals
home page. From this page there is a login link that requires the
user to enter their user name and password (if they are unable to
remember their user name and password, they may enter their email
address, which will then provide them with the correct login
information via return email). Once the correct information has been
entered, subscribers are brought to their custom page.
2. Custom Page features: The custom page will provide the user with:
a. Subscription information: All subscription information pertaining
to the user's account will be provided, including: names of journal
subscriptions (listed and linked), pricing of each subscription, and
the duration of subscription.
b. Updates on new content: Each subscriber will be provided with
updates on new content that correlates to their specified area(s) of
interest. This includes new journal articles, correspondence, news,
etc.
c. Customer Service: Users can choose to change their password,
subscriptions, credit card information, etc. by accessing the
customer service area at any time. Users may also email questions
regarding their subscription in this customer service area.
d. Searching: The user will have a variety of methods to track and
save searches from the custom page, including:
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 11
<PAGE>
USER SCENARIOS JOURNAL FEATURES
- --------------------------------------------------------------------------------
i) Entering searches from various journal sets (e.g., searches
of just Blackwell/Munksgaard journals, or all journals in a
related subject area.)
ii) Saved searches: The user will have the ability to view the
last five documents reviewed or the last five subject area
searches conducted.
iii) Collaborative filtering: In the future once an article
has been read, a user may choose to review which related
articles have been read by other users. A listing of the most
frequently accessed articles in the topic will be provided.
(For a more detailed description of the searching
capabilities, see the "Searching" category below.)
e. Promotions and advertising: The user will be notified in the
Custom Page of any promotions that may be of interest (i.e.,
discount rates, product offers, society notices, etc.) In addition,
users will be able to view advertising pertaining to their interests
on this page.
f. Interactive communication: This area will contain features that
allow users to communicate via email with Blackwell/Munksgaard. This
may be used, for example, to post notices of errata for articles. A
mechanism for acknowledging these notices will also be provided.
- --------------------------------------------------------------------------------
Journal Features
- --------------------------------------------------------------------------------
The following scenarios pertain to organization of the journals and their
various components on the Blackwell/Munksgaard site.
Journal Page
Users will be able to access information pertaining to subscriptions and
other publisher information directly from the journal pages, which will be
customized for each specific journal. We recommend that these pages follow
a standardized format, including links to the following (where
applicable):
a) Publisher's home page: A link will bring the user to the home page
of the appropriate publisher of the journal, either
Blackwell/Munksgaard Science Ltd., Blackwell/Munksgaard Science
Inc., or Munksgaard.
b) Society's home page: If the journal is published for a society,
users will be able to directly link to the society's home page
c) Journal information: Information regarding publication cycles and
other publication information will be provided via this link.
d) Journal subscriptions: If a user wishes to find detailed information
about subscribing to journals, this link will bring them to a page
which will provide pricing information, etc.
e) Journal listing by publisher: This link will provide the user with a
complete listing of journals, categorized by publisher
f) Listing of available back issues: For users wishing to search
previous journal issues, this link will show a listing of back
issues available
g) Current table of contents: Users will be able to quickly access the
most current table of contents from this link
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 12
<PAGE>
USER SCENARIOS JOURNAL FEATURES
- --------------------------------------------------------------------------------
h) Submission information: Prospective authors will find author's
guidelines and other submission information at this link
i) Letter to the editor via email: Users who wish to contribute
opinions to the journal editor will be able to link to a pop-up
email window, and send correspondence via email. This is optional.
j) Email to support: This link will provide users with the opportunity
to ask questions or request information from support staff via email
k) Copyright statements: All pertinent copyright information and legal
disclaimers will be provided via this link
Issue Listings
Issues will be displayed in the following manner:
a) Organization of journals: Journals will be organized by volume,
beginning with the most recent publication, and then catalogued in
descending chronological order, grouped by year.
b) Supplements: Any supplemental issues will be grouped with the
appropriate volume.
c) Listing by topic or theme: Each journal listing will also indicate
relevant topics or themes and page ranges where applicable.
d) Accessibility: Users will be able to access these journal volumes
from both their custom pages, as well as journal cover pages.
Table of Contents
Tables of Contents will be displayed in the following format:
a) The table of contents list the articles published in the issue by
page number
b) Each article listed contains the title (or title abbreviation for
longer titles), primary author(s) as well as page numbers.
c) From the article listing there will be links to the abstract, full
text, PDF versions of the article and supplemental information.
d) Prices of the full text and PDF versions may also be listed.
Abstract
All Blackwell/Munksgaard journal abstracts will be displayed in the
following format:
a) Title
b) Source
c) Author
d) Abstract
e) Address
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 13
<PAGE>
USER SCENARIOS JOURNAL FEATURES
- --------------------------------------------------------------------------------
f) Keywords
g) Article Type (Case report, review, rapid publication, original
article).
h) If applicable, both the MEDLINE Unique Identifier and MeSH terms
will be available
Full Text
As users read full text documents, they will be able to access the
following feature enhancements:
a) Linked references: References cited within the body of the article
will be linked to the bibliographic references (endnotes) for that
article. A link from the bibliographic reference to the abstract
(pulled from secondary databases, reference databases), if
available, is provided. If the corresponding article is available
online in the Blackwell/Munksgaard collection, a link to the
full-text with option to purchase will be provided.
b) Publication listing by author: All primary authors of the article
will be listed. The name of each author will be linked so that if
the user selects the author's name, a listing will be provided of
other available articles written this author. Again, these articles
in turn will be linked to their corresponding abstracts. If the
corresponding article is available online in the
Blackwell/Munksgaard collection, a link to the full-text with option
to purchase will be provided.
c) Link by keywords: The user will be provided with an option to search
for other related articles by keyword.
d) Email option: If a user would like to send a link to the abstract to
a colleague, an email window will be available. The user only needs
to type in the destination email address, and an automatic message
providing the article title and corresponding URL of the abstract
will be sent.
e) Supplemental Information: Links to supplemental information related
to the article will be presented if the information is available.
Email version of Table of Contents
A valuable reminder of newly released publications is the table of
contents email option. If users choose this feature (usually done during
subscription registration and payment), they will be sent the new table of
contents for each journal to which they have subscribed. This feature will
be available to both subscribers as well as non-subscribing users.
This scenario shows what a user can do after receiving an emailed version
of the table of contents. The scenario has two parts: one for text-based
email, the other for HTML enabled email.
Text Email
1. Receipt of email announcement: User receives an email message and
opens it in their email reader.
2. Table of contents listing: The message contains the table of
contents of the newly published issue of the journal.
3. URL linking: The email contains the URL for the Blackwell/Munksgaard
site. This link will be "live" in most email readers, and will bring
the user directly to the online version of the table of contents.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 14
<PAGE>
USER SCENARIOS SEARCHING
- --------------------------------------------------------------------------------
4. Article linking: Once the user accesses the table of contents, s/he
will find that all titles are linked to abstracts and the online
full text article.
HTML Email
1. Receipt of email announcement: The user receives an HTML based email
message, and opens it in their HTML enabled mail reader (e.g.,
Outlook Express, Outlook 98, Netscape 3.x and higher).
2. Table of contents: The message contains the complete table of
contents, and may be viewed exactly as it would look on the web
site.
3. URL linking: The email contains the URL for the Blackwell/Munksgaard
site. This link will be clickable in most email readers, and will
bring the user directly to the online version of the table of
contents.
4. Article linking: Once the user accesses the table of contents, s/he
will find that all titles are linked to abstracts and the online
full text article.
- --------------------------------------------------------------------------------
Searching
- --------------------------------------------------------------------------------
The capacity to search using a variety of keywords and subject headings is
of critical importance to users, and is an especially important feature of
the Blackwell/Munksgaard site.
Users will have the ability to select which set of journals to search.
Some example sets are: All Full Text Journals, All Subscribed Journals,
and Journals by particular Publisher. Searches that return a single
document will forward the user to the abstract or full text if they have
access to the full text.
The following scenarios outline several ways in which a subscriber may
search for content. In addition to offering different types of searching
mechanisms (i.e., "quick searches" through advanced searches), users will
also be able to access the searching capability from various areas of the
site. The following scenarios outline some of the search possibilities.
Quick Search
A "Quick Search" enables the user to search on a topic (e.g., insulin
pumps) and obtain a listing of areas where this topic is cited.
1. From custom page: From the custom page, users would enter a keyword
or phrase in the quick search box. The user would select the All
Subscribed journal set, and then submit the query.
2. Results: The search returns a listing of all articles; each linked
to the full text, PDF, and the abstract where available.
3. Save Query: On the results page, the user would have the option of
saving the query. This adds the query to the user's customized page.
Searching Full Text
Another option is to search the entire full text of a document for
specific terms. The following is a sample of how this search could be
conducted from the user's custom page.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 15
<PAGE>
USER SCENARIOS CUSTOMER HELP
- --------------------------------------------------------------------------------
1. Advanced search option: The user selects the advanced search option
from the search box.
2. Document choice: The user decides to view only abstracts; s/he
selects this choice from the pull down list of available fields to
search.
3. Subject choice: The user chooses the keyword or phrase they wish to
search, (e.g., lispro or Humalog), and enters it into the advanced
search form. This criterion is then added to the query.
4. Journal choice: The user then selects the journal set to search, and
selects the "All Full Text Journals" option. The query is then
submitted.
5. Results: The results contain a listing of all full text articles
available that match the user's search criteria. Included in this
list is the price of each full text document that references these
keywords, with the option to download. In addition, the entries that
the user has subscription access to would be noted. Results can be
ordered by relevancy, date, author and journal title.
The user has the ability to save the query.
Finding an Article Cited Elsewhere
This scenario provides the user with HealthGate's Citation Finder
Technology. It allows a subscriber the ability to quickly locate the
abstract (and the full text if available) from a bibliographic reference.
1. Access from custom page: From the registered subscriber's customized
page, s/he selects the Citation Finder option. The Citation Finder
page is pre-loaded and has a field for entry of the citation. The
user can either input the citation information or "copy and paste"
it into the appropriate fields. The Citation Finder does not require
information in all fields to execute a search successfully.
2. Search criteria: The user then selects the fields, or information,
which s/he wants to search. Examples of these fields include author,
journal name, year, volume, issue, article title, and all fields.
For this example, the user selects author, article title, and
journal name.
3. Results: The user submits the query. If an exact match is found, the
abstract will be provided. If not, the user is presented with a list
of matches from which to select.
- --------------------------------------------------------------------------------
Customer Help
- --------------------------------------------------------------------------------
Blackwell/Munksgaard will have administrative access to these features.
All access will be recorded to monitor any possible abuse.
Forgotten Password
When a user forgets his/her password, the system provides a mechanism for
the user to look up and find their password without calling customer
service. This scenario shows how that is accomplished:
1. On the login page, a user who has forgotten their password selects
the link "forgotten password."
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 16
<PAGE>
USER SCENARIOS CUSTOMER HELP
- --------------------------------------------------------------------------------
2. The user is asked to complete a form where the required information
is user name, first name, and last name.
3. The system will search the user database to see if there is a match.
If there is a match, the system will send the user's password to the
email address on file. The system will then tell the user that their
password is being sent to them via email.
4. If there is not a match, the system will prompt them to try again or
allow them to search for user name and password.
Forgotten User Name and Password
When a user forgets his/her password, the system provides a mechanism for
the user to look up and find their password without calling customer
service. This scenario shows how that is accomplished:
1. On the login page, a user who has forgotten their password selects
the link "forgotten password."
2. If they do not remember their user name, the user is prompted to
enter their first name, last name, and email address.
3. The system will compare the information supplied by the user against
the user database and email both the user name and password to the
address on file if there is a match.
4. If there is not a match, the user is instructed to either try again
or contact customer service.
Changing Password
Users often want to change their password. The system gives them an easy
way to do so.
1. From the user's personal profile page, the user selects the link to
"Modify Profile."
2. The Modify Profile page will allow them to go to a change password
form.
3. This form will ask the user to type their current password, then
enter a new password. To confirm, the user is asked to type their
new password again.
4. Upon correct entry (the old password matched the one on file and the
two new passwords matched), the password will be updated and the
user will be told that the change has been made.
5. If the entry is not correct then the user will be prompted to try
again.
Changing Email Address
Users often want to change their email address. The system gives them an
easy way to do so.
1. This feature is available in several places, such as the "Modify
Profile" page and the regularly scheduled email messages sent by the
system to the user.
2. From the Modify Profile page, the user would select a link to change
their email address. From an email message, the user selects the
link embedded in the email. When accessing the appropriate page via
the email link, the user will be prompted for user name and
password.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 17
<PAGE>
USER SCENARIOS CONTENT MANAGEMENT
- --------------------------------------------------------------------------------
3. A form will ask for the users new email address (actually allowing
them to edit their old email address).
4. Upon successful entry, the email address is checked for validity and
an email message is sent the address for confirmation.
Changing Credit Card Number
Users often want to change their credit card information on file. The
system gives them an easy way to do so. This method of updating the credit
card is also used when the credit card on file has expired. Customers with
expired credit cards are forced to enter a new credit card when they are
about to incur additional charges.
1. This feature is available from the "Modify Profile" page.
2. The user is connected to the secure server and asked to enter the
new credit card information.
3. The credit card is validated with a credit card clearing house.
4. If validated, the user is given a confirmation page.
5. If the card is not validated, the user is asked to try again.
Changing Other Information
Users are able to change other information off the "Modify Profile" page
by selecting the appropriate link. Examples of other information that may
be changed are postal address, purchasing new subscriptions, and change
the format in which they received emailed information (HTML verses text).
- --------------------------------------------------------------------------------
Content Management
- --------------------------------------------------------------------------------
Journal Setup
The procedure to setup new journals and their initial entry into the
system must be initiated by Blackwell/Munksgaard. It is possible to setup
a journal manually or electronically. The manual procedure for setting up
a new journal entry is as follows:
1. The authorized Blackwell/Munksgaard employee establishes a
connection to the Administration side of the site.
2. When prompted, the employee enters the appropriate user
name/password and establishes a secure connection.
3. The employee selects the option New Journal and enters all
applicable information, such as title, copyright statements,
submissions, subscription, etc.
4. The employee enters Society information, if applicable, including
name, links, and board members.
Set Journal Price
It is possible to setup a journal price manually or electronically. After
setting up the basic journal information, pricing criteria may be entered:
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 18
<PAGE>
USER SCENARIOS CONTENT PUBLISHING
- --------------------------------------------------------------------------------
1. The authorized Blackwell/Munksgaard employee accesses the
appropriate journal (the journal must be setup using the Journal
Setup before establishing the journal price) and selects the option
"Journal Pricing."
2. The employee then assigns the price in multiple currencies, any and
all subscription plans, including rates for print companion,
electronic only, and Society membership.
3. The employee then assigns pricing for each of the selected
currencies.
Set Document Price
1. The default for all document pricing is established by
Blackwell/Munksgaard. The Blackwell/Munksgaard employee may override
the default and establish a special price for documents from a
specific journal title.
2. To override the default document price, the employee accesses the
appropriate journal (the journal must be setup using the Journal
Setup before establishing the document price) and selects the option
"Document Pricing."
3. The employee then assigns the revised price in various currencies
for document delivery.
4. The price may be revised to the default at any time by accessing the
journal and selecting the option to Restore Default Price.
Template Submission
Initially, templates will be hand loaded by HealthGate Data Corp. to
insure security and consistency.
To accomplish this, an FTP location will be provided to allow templates to
be copied over and reviewed (and tested) prior to releasing them.
- --------------------------------------------------------------------------------
Content Publishing
- --------------------------------------------------------------------------------
Issue Loading
1. Loading upon receipt: All content for a new issue is loaded upon
receipt in a single directory.
2. Identification: A form is completed which indicates appropriate
journal, issue, and volume. It is also possible to enter this
information electronically.
3. Back-up: Upon submission, the content is copied to the content
repository, before conversion. This allows it to be referenced in
the future.
4. Conversion: The content is then converted to our internal Extensible
Markup Language (XML) format.
5. Storage: The XML version is then stored in the content repository.
6. Parsing: The XML is then parsed to add more information, including
tags to link bibliographic information and related information.
7. Storage of parsed content: This parsed XML version is also stored in
the content repository.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 19
<PAGE>
USER SCENARIOS THIRD PARTY ACCESS
- --------------------------------------------------------------------------------
8. Conversion to HTML: An Extensible Style Language (XSL) template is
used to convert the file to HTML.
9. HTML on staging: The HTML version is made available on the staging
server.
Issue Review
1. The issue is made available on the staging server
2. Email is sent to Blackwell/Munksgaard alerting the appropriate
personnel that the issue is available for review.
3. An employee wishing to review the issue would log on to the staging
server, and select the content they wish to review. This is limited
to authorized users only. Authorization is by group of journals.
4. The content is presented to them in the same way it is shown to an
end user. However, they also have access to a tool bar (in a frame).
The tool bar allows them to approve the content as well as adjust
some of the properties of the article.
5. They can change the price or approve the article for release.
Issue Release
An issue will be released automatically on the assigned electronic
publication date if all the articles contained in the issue have been
edited and approved for release. Blackwell/Munksgaard will be alerted to
content that has not be reviewed after a predetermined amount of time.
A Blackwell/Munksgaard employee would access the Journal Publishing
System, a secure area, and go to the System Control area.
1. A list of issues that are ready or awaiting publication would be
available. When an issue is selected, the listing of properties for
that issue will be presented.
2. The user would be able to adjust any of the properties.
3. To publish the issue, the user would set the publication date to the
following day.
- --------------------------------------------------------------------------------
Third Party Access
- --------------------------------------------------------------------------------
General
Creating an abstract-only export: To create an abstract-only export, a
Blackwell/Munksgaard employee will need to determine the list of journal
abstracts to be included for extract, the formatting of the extract, and a
user profile of which third parties will have access to the extract file.
1. Criteria: Once the above information has been determined, the
following information will need to be entered:
a. Frequency of updating abstract information,
b. Packaging method (tar, zip), push, pull or tape.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 20
<PAGE>
USER SCENARIOS REPORTING
- --------------------------------------------------------------------------------
2. Push extracts: For push extracts (extracts that are sent to someone
either via FTP or email), a user will have to enter the destination
email address, or the FTP server, directory, user name and password
to use.
3. Pull extracts: For pull extracts (extracts that require someone to
pull the content off the journal server), a user will have to enter
the user name and password that the third party will use to retrieve
the content.
4. Tape based abstracts: Tape based abstracts will be handled similar
to FTP pulls except that they would be loaded to tape and sent via
postal service.
Abstracts Only (Headers)
Some customers want the abstracts only. This will allow bibliographic
database to receive the information in electronic form rather than having
to re-key the documents. Ideally, all databases would also receive
information pointing them to the full text version of the documents. The
directory structure will also be included with this abstract. It is
possible to create a different directory structure and will have to be
handled on an ad-hoc basis.
This scenario will be completed upon the supply of the final version of
the Blackwell/Munksgaard DTD.
Abstracts and PDF (Headers and PDF)
This type of export would use the same DTD as the abstracts only, but
would include a reference to the PDF file inside each header. This extract
would obviously also include the PDF files.
Full Text Blackwell/Munksgaard DTD
This export will take the Blackwell/Munksgaard SGML files in full as well
as graphic files and PDF files.
Full Text in Ovid's DTD
This export will convert the full text to Ovid's DTD and includes the
graphic files and PDF files.
Delivery Options for Third Parties
Third parties will have the option to receive information via HTTP, FTP
(either sent to them or picked up), tape (4mm, 8mm, DLT) or CD-ROM.
- --------------------------------------------------------------------------------
Reporting
- --------------------------------------------------------------------------------
This section defines some of the reports available to
Blackwell/Munksgaard. It is expected that customization of reports will
continue to be refined over the duration of the project. This will allow
both HealthGate and Blackwell/Munksgaard to make necessary adjustments. As
a future direction HealthGate will provide direct access to the SQL
database (via ODBC or similar methods).
User
Each time an authorized user logs on, information regarding their usage,
purchases and transactions will be tracked. From this data, reports may be
compiled to include the following:
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 21
<PAGE>
USER SCENARIOS INTEGRATION
- --------------------------------------------------------------------------------
o Last usage: This information indicates when the user last accessed
the system
o Number of subscriptions per user: Will list how many subscriptions
and the title of each journal subscription that the user has bought
o Number of documents delivered (excluding subscriptions): The number
of documents (such as full text articles, etc.) purchased by the
user will be reported
o Number of documents read within a subscription: This will provide a
feature unique to the online medium; for the first time, editors
will be able to track which articles were viewed with the most
interest by their readers within a subscription.
o Accounting of all charges: Reports will have the capacity to reflect
accounting of all accrued charges by subscribers, document delivery,
etc.
Content
Each time an article is accessed by an authorized user, information
regarding usage, purchases and transactions will be tracked. These reports
could be grouped by abstract, article, issue, volume, journal and
publisher. From this data, reports may be compiled to include the
following:
o Number of documents read by subscribers: The number of times each
document (full-text article) from a specific issue is accessed by
subscribers
o Number of documents read by non-subscribers: The number of times
each document (full-text article) from a specific issue are
purchased by non-subscribers
o Advertisements shown per issue: The specific advertisement and
number of times displayed from each issue.
o Accounting of all charges: Reports will have the capacity to reflect
accounting of all accrued charges by subscribers, document delivery,
etc. associated with a specific issue
o Title and number of subscriptions: The number of subscriptions for
each journal
- --------------------------------------------------------------------------------
Integration
- --------------------------------------------------------------------------------
HeathMill or Other Subscription Systems to HealthGate Connection
On a regular basis, the following information will be transferred to the
publishing system. The information will be in a format to be determined.
Each user record can include the following information:
o User Information
o Update/Add/Delete Flag
o HeathMill Account Number
o Name (first, middle, surname)
o Address Information
o Email Address
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 22
<PAGE>
USER SCENARIOS INTEGRATION
- --------------------------------------------------------------------------------
o Contracts (Subscriptions)
o Account Number
o Group, Society, and type of membership
o Expiration Date
o Start Date
o Volume and Issue Start
o Volume and Issue End
o Journal List
o Short Code
o Subject Code
o ISSN Electronic Version
o ISSN Print
o Price Band
HealthGate to HeathMill or Other Subscription Systems
HealthGate will send back to HealthMill the user and subscription
Information from above.
Integration to JPMS
For integration to JPMS, the Publishing System will send messages each
time an issue completes the following stages:
o Received
o Loaded
o Staging
o Review Complete
o Live
These messages will contain the following information:
o Message Code (Received, Loaded, Staging, Review, Live,
Deleted)
o ISSN (both electronic and paper)
o Journal Short Code
o Volume
o Issue
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 23
<PAGE>
USER SCENARIOS FUTURE ITEMS
- --------------------------------------------------------------------------------
o Date
o Scheduled Publication Date
o Actual Publication Date (if known)
In the event that an article is withdrawn, a message containing the
following will be sent:
o Message Code (Staging, Review, Live, Deleted)
o ISSN (both electronic and paper)
o Journal Short Code
o Volume
o Issue
o Article
o Page range
o Date
Integration with Blackwell/Munksgaard Web Site(s)
The system will provide an interface to access table contents, abstracts
and full text articles programmatically. The interfaces will require the
following information:
o ISSN (either electronic or print) or Blackwell/Munksgaard
Journal Code
o Volume
o Issue
o Page or Article Title (only for abstract and full text)
The interface will be similar to the following:
http://servername/abstract?issn=1234-123456&volume=2&issue=3&page=5
- --------------------------------------------------------------------------------
Future Items
- --------------------------------------------------------------------------------
This section contains a list of features, which HealthGate will deliver
outside of the deadlines agreed upon in the contract. Some of these items
may have additional charges due to licensing of software and content.
In the future HealthGate will provide the following features:
o Electronic forums at the Journal Level.
o Links to pharmaceutics, company names, people, and software.
o Method of linking terms to encyclopedias.
o Delivery of equations in a format that Mathematica can use.
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 24
<PAGE>
USER SCENARIOS FUTURE ITEMS
- --------------------------------------------------------------------------------
o The system will provide the ability to check whether a user is
concurrently logged on from multiple locations to prevent fraudulent
use.
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
- --------------------------------------------------------------------------------
BLACKWELL/MUNKSGAARD JOURNAL PUBLISHING 25
<PAGE>
SCHEDULE 2
<PAGE>
Use Fees
HealthGate will charge for Downloads of the material, as follows:
Type of User Fee per Download Max. per User/Title/Year
- -----------------------------------------------------------------------
Institution: $0.10 $20.00
Individual: $0.05 $10.00
Member: $0.01 $1.00
Download is defined as retrieval of a full-text article, there will be no charge
for searching and browsing of tables of contents and abstracts. These usage
charges will be billed on 1 January, 1 April, 1 July, 1 September and 31
December 1999, on payment terms of 60 days.
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
5
<PAGE>
SCHEDULE 3
<PAGE>
Project Managers
The Publishers:
Project Manager
- ---------------
Ian Bannerman
Blackwell Science Ltd
Osney Mead
Oxford
OX2 0EL
UK
e-mail: [email protected]
tel: +44 (0)1865 206101
Deputy Project Manager
- ----------------------
Martin Clutterbuck
Blackwell Science Ltd
Osney Mead
Oxford
OX2 0EL
UK
e-mail: [email protected]
tel: +44 (0)1865 206110
Deputy Project Manager
- ----------------------
Anders Geertsen
Munksgaard International Publishers Ltd
35 Norre Sogade, P.O. Box 2148
1016 Copenhagen K
Denmark
e-mail: [email protected]
tel: +45 77 33 31 03
HealthGate:
Project Manager
- ---------------
Mark Israel
HealthGate
380 Pleasant Street
Suite 230
Malden MA 02148
USA
tel: 781 321 6000 Ext 248
e-mail: [email protected]
Deputy Project Manager
- ----------------------
Rick Lawson
HealthGate
380 Pleasant Street
Suite 230
Malden MA 02148
USA
tel: 781 321 6000 Ext 211
e-mail: [email protected]
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
6
<PAGE>
SCHEDULE 4
<PAGE>
3
SCHEDULE 4
ESCROW AGREEMENT
When the annexed escrow agreement is entered, the terms shall include those set
out in the annexed letter from NCC Escrow International, the escrow agent, of 12
March 1998 by way of variation of NCC document STD001Y2K.UK.
The Required Information at ii) shall be provided by the parties. The date of
the Licence Agreement shall be the date of this agreement. The name of the
package shall be "HealthGate Electronic Journal Proprietary Software". These
words shall also appear in Schedule 1 of the escrow agreement. The parties shall
provide the medium on which the source code shall be supplied, which in default
of agreement shall be such medium as the escrow agent NCC Escrow International
Limited thinks fit.
The fees to be inserted in Schedule 4 of the Escrow Agreement shall be the then
applicable fees of NCC Escrow International Limited.
The Escrow Agreement shall be signed by HealthGate and Blackwell Science
Limited.
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
<PAGE>
NCC ESCROW INTERNATIONAL
12 March 1998 National Computing Centre
Oxford House, Oxford Road
Manchester M1 7ED, UK
Telephone: +44(O)161 228 6333
Facsimile: +44(0)161 242 2275
e-mail: [email protected]
Mr J S Saunders [NCC LOGO]
Linnells, Solicitors
Greyfriars Court
Paradise Square
Oxford OX1 1BB
Dear Mr Saunders
Proposed Escrow Agreement: Healthgate Data Corp / Blackwell Science Ltd / NCC
I confirm that NCC is willing to enter into our standard form escrow agreement
std001y2k.uk with the following amendments by reference to the appropriate
clauses:
(2) Add the words "and/or companies in the Blackwell Science Ltd group" after
"Blackwell Science Ltd".
6.1.6 A new clause: "there is a Change in Control of the Owner. For the purposes
of this clause, a person shall have "Control" of a company if he holds,
directly or indirectly, shares which together with shares held by any
persons acting in concert with him carry 50% or more of the voting rights
of that company, and "Change in Control" shall be interpreted accordingly.
Words and phrases in the City Code on Take-overs and Mergers shall have
the same meaning here."
6.1.7 A new clause: "the Licensee exercises its option under clause 10.4.1 of
the Licence Agreement".
11.4 Replace with: "If the obligations in clause 31 of the Licence Agreement
have terminated this Agreement will automatically terminate on the same
date."
Yours sincerely
/s/ Carmel Gorman
Carmel Gorman
NCC Escrow International
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
<PAGE>
[NCC Escrow International logo]
This document is to be used where an Owner deposits source code on behalf of a
single user only.
PROCEDURE:
The required information sheet on page ii should be completed, detached
and returned by fax or post to NCC at the following address:
Contracts Administrator
NCC Escrow International Limited
Oxford House, Oxford Road
Manchester M1 7ED, England
Telephone: +44 (0) 161 242 2109
Facsimile: +44 (0) 161 242 2275
E-mail: [email protected]
i. NCC will check the required information and will then send out signature
copies of the Escrow Agreement, together with the relevant invoices. A
reference number will be given in respect of that agreement which must be
quoted in all correspondence.
ESCROW 2000
ii. When the Owner and the Licensee have signed the Escrow Agreement all
copies must be returned to NCC.
iii. NCC will sign and date the Agreement and a signed copy will be sent to
each party.
iv. The Owner should then lodge the Material.
NB: Until all parties sign the Escrow Agreement no binding escrow arrangements
have been made.
single
licensee
----------
UK
Version 1: August 1997 i
<PAGE>
FAO: P. FLEMING REQUIRED INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER
[-1] Company Name
---------------------------------------------------------------
[-2] Registered Office
----------------------------------------------------------
- --------------------------------------------------------------------------------
Correspondence Address
----------------------------------------------------------
*[-3] Company Registration Number *VAT Number
------------------- -----------------
Telephone Number Fax Number
------------------------------------ ------------------
Contact Name Position in Company
------------------------------- ------------------
*only applicable to countries within the EU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LICENSEE
[-4] Company Name
---------------------------------------------------------------
[-5] Registered Office
----------------------------------------------------------
- --------------------------------------------------------------------------------
Correspondence Address
----------------------------------------------------------
*[-6] Company Registration Number *VAT Number
------------------- -----------------
Telephone Number Fax Number
------------------------------------ ------------------
Contact Name Position in Company
------------------------------- ------------------
*only applicable to countries within the EU
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER DETAILS
[-7] Name of Package
------------------------------------------------------------
- --------------------------------------------------------------------------------
INSURANCE FEE (complete if appropriate)
- --------------------------------------------------------------------------------
Standard NCC limitation of liability is St(pound)500,000 (no charge).
There is a charge of St(pound)100 (annual fee) for each additional
St(pound)500,000.
Maximum liability is St(pound)5,000,000.
Please indicate required liability
--------------------------
- --------------------------------------------------------------------------------
------------------------------------
FEES PAYABLE (tick as appropriate) Owner Licensee
- --------------------------------------------------------------------------------
Initial Fee
- --------------------------------------------------------------------------------
Annual Fee
- --------------------------------------------------------------------------------
Update Fee
(payable in the event of more than 4
updates per annum)
- --------------------------------------------------------------------------------
Storage Fee
(payable if the source code exceeds
one cubic foot)
- --------------------------------------------------------------------------------
Annual liability fee payable (if appropriate)
- --------------------------------------------------------------------------------
Release Fee (plus NCC's reasonable expenses) X
- --------------------------------------------------------------------------------
ii Version 1: August 1997
<PAGE>
(C) NCC Escrow International Limited 1997 STD001Y2K.UK
[NCC Escrow International logo]
SINGLE LICENSEE (UK)
ESCROW 2000
- --------------------------------------------------------------------------------
ESCROW AGREEMENT: DATED:
Between:
(1) [-1] whose registered office is at [-2] (CRN: [-3]) ("the Owner");
(2) [-4] whose registered office is at [-5] (CRN: [-6]) ("the Licensee"); and
(3) NCC ESCROW INTERNATIONAL LIMITED whose registered office is at Oxford
House, Oxford Road, Manchester M1 7ED, England (CRN:3081952) ("NCC").
Preliminary:
(A) The Licensee has been granted a licence to use a software package
comprising computer programs.
(B) Certain technical information and documentation describing the software
package are the confidential property of the Owner and are required for
understanding, maintaining and correcting the software package.
(C) The Owner acknowledges that in certain circumstances the Licensee may
require possession of the technical information and documentation held
under this Agreement.
(D) Each of the parties to this Agreement acknowledges that the considerations
for their respective undertakings given under it are the undertakings
given under it by each of the other parties.
It is agreed that:
1 Definitions
In this Agreement the following terms shall have the following meanings:
1.1 "Full Verification Service" means those bespoke tests agreed between
the Licensee and NCC for the verification of the Material;
1.2 "Intellectual Property Rights" means copyright, trade secret,
patent, and all other rights of a similar nature;
1.3 "Licence Agreement" means the licence granted to the Licensee for
the Package;
1.4 "Material" means the source code of the Package comprising the
latest technical information and documentation described in
Schedules 1 and 2;
1.5 "Package" means the software package licensed to the Licensee under
the Licence Agreement; and
1.6 "Standard Verification Service" means those tests detailed in the
Standard Verification Service published by NCC from time to time.
2 Owner's Duties and Warranties
2.1 The Owner shall:
2.1.1 deliver a copy of the Material to NCC within 30 days of the
date of this Agreement;
2.1.2 at all times ensure that the Material as delivered to NCC is
capable of being used to generate the latest version of the
Package issued to the Licensee and shall deliver further
copies of the Material as and when necessary;
2.1.3 deliver to NCC a replacement copy of the Material within 12
months of the last delivery;
2.1.4 deliver a replacement copy of the Material within 14 days of
receipt of a notice served upon it by NCC under the provisions
of Clause 4.1.5; and
2.1.5 deliver with each deposit of the Material the information
detailed in Schedule 2.
2.2 The Owner warrants that:
2.2.1 it owns the Intellectual Property Rights in the Material and
has authority to enter into this Agreement; and
2.2.2 the Material lodged under Clause 2.1 shall contain all
information in human-readable form and on suitable media to
enable a reasonably skilled programmer or analyst to
understand, maintain and correct the Package without the
assistance of any other person.
3 Licensee's Responsibilities
It shall be the responsibility of the Licensee to notify NCC of any change
to the Package that necessitates a replacement deposit of the Material.
Version 1: August 1997 1 of 6
<PAGE>
4 NCC's Duties
4.1 NCC shall:
4.1.1 hold the Material in a safe and secure environment;
4.1.2 inform the Owner and the Licensee of the receipt of any copy
of the Material;
4.1.3 in accordance with the terms of Clause 9 perform those tests
that form part of its Standard Verification Service from time
to time;
4.1.4 at all times retain a copy of the latest verified deposit of
the Material; and
4.1.5 notify the Owner if it becomes aware at any time during the
term of this Agreement that the copy of the Material held by
it has been lost, damaged or destroyed.
4.2 NCC shall not be responsible for procuring the delivery of the
Material in the event of failure by the Owner to do so.
5 Payment
NCC's fees are payable in accordance with Schedule 4.
6 Release Events
6.1 Subject to the provisions of Clauses 6.2 and 6.3, NCC shall release
the Material to a duly authorised officer of the Licensee if at any
time or times any of the following events or circumstances occur,
arise or become apparent:
6.1.1 the Owner enters into any composition or arrangement with its
creditors or (being a company) enters into liquidation whether
compulsory or voluntary (other than for the purposes of
solvent reconstruction or amalgamation) or has a receiver or
administrative receiver appointed over all or any part of its
assets or undertaking or a petition is presented for an
Administration Order or (being an individual or partnership)
becomes bankrupt, or an event occurs within the jurisdiction
of the country in which the Owner is situated which has a
similar effect to any of the above events in the United
Kingdom; or
6.1.2 the Owner ceases to trade; or
6.1.3 the Owner assigns copyright in the Material and the assignee
fails within 60 days of such assignment to offer the Licensee
substantially similar protection to that provided by this
Agreement without significantly increasing the cost to the
Licensee; or
6.1.4 the Owner without legal justification, has defaulted to a
material degree in any obligation to provide maintenance or
modification of the Package under the Licence Agreement or any
maintenance agreement entered into in connection with the
Package and has failed to remedy such default notified by the
Licensee to the Owner; or
6.1.5 coding of the Package is such that either the accuracy or the
functionality or the performance of the Package is or becomes
or is demonstrably likely to become significantly adversely
affected by the entry or processing of data incorporating any
date or dates whether prior or subsequent to or including 31
December 1999, including but not limited to any of the
following:
6.1.5.1 the Package crashes at any time while processing any
such data;
6.1.5.2. the Owner has warranted or represented that the
Package is capable of accurately and correctly
processing such data in accordance with the Package's
current functional specification and the Licensee
demonstrates that the Package is not so capable;
6.1.5.3 the Owner has undertaken or attempted to procure the
Package to be so capable and the Licensee
demonstrates that the Package is still not so
capable;
6.1.5.4 no such warranty, representation, undertaking or
attempt has been given or made and the Licensee
demonstrates that the Package is not so capable.
6.2 The Licensee must notify NCC of any event or circumstance of any of
the kinds specified in Clause 6.1 by delivering to NCC a statutory
or notarised declaration ("the Declaration") made by an officer of
the Licensee attesting that such event has occurred and that the
Licence Agreement was still valid and effective up to the occurrence
of such event and exhibiting:
6.2.1 such documentation in support of the Declaration as NCC shall
reasonably require;
6.2.2 a copy of the Licence Agreement; and
6.2.3 a signed confidentiality undertaking as detailed in Schedule 3
then NCC will release the Material to the Licensee upon receipt of
the release fee stated in Schedule 4.
6.3 Upon receipt of a Declaration from the Licensee claiming a release
event under Clause 6.1.4:
6.3.1 NCC shall send a copy of the Declaration to the Owner by
registered post; and
6.3.2 unless within 14 days after the date of delivery the Owner
delivers to NCC a counter-notice signed by a duly authorised
officer of the Owner stating that no such failure has occurred
or that any such failure has been rectified
then NCC will release the Material to the Licensee upon receipt of
the release fee stated in Schedule 4.
2 of 6 Version 1: August 1997
<PAGE>
(C) NCC Escrow International Limited 1997 STD001Y2K.UK
6.4 Where there is any dispute as to the occurrence of any of the events
or circumstances set out in Clause 6.1.1 to 6.1.4, 6.2 or 6.3 or the
fulfilment of any obligations detailed therein, such dispute will be
referred at the request of either the Owner or the Licensee to the
Managing Director for the time being of NCC for the appointment of
an expert who shall give a decision on the matter within 14 days of
the date of referral or as soon as practicable thereafter. The
expert's decision shall be final and binding as between the Owner
and the Licensee except in the case of manifest error.
6.5 Where there is any dispute as to the occurrence of any of the events
or circumstances set out in Clause 6.1.5 or the fulfillment of any
obligations referred to therein, such dispute will be referred to
arbitration in accordance with Clause 12.
7 Confidentiality
7.1 The Material shall remain the confidential property of the Owner and
in the event that NCC provides a copy of the Material to the
Licensee, the Licensee shall be permitted to use the Material only
in accordance with a confidentiality undertaking in the form
contained in Schedule 3.
7.2 NCC agrees to maintain all information and/or documentation coming
into its possession or to its knowledge under this Agreement in
strictest confidence and secrecy. NCC further agrees not to make use
of such information and/or documentation other than for the purposes
of this Agreement and will not disclose or release it other than in
accordance with the terms of this Agreement.
7.3 Termination of this Agreement will not relieve NCC or its employees,
or the Licensee or its employees, from the obligations of
confidentiality contained in this Clause 7.
8 Intellectual Property Rights
The release of the Material to the Licensee will not act as an assignment
of any Intellectual Property Rights that the Owner possesses in the
Material.
9 Verification
9.1 Subject to the provisions of Clauses 9.2 and 9.3, NCC shall bear no
obligation or responsibility to any person, firm, company or entity
whatsoever to determine the existence, relevance, completeness,
accuracy, effectiveness or any other aspect of the Material.
9.2 Upon the Material being lodged with NCC, NCC shall perform those
tests in accordance with its Standard Verification Service and shall
provide a copy of the test report to the parties to this Agreement.
9.3 The Licensee shall be entitled to require that NCC carries out a
Full Verification. Any reasonable charges and expenses incurred by
NCC in carrying out a Full Verification will be paid by the Licensee
save that if in the opinion of the expert appointed by the Managing
Director of NCC the Material is substantially defective in content
any such reasonable charges and expenses will be paid by the Owner.
10 NCC's Liability
10.1 NCC shall not be liable for any loss caused to the Owner or the
Licensee either jointly or severally except for loss of or damage to
the Material to the extent that such loss or damage is caused by the
negligent acts or omissions of NCC, its employees, agents or
sub-contractors and in such event NCC's total liability in respect
of all claims arising under or by virtue of this Agreement shall
not (except in the case of claims for personal injury or death)
exceed the sum of (pounds)500,000.
10.2 NCC shall in no circumstances be liable to the Owner or the Licensee
for indirect or consequential loss of any nature whatsoever whether
for loss of profit, loss of business or otherwise.
10.3 NCC shall be protected in acting upon any written request, waiver,
consent, receipt or other document furnished to it pursuant to this
Agreement, not only in assuming its due execution and the validity
and effectiveness of its provisions but also as to the truth and
acceptability of any information contained in it, which NCC in good
faith believes to be genuine and what it purports to be.
11 Termination
11.1 NCC may terminate this Agreement after failure by the Owner or the
Licensee to comply with a 30 day written notice from NCC to pay any
outstanding fee. If the failure to pay is on the part of the Owner
the Licensee shall be given the option of paying such fee itself.
Such amount will be recoverable by the Licensee direct from the
Owner.
11.2 NCC may terminate this Agreement by giving 60 days written notice to
the Owner and the Licensee. In that event the Owner and the Licensee
shall appoint a mutually acceptable new custodian on terms similar
to those contained in this Agreement.
11.3 If a new custodian is not appointed within 30 days of delivery of
any notice issued by NCC in accordance with the provisions of Clause
11.2, the Owner or the Licensee shall be entitled to request the
President for the time being of the British Computer Society to
appoint a suitable new custodian upon such terms and conditions as
he shall require. Such appointment shall be final and binding on all
parties.
11.4 If the Licence Agreement has expired or has been lawfully terminated
this Agreement will automatically terminate on the same date.
11.5 The Licensee may terminate this Agreement at any time by giving
written notice to the Owner and NCC.
11.6 The Owner may only terminate this Agreement with the written consent
of the Licensee.
Version 1: August 1997 3 of 6
<PAGE>
STD001Y2K.UK (C) NCC Escrow International Limited 1997
11.7 This Agreement shall terminate upon release of the Material to the
Licensee in accordance with Clause 6.
11.8 Upon termination under the provisions of Clauses 11.2, 11.4, 11.5 or
11.6 NCC will deliver the Material to the Owner. If NCC is unable to
trace the Owner NCC will destroy the Material.
11.9 Upon termination under the provisions of Clause 11.1 the Material
will be available for collection by the Owner from NCC for 30 days
from the date of termination. After such 30 day period NCC will
destroy the Material.
11.10 NCC may forthwith terminate this Agreement and destroy the Material
if it is unable to trace the Owner having used all reasonable
endeavours to do so.
12 Arbitration
12.1 Any dispute arising under Clause 5.1.5 shall be referred to a panel
of arbitrators ("the Panel") constituted as follows:
12.1.1 the Owner and the Licensee shall each appoint one member; and
12.1.2 the third member who shall act as chairman of the Panel shall
be appointed by the President for the time being of the
International Chamber of Commerce.
12.2 The Owner and the Licensee shall pay the fees and disbursements of
its own member and half the fees and disbursements of the chairman
of the Panel.
12.3 Should any member of the Panel die, become ill or incapacitated,
resign or retire from his appointment, become disqualified from
acting or otherwise cease to act as arbitrator before the dispute is
resolved, he shall be replaced by a new member appointed by the
party who appointed his predecessor.
12.4 Upon the appointment of such new member, the proceedings shall not
be held de nova but shall continue from the stage at which the
previous member ceased to act.
12.5 Proceedings under Clause 12 may be commenced by any party to a
dispute by:
12.5.1 serving upon the other or others notice of its intention to
refer such dispute to arbitration and nominating a member of
the Panel; and
12.5.2 requesting the President of the International Chamber of
Commerce for the time being to appoint a chairman of the
Panel.
12.6 The Panel shall determine its own rules of procedure.
13 General
13.1 This Agreement shall be governed by and construed in accordance with
the laws of England and Wales.
13.2 This Agreement represents the whole agreement relating to the escrow
arrangements between the parties for the Package and supersedes all
prior arrangements, negotiations and undertakings.
13.3 All notices to be given to the parties under this Agreement shall be
deemed to have been duly given or made when delivered personally or
7 days after posting of it sent by facsimile, 12 hours after
despatch to the party to which such notice is required to be given
or made under this Agreement addressed to the principal place of
business, or for companies based in the UK, the registered office.
SCHEDULE 1
The Material
The source code of the Package known as [-7].
SCHEDULE 2
Material: Technical Information
The Material shall be supplied with details of the following:
1 Details of the deposit: full name and version details, number of
media items, media type and density, file or archive format, list or
retrieval commands, archive hardware and operating system details.
2 Name and functionality of each module/application of the Material.
3 Names and versions of development tools etc.
4 Documentation describing the procedures for building / compiling /
executing / using the software (technical notes, user guides).
5 Hardcopy directory listings of the contents of the media.
6 Name and contact details of employee(s) with knowledge of how to
maintain and support the Material.
SCHEDULE 3
Confidentiality Undertaking
This undertaking is given on release of the Material pursuant to an Escrow
Agreement dated [ ] between:
(1) [-1] ("the Owner");
(2) [-4] ("the Licensee"); and
(3) NCC ESCROW INTERNATIONAL LIMITED ("NCC");
1 Definitions contained in the Escrow Agreement will apply to this
undertaking.
4 of 6 Version 1: August 1997
<PAGE>
2 In consideration of NCC delivering the Material to the Licensee, the
Licensee undertakes with the Owner and NCC:
2.1 to use the Material only for the purpose of understanding,
maintaining and correcting the Package exclusively on behalf of the
Licensee;
2.2 not to use the Material for any other purpose nor disclose it to any
person save such of its employees or contractors who need to know
the same in order to understand, maintain and correct the Package
exclusively on behalf of the Licensee. In that event such
contractors shall enter into a Confidentiality Undertaking direct
with NCC in similar terms to this Undertaking;
2.3 to hold all media containing the Material in a safe and secure
environment when not in use; and
2.4 forthwith to destroy the same should the Licensee cease to be
entitled to use the Package.
SCHEDULE 4
NCC's Fees (St(pound))
- --------------------------------------------------------------------------------
DESCRIPTION FEE OWNER LICENSEE
- --------------------------------------------------------------------------------
1 Initial Fee (payable on completion of
this Agreement)
- --------------------------------------------------------------------------------
2 Annual Fee (payable on completion of
this Agreement and on each anniversary
thereafter)
- --------------------------------------------------------------------------------
3 Update Fee (per update after the first
4 updates per annum)
- --------------------------------------------------------------------------------
4 Storage Fee (per annum, per cubic foot
payable if the source code exceeds 1
cubic foot)
- --------------------------------------------------------------------------------
5 Liability Fee (per annum, (pound)100 per
(pound)500,000 of liability exceeding
(pound)500,000)
- --------------------------------------------------------------------------------
6 Release Fee (plus NCC's reasonable
expenses) NIL 100%
- --------------------------------------------------------------------------------
1 All fees are subject to VAT where applicable*
2 All fees are reviewed by NCC from time to time
* only applicable to countries within the EU.
Signed on behalf of [-1]
Name
--------------------------------------:------------------------------------
Position:
----------------------------------: (Authorised Signatory)
Signed on behalf of [-4]
Name
--------------------------------------:------------------------------------
Position:
----------------------------------: (Authorised Signatory)
Signed on behalf of NCC ESCROW INTERNATIONAL LIMITED
Name
--------------------------------------:------------------------------------
Position:
----------------------------------: (Authorised Signatory)
Version 1: August 1997 5 of 6
<PAGE>
STD001Y2K.UK (C) NCC Escrow International Limited 1997
Any queries regarding this document should be directed to:
Contracts Administrator
NCC Escrow International Limited
Oxford House
Oxford Road
Manchester M1 7ED
England
Telephone: +44 (0) 161 242 2109
Fax: +44 (0) 161 242 2275
E-mail: [email protected]
The following information is referenced within this agreement:
[-1] Owner's Name
[-2] Owner's Registered Office
[-3] Owner's Company Registration Number*
[-4] Licensee's Name
[-5] Licensee's Registered Office
[-6] Licensee's Company Registration Number*
[-7] Name Of Package
[INITIALS ILLEGIBLE] [INITIALS ILLEGIBLE]
20.3.98 30.4.98
<PAGE>
Ex 10.3
STANDARD
DISTRIBUTOR AGREEMENT
between
Clinical Reference Systems, Ltd.
and
HealthGate Data Corp.
This agreement, entered into this 30th day of December, 1996 by and between
Clinical Reference Systems, Ltd., hereinafter referred to as "CRS", with offices
at 7100 E. Belleview, Suite 208, Greenwood Village, CO 80111-1636, and
HealthGate Data Corp., hereinafter referred to as "Distributor", with offices at
380 Pleasant Street, Suite 230, Malden, MA 02148-8123.
WHEREAS, Distributor owns and operates a world wide web site on the internet
which markets and distributes biomedical and health care related information to
institutions and individuals;
WHEREAS, CRS distributes CRS Product(s) (as defined below) in disk format:
WHEREAS, both Distributor and CRS wish to make available and license CRS
Product(s) through Distributor's world wide web site:
WHEREAS, Distributor has agreed to assist CRS, as set forth in this agreement,
in the demonstration, marketing, and sales and licensing of the CRS Product(s)
(see Exhibit A) to their current and future customers.
In consideration of the mutual covenants contained herein, the parties jointly
agree as follows:
I. Termination: This agreement shall be effective upon the date first above
written after execution by both parties and shall remain in effect for a
period of one year. After that time this agreement shall automatically
renew for additional one-year periods unless either party gives six (6)
months written notification of termination of the agreement. In any event,
this agreement shall terminate five years after it becomes effective.
Termination of this agreement shall suspend Distributors right to resell
CRS's Product(s) (see Exhibit A) and suspend CRS's right for collection of
any additional fees from Distributor other than those fees due and payable
upon the date of termination. However, termination shall not suspend or
alter either party's obligations for representations, warranties, and
indemnification under this agreement.
In the event of a material breach of this agreement by either party to
this agreement, the non-breaching party shall have the right to terminate
this agreement by giving written notice to the breaching party, provided
the breaching party is given sixty (60) days from notification of the
breach to remedy the breach. Said notice of termination shall state the
breach in sufficient detail that the breaching party will have a
reasonable opportunity to remedy it.
1
<PAGE>
II. CRS Agrees to Comply with the following:
A. CRS hereby appoints HealthGate Data Corp. as a Distributor for CRS
Product(s) and license described in Exhibit A attached hereto on the
terms and conditions of this agreement for the resale and license of
such products to current and prospective customers.
B. Provide 180 day written notice of any price changes.
C. Provide Distributor with a 50% discount off the retail price (see
Exhibit B).
D. Provide a set of marketing and sales materials.
E. Provide Product(s) as tagged ASCII files.
F. Provide toll-free customer support to Distributor's licensees with
respect to the content of the products.
G. Provide revisions, updates and upgrades to the CRS Product(s) as
ASCII tagged files as soon as such revisions, updates or upgrades
are made available to licensees of CRS Product(s) on disks.
H. Permit Distributor's sales and marketing representatives to
demonstrate CRS Product(s) on-line to potential licensees without
charge.
III. Distributor Agrees to Comply with the following:
A. Distributor shall pay CRS 50% of all license fees listed under
Exhibit B collected for CRS Product(s) as described in item III. J.,
below. Distributor has paid CRS $24,950 with the execution of the
agreement representing pre-payment of fixture licensing fees and
Distributor agrees to make additional pre-payments of licensing fees
to CRS on the six month anniversary of this Agreement if by such
date a total of $49,900 (including the $24,950 initial payment)
licensing fees has not otherwise been paid by Distributor to CRS.
B. Market, license, and sell CRS Product(s) to Distributor's existing
customer base and to future potential customers.
C. Provide CRS with the following information: hospital (customer)
name(s), address, and phone number of those customers who purchase
CRS Product(s) within 15 days of any installation, provided CRS
shall not contact such licenses without Distributor's consent.
o D. Have licensees enter into an Annual Renewable License in the form of
Exhibit C with changes thereto to reflect the on-line nature of the
license rather than a license of software on disks.
E. Provide customer support by telephone with respect to on-line
matters to all customers who license CRS Product(s) from
Distributor.
F. Provide Distributor sales personnel with CRS sales literature and
pricing information.
G. Distributor agrees to not use promotional/collateral materials
designed by Distributor to market/sell CRS Product(s) without prior
approval from CRS. CRS will not unreasonably withhold or delay its
approval, and that any request that is unanswered after ten working
days shall be deemed approved.
2
<PAGE>
H. Distributor is responsible for the on-line delivery, invoicing, and
collection of all licensing fees of CRS Product(s) by Distributor.
I. Remit payment to CRS within CRS terms of Net 30 days.
o J. To make the CRS Product(s) available on-line to potential licensees
through Distributor's world wide web site. Distributor will license
each product on an annual basis to licensees for the license prices
set forth in Exhibit B. The license of CRS Product(s) shall be
pursuant to the Annual Renewable License Agreement referred to in
item III. C., above. Distributor shall invoice for and collect all
license fees for the on-line CRS Product(s).
IV. CRS and Distributor Agree that:
A. This agreement is a non-exclusive agreement permitting Distributor
to market and sell the CRS Product(s). Distributor specifically
agrees not to sell CRS Product(s) to other dealers without the
express written permission of CRS.
B. This agreement may not be modified except in writing executed by
both parties.
C. This agreement supersedes previous, if any, CRS Distributor
Marketing Agreements.
D. Distributor is not and shall not be considered an employee,
representative, or agent of CRS. Distributor is an independent
contractor. Distributor and CRS are not authorized, to and agree
that they will not make any warranties of representations or assume
or create any obligations on each other's behalf.
E. This agreement shall be deemed to be a contract made under, and
shall be construed in accordance with the laws of the State of
Colorado.
F. Any controversy or claim arising out of or relating to the contract,
or any breach thereof, shall be settled by arbitration in accordance
with the Commercial Association Rules of the American Arbitration
Association, and judgment upon the reward rendered by the
arbitrator(s) may be entered in any court having jurisdiction
thereof. The arbitration shall be held in Denver unless otherwise
agreed to by the parties.
G. Either party may assign, delegate, or transfer, by operation of law,
merger, sale or otherwise, this Agreement or any of the rights or
obligations hereunder.
V. Hold Harmless:
A. CRS agrees to indemnify Distributor and hold it harmless for, from
and against any and all costs, damages, liabilities, demands,
obligations or expenses (including, without limitation, reasonable
attorney fees) arising out of or relating to this agreement,
provided that Distributor provides CRS with prompt written notice of
all suits or threats or that CRS is not materially damaged by any
delay in receiving such notice.
B. Distributor agrees to indemnify CRS and hold it harmless for, from
and against any and all costs, damages, liabilities, demands,
obligations or expenses (including, without limitation, reasonable
attorney fees) for product misrepresentations by Distributor that
are not based upon information or materials provided by CRS,
misappropriation of trade secrets by Distributor (excluding claims
related to breaches of Section VII.B.), or infringement by
Distributor of CRS's other proprietary
3
<PAGE>
rights in the CRS Product(s), provided that CRS provides Distributor
with prompt written notice of all suits or threats or that
Distributor is not materially damaged by any delay in receiving such
notice.
VI. Trademarks:
Distributor may use the product name with Registration Symbol and
description for the CRS Product(s) in distributing CRS literature and
performing CRS Product(s) demonstrations. Distributor may not, however,
use any trademarks or tradenames of CRS without the prior written consent
of CRS.
VII. Warranty:
A. CRS warrants that it has developed and has title to the following
CRS Products: Pediatric Electronic Drug Reference, Pediatric
Advisor, Spanish/English Pediatric Advisor, Electronic Drug
Reference, Adult Health Advisor, Women's Health Advisor, Medication
Advisor, Behavioral Health Advisor, Senior Health Advisor, and
Clinical Navigator, the software which runs the CRS Products, and
documentation. The CRS Products and documentation contains
proprietary information of CRS which has not been disclosed to
others except under an obligation of confidentiality.
B. CRS warrants that it has the right and power to grant a license and
rights referred to in this agreement and warrants that the Products
and documentation do not violate the patents, copyrights, trade
secrets, or other proprietary rights of others.
C. CRS warrants that neither the CRS Products nor the documentation are
in the public domain.
VIII. Limitation of Liability:
Neither party shall be liable for incidental, indirect, special, or
consequential damages or loss of use, revenue, or profit even if the other
party has advised of the possibility of such damage.
IX. Disclaimer:
Except as expressly stated herein, neither party has made any warranties
or representations, expressed or implied, by operation of law otherwise,
concerning the Product or Products to be provided hereunder, the scope or
duration of any marketing effort which CRS and/or Distributor may
undertake, or the success of any such marketing effort. Neither party has
relied on any party, written or verbal, as an inducement to entering the
agreement.
CRS and Distributor have executed this agreement as of the day and year written
above.
4
<PAGE>
CLINICAL REFERENCE SYSTEMS, LTD.
By: /s/ Richard Thompson
----------------------------------------------------------------------
Signature
Name: Richard Thompson
--------------------------------------------------------------------
Please Print
Title: President
-------------------------------------------------------------------
HealthGate Data Corp.
By: /s/ Rick Lawson
----------------------------------------------------------------------
Signature
Name: Rick Lawson
--------------------------------------------------------------------
Please Print
Title: Vice President
-------------------------------------------------------------------
5
<PAGE>
EXHIBIT A - PRODUCT FACT SHEET
(Made Available in ASCII text flies)
Pediatric Advisor
Edited by Barton Schmitt, M.D., the Pediatric Advisor provides advice for
parents on over 700 infant, child, and adolescent health problems. In
addition to medical topics, many aspects of newborn care and parenting
issues - such as child development, day care, discipline, and divorce -
are covered. Handouts generated by the program provide immediate
reinforcement of verbal instruction and enhance the public relations of
the practice. Use the program editor to modify or create handouts.
Adult Health Advisor
The Adult Health Advisor provides patient advice on over 400 medical and
surgical topics. Healthcare professionals can use the program editor to
modify or create handouts.
Women's Health Advisor (formerly OB/GYN Advisor)
The Women's Health Advisor provides patient advice on nearly 400
obstetric, gynecologic, and new baby care topics. Healthcare professionals
can use the program editor to modify or create handouts.
Behavioral Health Advisor
The Behavioral Health Advisor provides patient advice on over 300 common
behavioral and mental health topics. Book and publication lists and
telephone numbers of national mental health advocacy groups provide
additional resources. Adult and pediatric topics cover a wide variety of
issues.
Senior Health Advisor
The Senior Health Advisor contains several hundred patient education
topics written to help older adults understand common illnesses, as well
as the physical and emotional aspects of aging. Informational topics such
as how to choose a nursing home, writing a living will, and health
insurance for people with Medicare are included. Resource lists and
illustrations are also featured.
6
<PAGE>
EXHIBIT B
SUGGESTED ANNUAL RENEWABLE LICENSE PRICES
SITE WAN
PRICE PRICE
----- -----
PRODUCT
- -------
Pediatric Advisor $2495 $9500
Adult Health Advisor $2495 $9500
Women's Health Advisor $2495 $9500
Behavioral Health Advisor $2495 $9500
Senior Health Advisor $2495 $9500
Site License means the use of the Product(s) on an unlimited number of single
computers or workstations as long as all the single computers and workstations
are located at the same institution, same city, and where all the users have the
same billing address.
WAN (Wide Area Network) means the use of the Product(s) on up to 100 computers
or workstations at different institutions or different cities that are connected
by a communications link.
Above prices are Annual Renewable Licenses (ARL).
ARL PRICING INCLUDES:
1. Toll-free customer support.
2. Information updates.
3. Newsletter and current and future product information.
7
<PAGE>
Exhibit 10.6
STANDARD DISTRIBUTION AGREEMENT
VALUE ADDED RESELLER (VAR)
THIS AGREEMENT is entered into as of the 20 day of June 1998, by and
between HealthGate Data Corp., a Delaware corporation, having an address at 380
Pleasant Street, Suite 230, Malden, MA 02148 (hereinafter referred to as
"HealthGate") and Data General Corporation a Delaware corporation,
having an address at 3400 Computer Drive, Westborough, MA 01580 (hereinafter
referred to as "VAR").
WITNESSETH:
WHEREAS, VAR markets and sells to companies, institutions and other
entities, alone or in combination with others, interactive information,
communication and transactional services (whether presently existing or
hereafter developed referred to herein as the "VAR Services"); and
WHEREAS, HealthGate offers several series of information including the
MEDLINE database and other databases through HealthGate's Internet sites,
including HealthGate's Internet sites having the following URLs:
http://www.healthgate.com and http://beWELL.com (the "HealthGate Sites");
WHEREAS, VAR and HealthGate wish to enter into an agreement providing
for VAR to sell and license certain of HealthGate's series of databases
available through the Internet and other HealthGate products and services to
VAR's clients and prospects through a Co-Branded Site (as defined in Section
1.1) designed for the VAR's clients and prospects.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
I. CO-BRANDED SITE; RELICENSING; AUTHORIZED USERS; LINKS TO CO-BRANDED SITE
1.1 CO-BRANDED SITE. HealthGate will design, develop, host and
maintain, if applicable, a customized site that can be accessed by the
Authorized Users (as defined in Section 1.3) and contain databases and
information, including the HealthGate Series of Products (the "Co-Branded
Site"). Each Co-Branded Site shall be subject to a separate End-User
Agreement, by and among HealthGate, VAR and the Corporate/Institutional
Account (as defined in Section 1.2), substantially in the form of SCHEDULE E
hereto, which sets forth, among other matters, the following: (i) the
specific databases and information available at the Co-Branded Site through
HealthGate; (ii) whether advertising and sponsorship messages shall be
available on the Co-Branded Site; and (iii) specification, customization and
responsibility concerning the design, development, hosting and maintenance of
the Co-Branded Site; and (iv) usage and overage charges
1.2 RELICENSING. VAR shall market, sell and license to institutions,
companies, corporations and other entities ("Corporate/Institutional Accounts")
access to HealthGate Series of Products (as defined in Section 2.1, below)
pursuant to the terms of this Agreement. With the exception of the defined "VAR
Territory", as defined in Schedule D, VAR shall contact HealthGate and register
each prospect in advance of licensing a HealthGate Series of Products to
<PAGE>
a Corporate/Institutional Account. HealthGate may reject to the proposed
transaction with the potential Corporate/Institutional Account, if such
Corporate/Institutional Account is outside the VAR Territory.
1.3 AUTHORIZED USERS. For the purposes of this Agreement, "Authorized
User" shall mean (i) Corporate/Institutional Accounts that have been licensed to
access the "Co-Branded Site" pursuant to an End-User Agreement; and (ii) persons
who access a Corporate/Institutional Account through such entity's Intranet or
Internet access pursuant to the terms of the End-User Agreement.
1.4 LINKS TO CO-BRANDED SITE; INTERACTIONS BETWEEN SITES. HealthGate
will accept links from the Corporate/Institutional Account's Internet or
Intranet site(s) to the Co-Branded Site. On the Co-Branded Site, HealthGate will
accept queries posed by an Authorized User and return to the Authorized User the
results of said queries to the Co-Branded Site.
All such interactions between the two sites will be conducted according
to mutually agreed upon standards. The Co-Branded Site shall contain prominent
reference to HealthGate and prominently feature HealthGate's logo in a manner
acceptable to HealthGate. In the event the parties do not mutually agree upon
the interaction standards within 30 days of the date of the applicable End-User
Agreement, such standards shall be established by HealthGate to be consistent
with the interaction standards utilized by HealthGate in its other VAR or
similar arrangements.
II. HEALTHGATE SERIES OF PRODUCTS
2.1 HEALTHGATE SERIES OF PRODUCTS. Following receipt by HealthGate of
the applicable fully- executed End-User Agreement (SCHEDULE E) and VAR purchase
orders, Authorized Users shall have access via the Co-Branded Site to one or
more of the series of databases listed on SCHEDULE A attached hereto (the
"HealthGate Series of Products").
2.2 EXCLUSIVITY. VAR agrees that during the term of this agreement it
shall not market, license or provide links or access from its sites to any other
entity's products or services that are similar in nature to those of HealthGate
Series of Products.
III. FEES
3.1 LICENSE FEES. Annual list price license fees and annual license
fees chargeable by HealthGate to VAR for each of the HealthGate Series of
Products are set forth in SCHEDULE A. Unless otherwise expressly agreed to in
writing by HealthGate, license fees to HealthGate are payable in advance.
3.2 ADVERTISING AND OTHER FEE ARRANGEMENTS. Arrangements concerning
advertising or other fee arrangements, if any, are set forth on SCHEDULE B
attached hereto.
3.3 PROFESSIONAL SERVICES AND CUSTOM DEVELOPMENT (SETUP CHARGES).
Arrangements concerning other professional services, custom development or setup
fees, if any, are set forth on SCHEDULE C attached hereto.
2
<PAGE>
3.4 LATE FEES. All late fee payments shall accrue interest at the rate
of twelve percent (12%) per annum.
IV. TERM AND TERMINATION
4.1 TERM. This Agreement shall be effective on June 20, 1998, and
shall continue in effect until ____, ____ (the "Initial Scheduled Expiration
Date"), unless otherwise terminated as provided hereunder.
4.2 RENEWAL. Unless notice of intent not to renew is given by either
party at least ninety (90) days prior to the then current Scheduled Expiration
Date, this Agreement shall be automatically extended for an additional
twelve-month period.
4.3 TERMINATION FOR BREACH. Each party hereto shall have the right to
terminate this Agreement in the event that the other party has materially
breached this Agreement; provided, however, that no such termination shall be
effective unless (i) the terminating party provides at least ten (10) days
written notice (the "Termination Notice") to the other party setting forth the
facts and circumstances constituting the breach, and (ii) the party alleged to
be in default does not cure such default within thirty (30) days following
receipt of the Termination Notice. In the event that the nature of the default
specified in the Termination Notice cannot be reasonably cured within thirty
(30) days following receipt of the Termination Notice, a party shall not be
deemed to be in default if such party shall, within such thirty (30) day period,
present an agreed upon plan to cure the default, commences curing such default
and thereafter diligently prosecutes the same to completion. If the breach
specified in the Termination Notice is timely cured or cure is commenced and
diligently pursued, as provided above, the Termination Notice shall be deemed
rescinded and the Agreement shall continue in full force and effect.
4.4 POST TERMINATION OBLIGATIONS. (a) PAYMENTS. In the event of any
termination of this Agreement by either party, all fees previously due or owing
by either party as of the date of termination will be immediately due and
payable in full to the other party.
(b) SEVERANCE OF LINKS AND DISCONTINUANCE OF PROMOTION OF CO-BRANDED
SITE. Within ten (10) business days of any termination by either party of this
Agreement, both parties will destroy advertising or promotional materials, if
any, containing any reference to the other party or their products.
(c) CONTINUING ACCESS FOR PAID CORPORATE/INSTITUTIONAL ACCOUNTS.
Notwithstanding the termination of this Agreement, HealthGate shall continue to
make available access to the HealthGate Series of Products to
Corporate/Institutional Accounts following termination of this agreement (i) to
the extent that HealthGate has received prior to such termination from VAR or
such Corporate/Institutional Account prepayment of licensing fees and (ii)
provided such Corporate/Institutional Account was not directly or indirectly
involved in the breach or default giving rise to the termination of this
agreement.
3
<PAGE>
V. HEALTHGATE TRADEMARKS
5.1 HEALTHGATE TRADEMARKS. Notwithstanding the limited right to use
HealthGate's name, logo and other marks created or utilized by HealthGate
(collectively the "HealthGate Trademarks") on the Co-Branded Sites, VAR
recognizes and acknowledges HealthGate's representation that HealthGate is the
sole owner of the HealthGate Trademarks and all rights therein and the goodwill
pertaining thereto belong exclusively to HealthGate. VAR recognizes and
acknowledges HealthGate's representation that HealthGate Trademarks have
acquired a secondary meaning and are associated with high quality services and
products available from HealthGate. Accordingly, the VAR is authorized to use
the HealthGate Trademarks in accordance with the applicable trademark laws in
conjunction with the sales and marketing effort surrounding the HealthGate
services to the VAR territory. Any other use of the HealthGate Trademarks is
subject to written approval by HealthGate
VAR acknowledges HealthGate's representation that each HealthGate
Trademark is and will remain the exclusive property of HealthGate and all use by
the Co-Branded Site, Corporate/Institutional Accounts or VAR of any HealthGate
Trademark will inure solely to the benefit of HealthGate. Neither this Agreement
nor any rights granted hereunder will operate as a transfer to VAR or
Corporate/Institutional Accounts or the Co-Branded Site of any rights in or to
any HealthGate Trademark, except for the limited rights expressly granted under
this Agreement. VAR will not take any action that would undermine, conflict
with, or be contrary to the rights and interest of HealthGate, including,
without limitation, any use of, or attempt to register, any trademark, service
mark or trade name substantially similar to any HealthGate Trademark.
All advertising and promotional material for the Co-Branded Sites or
the HealthGate Series of Products, which contains any HealthGate Trademark,
shall be subject to review and approval by HealthGate (which approval shall not
be unreasonably withheld).
VI. REPRESENTATIONS, WARRANTIES AND RELATED AGREEMENTS.
6.1 HEALTHGATE'S REPRESENTATIONS AND WARRANTIES. HealthGate represents
and warrants that (i) it has the right and authority to enter into this
Agreement, (ii) the HealthGate Series of Products are either HealthGate's own
and original creation or are validly licensed to HealthGate for use by others or
are in the public domain; (iii) it has full ownership of the HealthGate
Trademarks.
6.2 COMPLIANCE WITH LAWS. Except to the extent such obligation is
expressly assumed by VAR, HealthGate shall, at its own expense, comply with any
laws relating to the sale, lease, or license of the HealthGate Series of
Products, and shall procure all licenses and pay all fees and other charges
required thereby.
6.3 VAR REPRESENTATIONS AND WARRANTIES. VAR represents and warrants
that (i) it has the right to enter into this Agreement, (ii) VAR's agreements
with its Corporate/Institutional Accounts shall be consistent with the terms and
conditions of this Agreement; and (iii) VAR shall not commit HealthGate to
provide the HealthGate Series of Products or any other HealthGate Service or
product without HealthGate's express written consent.
6.4 COMPLIANCE WITH LAWS; PROHIBITION ON RESALE AND RELICENSING OF
PRODUCTS. In the
4
<PAGE>
End-User Agreement and in other agreements, contracts and arrangements with its
Corporate/Institutional Accounts, VAR shall require each of its
Corporate/Institutional Accounts to limit its actions (including the actions of
its Authorized Users) and use of the HealthGate Series of Products to conform to
applicable laws regarding the export of re-export of any information, or any
process, product, or service, to countries specified as prohibited destinations,
including the Regulations of the U.S. Department of Commerce and/or the U.S.
State Department, to the extent applicable. Corporate/Institutional Accounts and
Authorized Users of the Co-Branded Site shall be prohibited from reselling or
re-licensing the HealthGate Series of Products or any portion thereof without
the express written consent of VAR and HealthGate (which consent may be withheld
for any reason or for no reason). VAR shall be responsible for enforcing this
prohibition and having appropriate written limitations of the use of the
HealthGate Series of Products with all its Corporate/Institutional Accounts or
other users of the Co-Branded Sites. VAR shall have all Authorized Users
register with VAR or the Corporate/Institutional Account in a manner acceptable
to HealthGate and such registration information shall be available for review by
HealthGate upon written request.
VII. NEW PRODUCTS AND QUARTERLY MUTUAL NON-DISCLOSURE
7.1 INCLUSION OF NEW HEALTHGATE PRODUCTS If during the term of this
Agreement, HealthGate develops or promotes new products or services (including
new content sources) which HealthGate offers for resale or licensing through
HealthGate's value added reseller network ("New VAR Products and Services"),
then HealthGate shall permit VAR to also promote, sell and license such New VAR
Products and Services.
7.2 QUARTERLY INFORMATIONAL MEETINGS. Representatives of HealthGate and
VAR shall meet quarterly to share information concerning products, services,
promotions, marketing and technical matters. The purpose of such meetings shall
be to plan for improvements to existing HealthGate Series of Products and to
coordinate future marketing and other activities. Neither party shall be
obligated to provide confidential information in such meetings; however, if
confidential information is disclosed in such meetings, the recipient of such
confidential information shall use reasonable care, but in no event no less than
the same degree of care that it uses to protect its own confidential and
proprietary information of similar importance, to prevent the unauthorized use,
disclosure, publication or dissemination of such confidential information.
Additionally, the recipient agrees it is accepting the confidential information
for the sole purpose of licensing and sales pursuant to this VAR Agreement and
the recipient agrees not to use such confidential information otherwise for its
own or any third party's benefit.
VIII. ADMINISTRATORS; CONTACT PERSONS.
8.1 ADMINISTRATORS. The parties each hereby designate an Administrator
to receive notices, and any other contact between parties pursuant to this
Agreement.
HealthGate's Administrator is:
------------------
HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, MA 02148
5
<PAGE>
1-781-321-6000 x____ (voice)
1-781-321-2262 (fax)
@healthgate.com (electronic mail)
---------
VAR's Administrator is:
-----------
-----------
(voice)
-----------
(fax)
-----------
(electronic mail)
-----------
Either party may change its Administrator pursuant to written notice to
the other party containing an express reference to this Agreement.
IX. DISPUTE RESOLUTION
9.1 GOOD FAITH DISCUSSIONS. The parties hereto agree to meet and confer
in good faith to resolve any problems or disputes that may arise under this
Agreement.
9.2 ARBITRATION. Any dispute or controversy between the parties,
including a fee dispute or a dispute arising from an alleged material breach of
this Agreement by a party, shall, on written request of one party served on the
other, be submitted to arbitration. Any arbitration shall be conducted before a
panel of three arbitrators in accordance with the then existing Rules for
Commercial Arbitration of the American Arbitration Association and judgment upon
any award rendered by the arbitrator(s) may be entered by any State or Federal
court having jurisdiction thereof. The parties intend that this agreement to
arbitrate be valid, enforceable and irrevocable. The decisions of the
arbitrators shall be final and conclusive upon all parties and judgment upon the
award may be entered in any court of competent jurisdiction. The arbitrators may
assess costs, including counsel fees, in such manner as they deem fair and
equitable. The arbitration shall be conducted in Boston, Massachusetts unless
otherwise mutually agreed by the parties.
9.3 INJUNCTIVE RELIEF. VAR acknowledges that in the event of a breach
of certain sections of this Agreement, including, without limitation Article V
and Sections 4.4(b) and 6.4, HealthGate may not have an adequate remedy at law
and may suffer irreparable damage and injury. Therefore, in addition to any
other remedy available, VAR agrees that if it violates any of the provisions of
Article V or Sections 4.4(b) or 6.4, HealthGate shall be entitled to seek
injunctive relief by a court of competent jurisdiction.
X. MISCELLANEOUS
10.1 CONFIDENTIAL INFORMATION. Unless otherwise agreed to in writing
signed by the authorized representatives of both parties, neither party shall
provide the other party with information that is confidential or proprietary to
itself or any third party. Accordingly, no obligation of confidentiality of any
kind is assumed by, or shall be implied against, either party
6
<PAGE>
by virtue of its discussions and/or correspondence with the other party or with
respect to any information received (in whatever form or whenever received) from
the other party under this Agreement or in activities related thereto.
10.2 LIMITATIONS ON DAMAGES. Neither party shall be entitled to
indirect, incidental, or consequential damages, including lost profits based on
any breach or default under this Agreement. This limitation shall not apply to
any liabilities based on obligations to third parties. In no event shall
HealthGate be liable under this Agreement to VAR for damages exceeding the
amounts paid by VAR under this Agreement.
For any period of time in which the HealthGate Site is not available to
Authorized Users or not properly functioning through the Co-Branded Site due to
actions or inactions by HealthGate, VAR's remedy shall be limited to an
abatement of that portion of the License Fee attributable to the period of time
of which the HealthGate Site is unavailable or not functioning.
10.3. FREEDOM OF ACTION. Except as set forth in Section 2.2, nothing in
this Agreement shall be construed as prohibiting or restricting either party
from independently developing or acquiring and marketing materials and/or
programs that are competitive with the Co-Branded Sites.
10.4 INDEPENDENT CONTRACTOR. HealthGate and VAR are and shall remain
independent contractors with respect to all matters pursuant to the Agreement.
10.5 NO ASSIGNMENT. VAR may not sell, transfer, assign, or subcontract,
any right or obligation set forth in this Agreement without the express advance
written consent of HealthGate.
10.6 AMENDMENTS IN WRITING. No amendment, modification, or waiver of
any provision of this Agreement shall be effective unless it is set forth in a
writing that refers to this Agreement and is executed by an authorized
representative of both parties. No failure or delay by either party in
exercising any right, power, or remedy will operate as a waiver of any such
right, power, or remedy.
10.7 THIRD PARTY RIGHTS. This Agreement is not intended and shall not be
construed to create any rights for any third party.
10.8 FORCE MAJEURE. Neither party shall be liable nor deemed to be in
default of its obligations hereunder for any delay or failure in performance
under the Agreement or other interruption of Service resulting, directly or
indirectly, from acts of God, civil or military authority, act of the public
enemy, war, accidents, natural disasters or catastrophes, strikes, or other work
stoppages or any other cause beyond the reasonable control of the party affected
thereby. However, each party shall utilize it best good faith efforts to perform
such obligations to the extent of its ability to do so in the event of any such
occurrence or circumstances.
10.9 GOVERNING LAW. The validity, interpretation, and performance of
this Agreement shall be governed by and construed in accordance with the
internal laws and not the law of conflicts of the Commonwealth of Massachusetts.
7
<PAGE>
10.10 ENTIRE AGREEMENT; SEVERABILITY. This Agreement, together with the
Schedules and other attachments referenced herein, contains a full and complete
expression of the rights and obligations of the parties. This Agreement
supersedes any and all other agreements, written or oral, made by the parties.
If any provision of this Agreement is finally held by a court or arbitration
panel of competent jurisdiction to be unlawful, the remaining provisions of this
Agreement shall remain in full force and effect to the extent that the parties'
intent can be lawfully enforced.
10.11 EXHIBITS. All exhibits and attachments referenced in this
Agreement are incorporated herein as though set forth in full. If any provision
of this Agreement conflicts with any Exhibit to this Agreement, this Agreement
shall control with respect to the subject matter of such Exhibit.
10.12 CAPTIONS & HEADINGS. The headings, titles and captions of the
sections of this Agreement and the Exhibits and Attachments are inserted only to
facilitate reference, and they shall not define, limit, extend or describe the
scope or intent of this Agreement or any provision hereof or any Exhibit or
Attachment hereto, and they shall not constitute a party hereof or affect the
meaning or interpretation of this Agreement or any part hereof.
10.13 OPERATION OF HOT SITE. HealthGate is currently investigating the
use of appropriate alternate sites for its data center. These sites will serve
as alternative sites or "hot sites" in the event of disaster or any other causes
of interruption of service at its data center facilities. Additionally, these
sites will serve as high-bandwidth access sites for HealthGate's international
clients and partners. VAR is encouraged to submit candidates for the hot sites,
including VARs data center(s).
10.14 YEAR 2000 - The PROGRAMS(S) requiring date data input of four
digit date years. Provided that input to the PROGRAM(S) comply with this
requirement, for each PROGRAM(S) shipped by VENDOR, VENDOR warrants to DGC
and to the END USER, if any, that the PROGRAM(S) shall, for a period that
commences on such shipment and expires ninety (90) calendar days successful
installation, or March 31, 2001, whichever occurs later, correctly process,
calculate, compare and sequence data from, into and between the twentieth and
twenty-first centuries, including leap-year calculations, when used in
accordance with its user documentation and published specifications and any
other requirements set forty in the applicable PROGRAM ATTACHMENT, provided
that all hardware and software used in combination with such PROGRAM(S)
properly exchange data therewith.
10.15 ESCALATION OF PROBLEMS. Both parties wish to work together to
assure an effective and efficient implementation, therefore both parties will
have the right to escalate any issue through the other party's organization if
they are not resolved in a timely manner. In the event that an issue cannot
be resolved by the parties' respective Program Manager ("PROGRAM MANAGER"),
the issue shall be referred to designated representatives of each party in
the following manner. B. To prevent any significant disruption in any work
for a PROGRAM ATTACHMENT, the following events will be automatically
escalated: (a) Tasks scheduled but not completed during the month and there
is a disagreement with respect to the source of delay and/or the rescheduling
of such tasks; and (b) Issues that may result in a material change in project
scope and therefore may require additional charges by VENDOR. Issues
involving changes in scope that may be billable include, but are not limited
to, the following: (a) requests for additional training or additional
tailoring assistance, (b) project delays greater than one month or (c)
material changes in the scope of interfaces and conversions. These issues
must be resolved to the mutual written agreement of both parties before any
material changes in scope are acted upon. C. The parties agree that
unresolved issues reported will be discussed within ten (10) business days by
the next level representatives identified in Exhibit 4 who shall work to
resolve the issues amicably and expeditiously. Issues that remain unresolved
will continue to be escalated to the next level of representatives in the
same manner. Should such issue not be resolved via this escalation process,
then the matter may be addressed in accordance with the Mediation of a
PROGRAM Attachment processes set forth below.
IN WITNESS WHEREOF, duly authorized representatives of the parties have
executed this Agreement as of the date first written above:
HEALTHGATE DATA CORP. DATA GENERAL CORPORATION (VAR)
By: /s/ WILLIAM S. REECE By: /s/ ROBERT S. IACONO
------------------------------- -----------------------------
Name: William S. Reece Name: Robert S. Iacono
Title: Chief Executive Officer ---------------------------
Title: VP, Worldwide Healthcare
--------------------------
8
<PAGE>
SCHEDULE A. TO VAR AGREEMENT
***DATA GENERAL CORPORATION***
THE HEALTHGATE SERIES OF PRODUCTS; LICENSE FEES & PRICES
The HealthGate Series of Products
The following collection of databases and content are available through
HealthGate to the VAR for relicensing.
Health Communication System Pricing
Patient and Consumer Package $20,000
- --------------------------------------------------------------------------------
Consumer Series Content
Patient Series Content
Included Features:
o Customized "Web-zines" for front page of the articles
o Three article per magazine per month
o Standard "Send to a friend"
o Quarterly reports on the usage
o Authentication for Patient and Professionals
o 1500 authentication cards with hospital ID number
o Customized "Intelligent promotional" Service
o Includes hosting of up to 10 banner ads
o Customized "Commercial advertising and sponsorship" spots
Required customization and implementation (one-time,
non-discountable fee) $ 7,000
o A Standard design template
o Customized coloring scheme
o Customized sizing of the templates
o Customized logo placement
o Customized front page for each of the selected series
o Customized linking to and from the Institution's Web site
o Limited Customized authentication scheme, including combination of
o Linked URL
o Linked Domain address
o Password and Username
o Customized Quarterly usage report
o User support at HealthGate
Additional optional Features
o Printing Module for the Patient Series $ 2,000
o School Nurse Communication module $ 2,000
10
<PAGE>
o Customized "Send to..." from the local address book $ 2,000
o Additional banner ads, package of 5 $ 1,000
o Resource Locator Module with content sensitive links $ 5,000
o Find a doctor
o Find a facility
o Find a service
Total $39,000
If the entire package, including the optional features, is
ordered in advance, the cost is discounted to:
$35,000
Professional Package $20,000
- --------------------------------------------------------------------------------
Included Content
o MEDLINE
o AIDSLINE
o AIDSDRUGS
o AIDSTRIAL
o CANCERLIT
o BIOETHICSLINE
o HEALTHSTAR
o Drug Information Handbook
o PsycINFO; 5000 citations
o EMBASE; 2,000 citations
o CMEs unlimited for 100 physicians
o Cinahl
o Reuter's MedNews
o Detwilers Directory
o Doody's Book Review
Included Features
o Standard "Send to a friend"
o Quarterly reports on the usage
o Authentication for Professionals
o 750 authentication cards with hospital ID number
o "Intelligent promotional" Service
o Includes hosting of up to 10 banner ads
o Commercial advertising and sponsorship Module
11
<PAGE>
Required customization and implementation $7,000**
(If the Professional Package is implemented with the Patient and Consumer
package this 2nd implementation fee is waived.)
Additional optional content or features
o Ageline $ 2,500
o Additional CMEs unlimited for 50 physicians $ 5,000
o Additional PsycINFO; 5,000 citations $ 3,000
o Additional EMBASE; 2,000 citations $ 3,000
o Customized "Send to a librarian" $ 1,000
Sub-total of options $14,500
Total with all options $34,500
**If implementation fee is required $41,500
All above prices are based on annual contracts and an average of 10,000 daily
page views for sponsorship-based licenses or 5,000 daily page views for
non-sponsorship-based licenses. (If a customer accepts sponsorship and
advertising on the Co-Branded Site, their package includes an extended per day
usage). For the purposes of this Agreement, a "Page View" is defined as each
HTML page, non-HTML page, or detailed record citation of the Products viewed by
the Authorized User of VAR's Corporate/Institutional Account(s). The "Usage" and
"Overage Fees" are described in Schedule E.
Description of the Patient and Consumer Series
The Patient Series
This series provides education materials for the organization's patient
population (including several in both English and Spanish), as well as a place
for patients to do independent research on conditions and diagnoses. The use of
this series is restricted to the organization's patient population. This series
is password protected and requires user registration.
Adult Health Advisor
Behavioral Health Advisor
Pediatric Health Advisor
Woman's Health Advisor
Seniors Health Advisor
Well-Connected Patient Education Reports
12
<PAGE>
The Consumer Series
Content in the Consumer Series is available to users on healthcare
organization's internet, intranet and extranet sites via a link to the
"Co-Branded Site". This series is not password protected, does not require user
registration, and allows unrestricted access via the "Co-Branded Site".
Reuters Health eLine
The Wellness Center
Complete Guide to Prescription and Non-Prescription Drugs
MDX Complete Guide to Symptoms, Illness, and Surgery
DPH - Diagnostic Procedures Handbook
Healthy Eating
Healthy Parenting
Healthy Sexuality
Healthy Woman
Healthy Man
Healthy Mind
VAR and HealthGate agree that other content and databases may be added to the
Products upon written mutual agreement of both parties from time to time and in
writing. Additionally, HealthGate reserves the right to substitute a database or
content in the event a listed database or content become unavailable or cost
prohibitive as determined by HealthGate.
License Fees.
License Fees. The annual license fees for the Health Communication System
packages and features that comprise the HealthGate Series of Products payable by
are 70% of the fees listed above, excluding the customization and implementation
fee, which is non-discountable.
Payment and Invoicing of License Fees and Set-up Charges. Annual license
fees and set-up charges, as applicable, are payable by VAR to HealthGate upon
the execution of the End-User Agreement (Schedule E). VAR will remit a purchase
order and a signed and completed End-User Agreement for each
Corporate/Institutional Account. HealthGate will invoice VAR for such License
Fee(s) and Set-up charges.
Adjustments to Fees. HealthGate may adjust the license fees for the
Products at any time and from time to time twelve months after the effective
date of this Agreement and the adjustments shall be effective sixty (60) days
following written notice to VAR of the fee changes (the "Fee Adjustment Date").
Such fee adjustments shall be based solely on increases on HealthGate's
licensing and copyright cost. The adjustments to fees will not impact the
13
<PAGE>
Corporate/Institutional Accounts with valid agreements during the initial term
of their contracts. Except as otherwise permitted in such contracts, the
adjustment to fees may, however, impact all new and renewal contracts that
become effective after the "Fee Adjustment Date".
Fees Related to Additional Products. Notwithstanding anything to the
contrary contained in the fee adjustment procedures described in this Agreement
or the fee schedule set forth above, any modification to the Products described
in this Schedule A may be accompanied by additional fees as determined by
HealthGate and approved in writing by VAR prior to initiation of such
modification.
14
<PAGE>
SCHEDULE B TO VAR AGREEMENT
***DATA GENERAL CORPORATION***
ADVERTISING / SPONSORSHIP AND OTHER FEE ARRANGEMENTS
Commercial Advertising Spots and Promotional Spots
The Co-Branded Site allows for advertising and sponsorship messages to be
served to the Authorized Users of each Corporate/Institutional Account of the
VAR. The areas of the Co-Branded Site that are targeted for this function shall
be referred to as "Commercial Advertising and Sponsorship Spots". In the
End-User Agreement, each Corporate/Institutional Account of the VAR may accept
or reject this option.
Additionally, the Co-Branded Site allows for the Corporate/Institutional Account
to serve messages on behalf of itself, its donors, corporate and commercial
partners. The areas of the Co-Branded Site that are targeted for this function
shall be referred to as "End-User Promotional Spots".
End User Promotional Spots
The Corporate/Institutional Account shall have the exclusive right to sell and
market the End-User Promotional Spots of the Co-Branded Site to its internal
departments, its donors, corporate and commercial partners. HealthGate will
serve the messages on the End-user Promotional Spots of the Co-Branded Site for
a one-time fee of $100 per campaign ad or message.
The revenues associated with the End-User Promotional Spots of the
Co-Branded site are earned and retained exclusively by the
Corporate/Institutional Account. Except for the $100 campaign fee(s) noted
above, neither HealthGate nor the VAR participates in any share of such revenues
or affiliated expenses.
Commercial Advertising and Sponsorship Spots
If the Commercial Advertising and Sponsorship Spot option is selected by
VAR's Corporate/Institutional Account, HealthGate shall have the exclusive right
to sell and serve advertising on the Commercial Advertising and Sponsorship
Spots of the Co-Branded Site. The Corporate/Institutional Account will have the
right to approve or reject each advertiser or sponsor.
Allocation of Commercial Advertising and Sponsorship Spots Revenue
The revenues associated with the Commercial Advertising and Sponsorship
Spots of the Co-Branded site are earned and collected by HealthGate. HealthGate
shall share the Net Advertising and Sponsorship Revenue (as defined below)
associated with the Commercial Advertising and Sponsorship Spots with the VAR
and the Corporate/Institutional Account as set forth below. "Net Advertising and
Sponsorship Revenue" shall equal all advertising and sponsorship revenue
actually collected for the Co-Branded Site, less HealthGate's reasonable
expenses associated with such advertising revenue, provided such reasonable
expenses shall not
15
<PAGE>
exceed 20% of such advertising and sponsorship revenue.
- --------------------------------------------------------------------------------
Net Advertising and HealthGate's VAR's Corporate/Institutional
Sponsorship share Share Account's share
Revenue
- --------------------------------------------------------------------------------
$0 to twice the 40% 10% 50%
amount paid by the
end-user for the
HealthGate
collection
- --------------------------------------------------------------------------------
Over twice the 90% 10% 0%
amount paid by the
end-user for the
HealthGate
collection
- --------------------------------------------------------------------------------
Commercial Advertising and Sponsorship Spots Statements and Payments
HealthGate will render a quarterly statement ("Statement") to VAR and its
Corporate/Institutional Account of the sales and collections of Commercial
Advertising and Sponsorship Spots revenue relating to the Co-Branded Site within
thirty (30) days after the end of a quarter. Payments to VAR and its
Corporate/Institutional Account for their respective share of Net Advertising
and Sponsorship Revenue that has been collected by HealthGate shall accompany
each Statement for the reported period.
Finder's fee for Advertising and Sponsorship
In addition to the above schedules, VAR will earn a Finder's fee for
introducing and facilitating the sale of advertising and sponsorship on a
Co-Branded Site to the VAR's corporate clients and partners. Each of these
introductions needs to be registered in writing with HealthGate. Within 10 days
of such registration, HealthGate will notify the VAR of the eligibility of the
account for Finder's fees (without limiting the requirement for eligibility,
potential advertisers which HealthGate has already contacted prior to VAR's
introduction shall not be eligible for finder's fees). VAR will earn a finder's
fee, for all eligible accounts, equal to 10% of the first two years of
advertising and sponsorship revenues collected through transaction with the
referred eligible accounts. The reporting and payment for all such finder's fees
shall be included in the quarterly Statements reporting on Commercial
Advertising and Sponsorship Spots revenue.
Audit Rights
During the Term of this Agreement and for a period of one (1) year
thereafter, VAR and HealthGate will each maintain accurate and complete books
and records, including copies of all customer and other correspondence, relating
to such party's performance of its obligations under this Agreement.
16
<PAGE>
Both parties will have the right, no more than once in any twelve (12)
month period, to audit the other party's books and records which are relevant to
this Agreement as provided for herein upon ten (10) days' prior written notice;
provided however, such audit shall not unreasonably interfere with the business
of either party. Such audits shall be conducted solely by an independent CPA
(Certified Public Accountant) firm hired on other than a contingency fee basis.
17
<PAGE>
SCHEDULE C TO VAR AGREEMENT
***DATA GENERAL CORPORATION***
SETUP CHARGES, PROFESSIONAL SERVICES AND CUSTOM DEVELOPMENT
Setup Charges
HealthGate will design, develop, host and maintain the Co-Branded Sites for
VAR's Corporate/Institutional Accounts. HealthGate offers customization from a
broad selection of design templates and standard functions to address rapid
development requirements of most clients. Each Co-Branded Site has an affiliated
setup charge of $7,000 that includes:
o A Standard design template
o Customized coloring scheme
o Customized sizing of the templates
o Customized logo placement
o Customized front page for each of the selected series
o Customized front page for the Healthy web-zines
o Customized linking to and from the Corporate/Institutional Account's
WEB site
o Customized "End-user promotion" spots
o Customized "Commercial advertising and sponsorship" spots
o Limited Customized authentication scheme
o Linked URL
o Linked Domain address
o Password and Username
o Customized Quarterly usage report
o Send-to-a-friend and send-to-a-colleague functions
o User support at HealthGate
Professional Services and Custom Development
HealthGate offers additional customization services beyond what is described in
the above Setup Charges. These additional services are treated as separate
projects and HealthGate will assist the VAR in defining a Statement of Work and
pricing the Custom Development effort per project. Examples of such services
are:
o Corporate/Institution Account Web-site design and development
o Corporate/Institution Account Web-site hosting
o Integration of the Co-Branded Site with other Corporate/Institution
Account's applications
o Personalization functions
o Commissioning of customized articles and editorials for the Co-Branded
Site
18
<PAGE>
SCHEDULE D TO VAR AGREEMENT
***DATA GENERAL CORPORATION***
VAR Territory
VAR Territory
In consideration of VAR's acceptance of a proposal sent to Peter Stone, from a
period beginning June 1, 1998 and continuing until June 30, 1999, VAR has the
exclusive right to resell the HealthGate product and services listed in
Schedules A and C to its current installed base of MEDITECH hospitals. The
installed base is defined as any MEDITECH/Data General account, world-wide, that
has purchased Data General equipment, software or services in conjunction with a
MEDITECH system. If any new MEDITECH/Data General account, has already been a
HealthGate customer either directly through HealthGate or another re-seller,
then the customer has the right to continue to purchase from its original
source, or Data General.
Renewal of Exclusive Territory
If VAR has successfully sold twenty-five (25) accounts (including the thirteen
(13) accounts described in the above-mentioned proposal accepted by VAR) by June
30, 1999, the exclusive territory will be renewed for another conditional 6
months. In the event that VAR sells fewer than 25 licenses by June 30, 1999, the
exclusive right shall revert to a non-exclusive right for the remainder of this
Agreement, as defined in section 4.1 of this Agreement.
19
<PAGE>
SCHEDULE E OF SUPPORT SERVICES
The following sets forth the SUPPORT SERVICES to be provided to DGC by VENDOR
for PROGRAM(S) for which DGC is entitled to receive SUPPORT SERVICES in
accordance with the applicable PROGRAM ATTACHMENT, and payment by DGC of the
applicable annual Support Services Fees, provided in the Program Attachment, for
EACH End User licensed by or through DGC.
1. DEFINITIONS
A. "UPDATE" - means any subsequent release of or change to each
PROGRAM(S), containing a bug fix, enhancement, modification, or addition
to the functionality or specifications of the immediately prior release,
which does not meet the requirements for designation as a VERSION.
B. "VERSION" - means any subsequent release of or change to a PROGRAM(S)
that contains a substantial functional enhancement to the immediately
prior release and is marketed by VENDOR in the following manner:
1) such release is made generally available to VENDOR's customers
under a model number or designation different from that used for the
immediately prior release, and
2) such release is made generally available to users of the
immediately prior release at a charge that is separate from and in
addition to both the original licensing fee and the usual and
customary support fees charged for support and bug fixes by VENDOR,
and
3) VENDOR continues to separately market and support only the
immediately prior release, while also offering support and bug fixes
for such subsequent release.
2. NAMED CONTACTS
DGC shall designate in writing, as the only DGC representatives authorized
to contact VENDOR's support center, the names of one Primary and one
Secondary Support Contact. DGC reserves the right to change such names
when appropriate.
3. SCOPE
DGC will provide the point of first-call contact to DGC customers. VENDOR
will provide the services described herein ("SUPPORT SERVICES") to DGC.
DGC will have access to any expanded services, service locations and
service hours that VENDOR makes available to its other distributors. The
right to use and distribute UPDATES for previously issued licenses for
PROGRAM(S) is included in the related SUPPORT SERVICES Fees for each End
User as provided in the Program Attachment. Payment of the SUPPORT
SERVICES Fee does not entitle DGC to receive or distribute VERSIONS at no
additional charge from VENDOR. DGC is not obligated to obtain or
distribute any VERSION but VENDOR is only obligated to support the then
current and the immediately prior release. VENDOR agrees, at its then
current standard charges and terms, to make enhancements, changes,
modifications, and additions to PROGRAM(S), in addition to those required
or provided by SUPPORT SERVICES, as may be reasonably requested by DGC.
4. NOTICE AND FORMAT
Prior to issuing any new release, VENDOR shall send DGC notice of the
existence of a new release, specifying the exact release designation to be
used by VENDOR for such release.
20
<PAGE>
Each new release of PROGRAM(S) shall demonstrate i) compatibility with the
applicable computer hardware and related operating system, and iii)
compliance with VENDOR's internal quality control and assurance
procedures. UPDATES containing relatively minor changes may be made
available with the documentation changes specified in a separate release
notice. UPDATES that contain major modifications or enhancements, and
VERSIONS, shall be made available with the changes integrated into a
revised set of documentation. VENDOR shall notify DGC in writing, no later
than the shipment date thereof, of the problems that are solved and those
that remain therein, and shall send documentation appropriate thereto. The
new release shall be supplied as an installable module or a complete
release, and sent to End User(s) on magnetic media or as an electronically
transferred file to a End User(s) End User(s) host computer.
5. SUPPORT PERIOD
The Support Period shall be for one year from the date of payment of the
applicable Support Services Fee(s).
6. BETA-TESTING
At DGC's request, VENDOR shall evaluate DGC for use as a beta-test site
for UPDATES and VERSIONS.
7. PHONE-CALL SUPPORT
Phone-call support allows DGC's technical support to obtain information
directly from VENDOR's support organization. This service is used in
connection with the following:
A. Telephone Support Hot-line - VENDOR answers DGC's calls related
to operation, sysgen and installation, configuration, documentation,
general product information, and Software Trouble Reporting (STR)
and Resolution services. The hotline service will be available from
8 A.M. to 8:00 P.M. Eastern Time. With regard to PROGRAM(S), DGC
will attempt to reproduce the problem and DGC shall not normally
contact VENDOR's support organization if the problem is i) related
to installation, ii) covered in a listing of known problems and
responses previously provided by VENDOR to DGC, or iii) caused by a
defect or problem in DGC hardware or the DG/UX operating system.
B. Product Newsletter - DGC provides and uses for support purposes
an on-line product newsletter describing proposed changes, future
releases, information on compatibility and third party software or
hardware, tips and techniques, articles, and known problems and
solutions not covered in the STR database, as well as general
information. VENDOR will provide relevant information to DGC, of the
type that VENDOR generally provides to its other distributors and
users, for inclusion in this newsletter.
C. Known Problems - VENDOR will provide DGC with information
concerning known problems, including, but not limited to, a
description, workarounds, and fixes.
D. Monthly Summary of Escalated Calls - VENDOR agrees to summarize
all responses to all unresolved STRs in a monthly written report
that will be provided to DGC within ten (10) days after the end of
each month, and shall include a description of the specific problem
resolution actions taken or contemplated, and the status of VENDOR's
remedial efforts and anticipated time of solution.
8. TROUBLE REPORTING AND RESOLUTION
The following process will be used in the support of the DGC customers the
VENDOR and DGC. The VENDOR will establish a 1-800 pager number and email
address to facilitate the exchange of information with the DGC customer
support center. The VENDOR will be
21
<PAGE>
responsible to provide customer service delivery for their application
programs until the service call is closed by the DGC customer support
center.
The Service Call Process:
A. Customer contacts DGC support center via 1 800 DGHELPS
hotline.
B. DGC support personnel perform initial problem determination in
order to establish if the problem is a DG hardware, DG system
software or VENDOR software related. If the problem is DG
hardware or system software related DG is responsible to
render service to the customer.
C. If DGC's support organization believes the problem is related
to the VENDORS software, the DGC support center will
electronically email the VENDOR a document detailing the
problem and including DGC's service request reference numbers.
D. DGC will follow up the email by paging the VENDORS on call
support organization. The page will detail a phone number at
which the VENDORS support organization can reach the DGC
representative who is in contact with the customer. The DGC
and VENDOR representatives will discuss the service problem
and establish if the VENDOR will now take responsibility for
the service call.
E. In the event the service problem is the VENDORS
responsibility, the VENDOR will contact the DGC customer and
render service.
F. When the service problem is corrected by the VENDOR, the
VENDOR will electronically email a call closed report to the
DGC customer support center detailing the action required to
fix the problem.
G. The DGC customer support center will then close the service
call.
H. In the event that the VENDOR determines that the service
problem is a DGC hardware or system software problem then the
VENDOR will call the 1 800 DGCHELPS hotline and use the
reference number that has been sent to the VENDOR via email
for this service problem to inform DGC customer support center
that the problem remains open and requires DGC attention. The
VENDORS responsibility for the call will remain open until the
DGC customer support center verifies the problem is DGC
harware or system software related.
9. COMMUNICATION MECHANISM
With the mutual consent of both parties, communication between the two
companies will be by electronic mail and direct file transfer. Data
transmission between the two systems shall be by common carrier.
Additional communication links may be established.
10. ADDITIONAL SUPPORT
VENDOR hereby agrees to provide DGC with reasonable assistance in order
for DGC to respond to requests for bids or demonstrations involving
PROGRAM(S).
22
<PAGE>
Ex 10.7
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (the "Sublease") is entered into by and between
SYNOPSYS, INC., a Delaware corporation ("Sublandlord"), and HEALTHGATE DATA
CORP., a Delaware corporation ("Subtenant"), with reference to the following
facts:
WITNESSETH
A. Sublandlord and The Multi-Employer Property Trust ("Landlord"), as
parties to that certain Gross Office Lease Agreement dated as of March 3, 1995
(the "Base Lease"), wherein Landlord leased to Sublandlord and Sublandlord
leased from Landlord certain premises ("Base Lease Premises") in the office
building located at 500 Burlington Centre, Burlington, Massachusetts (the
"Building").
B. Subtenant desires to sublease from Sublandlord and Sublandlord desires
to sublease to Subtenant the Subleased Premises (as hereinafter defined) subject
to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and for other good and valuable consideration paid by each
party hereto to the other, Sublandlord and Subtenant agree as follows:
1. Incorporation of Recitals. Recitals A through B are incorporated herein
by reference.
2. Terms. Capitalized terms used herein but not defined herein shall have
the meanings specified in the Base Lease.
3. Agreement to Sublease. Sublandlord subleases to Subtenant, and
Subtenant subleases from Sublandlord, approximately 20,641 square feet of
Premises Rentable Area (the "Subleased Premises Rentable Area") located on the
third (3rd) floor of the Building and consisting of the entire Base Lease
Premises (the "Subleased Premises") in accordance with and subject to the Base
Lease and the terms, conditions and provisions of this Sublease. A floor plan
depicting the Subleased Premises is attached hereto as Exhibit "A."
4. Term. The term (the "Term") of this Sublease shall commence (the
"Commencement Date") on March 1, 1999, and shall expire on June 30, 2000 (the
"Expiration Date"), unless earlier terminated pursuant to the terms of this
Sublease. Sublandlord shall use reasonable efforts to provide access to the
Subleased Premises to Subtenant on or about February 15, 1999, or as soon
thereafter as possible. If Sublandlord fails to tender the Subleased Premises to
Subtenant on or before March 1, 1999, the Commencement Date shall be delayed
until the date that Sublandlord tenders the Subleased Premises to Subtenant, and
Sublandlord shall have no liability therefor; notwithstanding the foregoing, if,
for any reason other than delays solely due to Subtenant, Sublandlord fails to
tender a possession of the Subleased Premises to Subtenant on or before March 1,
1999, Subtenant shall have the right, to be exercised by irrevocable written
notice delivered to Sublandlord on or before March 10, 1999, to terminate
<PAGE>
this Sublease, in which event the obligations of the parties hereunder shall
expire, Sublandlord shall return the Security Deposit (defined in Section 20
below) to Subtenant forthwith, and this Sublease shall be null and void and of
no further force or effect. If the Subtenant fails to timely exercise the option
to terminate described in the immediately preceding sentence, then the
Commencement Date will occur on the date that Sublandlord tenders the Subleased
Premises to Subtenant. Sublandlord hereby subordinates any option to expand the
Base Lease Premises contained in the Base Lease to any rights obtained by
Subtenant from Landlord to expand the Subleased Premises.
5. Rent.
a) Commencing on the Commencement Date and continuing thereafter
throughout the Term, Subtenant shall pay to Sublandlord, as rent (the "Basic
Rent") for the Subleased Premises, the following:
Commencement Date --the date that is six (6) months (180 days) after
the Commencement Date: $31,875.00 per month;
One hundred eighty-first (181st) day following Commencement Date--
Expiration Date: $43,862.13 per month.
b) Subtenant shall pay all amounts that become payable by Subtenant
under this Sublease to Sublandlord at the times and in the manner provided in
this Sublease, without demand, deduction, set-off or counterclaim, at 700 E.
Middlefield Road, Mountain View, California 94043, Attention: Director of
Facilities (or such other address as Sublandlord may designate in writing).
6. Additional Charges.
a) Definitions. For purposes of this Sublease and in addition to the
terms defined elsewhere in this Sublease, the following terms shall have the
meanings set forth below:
i) "Additional Rent shall mean the sums payable pursuant to
subparagraph 6(b) of this Sublease.
ii) "Base Additional Charges" shall mean the Additional
Charges payable by Sublandlord to Landlord for the Subleased Premises
during the Base Year.
iii) "Base Year" shall mean the calendar year 1998 for
"Operating Costs" and the fiscal year 1999 for "Property Taxes".
iv) "Additional Charges" shall mean the aggregate Operating
Costs and Property Taxes (as defined in the Base Lease) charged by
Landlord to Sublandlord.
v) "Rent" shall mean, collectively, Basic Rent, Additional
Rent, and all other sums payable by Subtenant to Sublandlord under this
Sublease, whether or not expressly designated as "rent", all of which are
deemed and designated as rent pursuant to the terms of this Sublease.
2
<PAGE>
b) In addition to the Basic Rent payable pursuant to Section 5
above, from and after the Commencement Date, for each calendar year of the Term,
Subtenant, as Additional Rent, shall pay (i) the amount by which Additional
Charges payable by Sublandlord for the then current calendar year exceed Base
Additional Charges. Sublandlord shall give Subtenant written notice of
Sublandlord's estimate of the amount of Additional Rent per month payable
pursuant to this Subsection (b) for each calendar year promptly following the
Sublandlord's receipt of Landlord's estimate of the Additional Charges payable
under the Base Lease. Thereafter, the Additional Rent payable pursuant to this
Subsection (b) shall be determined and adjusted in accordance with the
provisions of Subsection 6(c) below.
c) The determination and adjustment of Additional Rent contemplated
under Subsection 6(b) above shall be made in accordance with the following
procedures:
i) Upon receipt of a statement from Landlord specifying the
estimated Additional Charges to be charged to Sublandlord under the Base
Lease with respect to each calendar year, or as soon after receipt of such
statement as practicable. Sublandlord shall give Subtenant written notice
of its estimate of Additional Rent payable under Subsection 6(b) for the
ensuing calendar year, which estimate shall be prepared based on the
estimate received from Landlord (as Landlord's estimate may change from
time to time) On or before the first day of each month during each
calendar year, Subtenant shall pay to Sublandlord as Additional Rent
one-twelfth (1/12th) of such estimated amount together with the Base Rent.
ii) In the event Sublandlord's notice set forth in Subsection
6(c)(i) is not given in December of the calendar year preceding the
calendar year for which Sublandlord's notice is applicable, as the case
may be, then until the calendar month after such notice is delivered by
Sublandlord, Subtenant shall continue to pay to Sublandlord monthly,
during the ensuing calendar year, estimated payments equal to the amounts
payable hereunder during the calendar year just ended. Upon receipt of any
such post-December notice Subtenant shall (i) commence as of the
immediately following calendar month, and continue for the remainder of
the calendar year, to pay to Sublandlord monthly such new estimated
payments and (ii) if the monthly installment of the new estimate of such
Additional Rent is greater than the monthly installment of the estimate
for the previous calendar year, pay to Sublandlord within thirty (30) days
of the receipt of such notice an amount equal to the difference of such
monthly installment multiplied by the number of full and partial calendar
months of such year preceding the delivery of such notice.
d) After the receipt by Sublandlord of a final statement of
Additional Charges from Landlord with respect to each calendar year, Sublandlord
shall deliver to Subtenant a statement of any adjustment to be made for the
calendar year just ended. If on the basis of such statement Subtenant owes an
amount that is less than the estimated payments for the calendar year just
ended, previously paid by Subtenant, Sublandlord shall credit such excess to the
next payments of Rent coming due or, if the term of this Sublease is about to
expire or has expired, promptly refund such excess to Subtenant. If on the basis
of such statement Subtenant owes an amount that is more than the estimated
payments for the calendar year just ended
3
<PAGE>
previously made by Subtenant, Subtenant shall pay the deficiency to Sublandlord
within thirty (30) days after delivery of the statement from Sublandlord to
Subtenant.
e) For partial calendar years during the term of this Sublease, the
amount of Additional Rent payable pursuant to Subsection 6(b) that is applicable
to that partial calendar year shall be prorated based on the ratio of the number
of days of such partial calendar year falling during the term of this Sublease
to 365. The expiration or earlier termination of this Sublease shall not affect
the obligations of Sublandlord and Subtenant pursuant to this Section 6, and
such obligations shall survive, and remain to be performed after, any expiration
or earlier termination of this Sublease.
7. Electricity. The Estimated Electricity Payment (as defined in the Base
Lease) shall be $1.00 per square foot of Subleased Premises Rentable Area per
annum, subject to adjustment in accordance with the Base Lease. Subtenant shall
pay the Estimated Electricity Payment to Sublandlord with the Basic Rent
payments and, to the extent the cost of providing convenience electricity to the
Subleased Premises exceeds the Estimated Electricity Payment for any Operating
Year, Subtenant shall pay such excess in accordance with the Base Lease.
8. Parking. For so long as this Sublease remains in full force and effect
and Subtenant's right of possession of the Subleased Premises has not been
terminated, Subtenant shall at no additional cost lease from Sublandlord parking
permits ("Allocated Permits") for parking spaces in the parking garage or
parking area serving the Building (the "Parking Area") at a ratio of 3.3 parking
permits per one thousand (1,000) square feet of Subleased Premises Rentable
Area. So long as no default exists under this Sublease, parking permits for the
above parking shall be provided to Subtenant for use on an unassigned basis and
in common with the other tenants except five (5) parking permits shall be for
underground "reserved spaces."
9. Use of Subleased Premises. Subtenant may use and occupy the Subleased
Premises only for the Permitted use (as defined in Section 1.1(o) of the Base
Lease), and for no other purpose whatsoever.
10. Acceptance of and Improvements to the Subleased Premises. Upon the
Commencement Date (as may be adjusted pursuant to Paragraph 4 of this Sublease),
Sublandlord shall tender, and Subtenant shall accept, possession of the
Subleased Premises in its "AS-IS," "WHERE-IS" and "WITH ALL FAULTS" condition,
without the benefit of any further improvement, and Sublandlord shall not be
obligated to incur (or to cause Landlord to incur) any cost or obligation
whatsoever for the installation, renovation or demolition of any improvements to
the Subleased Premises., Sublandlord agrees that it will not damage the Premises
and will not damage or sever any phone and computer cables and will leave intact
all racks and patch panels in the computer room) during Sublandlord's move-out
of the Subleased Premises. Prior to the Commencement Date, at Subtenant's
request, Sublandlord will use reasonable efforts to provide Subtenant with
access to the Subleased Premises for the purpose of installing a "T-1"
telecommunications line, provided that Subtenant expressly agrees that
Sublandlord will have no liability for any interruption of service to such T-l
telecommunications line as a result of Sublandlord's move-out from the Subleased
Premises.
4
<PAGE>
11. Assumption. Subtenant hereby assumes and agrees, for the benefit of
Sublandlord and Landlord, to comply with and be bound by all of the provisions
of the Base Lease with respect to the Subleased Premises which are to be
observed or performed during the Term hereof by Sublandlord as "Tenant"
thereunder, including the rules and regulations applicable to the Building,
except as otherwise inconsistent with the agreements and understandings
expressly provided herein; provided, however, in no event shall Subtenant be
obligated to remove from the Subleased Premises any improvements which
Sublandlord may have installed upon the Subleased Premises, or correct or be
responsible for any prior acts of Sublandlord.
12. Indemnification. Subtenant shall indemnify, defend and hold harmless
Sublandlord from and against all losses, costs, damages, expenses and
liabilities, including, without limitation, reasonable attorneys' fees and
disbursements, which Sublandlord may incur or pay out (including, without
limitation, to the landlord under the Base Lease) by reason of (i) any
accidents, damages or injuries to persons or property occurring in, on or about
the Subleased Premises (unless the same shall have been caused by Sublandlord's
negligence or wrongful act or the negligence or wrongful act of the landlord
under the Base Lease), (ii) any breach or default hereunder on Subtenant's part,
(iii) the successful enforcement of Sublandlord's rights under this Sublease,
(iv) any work done after the date hereof in or to the Subleased Premises except
if done by Sublandlord, or (v) any act, omission or negligence on the part of
Subtenant and/or its officers, partners, employees, agents, customers and/or
invitees, or any person claiming through or under Subtenant.
13. Assignment and Subletting. In no event shall Subtenant assign this
Sublease or sublease the Subleased Premises or any part thereof without first
obtaining the prior written consent (which consent shall not be unreasonably
withheld) of Sublandlord and Landlord. Any such assignment or sublease shall
also be in accordance with and subject to the terms of the Base Lease.
Notwithstanding any such assignment or sublease, Subtenant shall remain
primarily liable and shall continue to make all rental payments and all other
payments that may become due and payable hereunder to Sublandlord in a timely
manner. Any violation of this Paragraph by Subtenant shall constitute an Event
of Default under this Sublease, entitling Sublandlord to exercise any and all of
the remedies herein provided for an Event of Default by Subtenant, including,
but not limited to, termination of this Sublease.
14. Subtenant Default. Any one or more of the following events will
constitute an event of default ("Event of Default") by Subtenant under this
Sublease:
i) failure or refusal by Subtenant to timely pay any
installment of Basic Rent, any adjustments thereto, or any other amount
herein provided to be paid by Subtenant to Sublandlord, where such failure
shall continue for five (5) days after the same is due; or
ii) failure or refusal by Subtenant to perform or observe any
other term, covenant or provision of this Sublease required to be
performed or observed by Subtenant, where such failure continues for
twenty (20) days after written notice to Subtenant from Sublandlord
(provided, however, if such default cannot be cured within such twenty
(20) day period and Subtenant commences to cure such default within such
5
<PAGE>
period and diligently prosecutes such cure to completion, then Subtenant
shall have an additional reasonable period, not to exceed sixty (60) days,
to cure such default); or
iii) the institution in a court of competent jurisdiction of
proceedings for reorganization, liquidation, or involuntary dissolution by
Subtenant, or for its adjudication as a bankrupt or insolvent, or for the
appointment of a receiver of the property of Subtenant, provided that
proceedings are not dismissed, and any receiver, trustee, or liquidator
appointed therein is not discharged within thirty (30) days after the
institution of said proceedings; or
iv) the performance or non-performance of any other obligation
hereunder, or the occurrence of any other event which, if it remains
uncured, would result in a Default of Sublandlord under the Base Lease.
v) At any time after such an Event of Default has occurred,
Sublandlord may exercise all rights and remedies provided under the Base
Lease for a default thereunder, including, but not limited to, declaring
this Sublease terminated, and Sublandlord may immediately or at any time
thereafter re-enter the Subleased Premises and remove all persons
therefrom with legal process, and without prejudice to any of its other
legal rights, and all claims for damages by reason of such re-entry are
expressly waived, as well as all claims for damages by reason of any
eviction proceedings or proceedings by way of sequestration or any other
legal proceedings which Sublandlord may employ to recover unpaid rents or
possession of the Subleased Premises. In addition, without limiting the
foregoing, in the event Sublandlord reasonably believes that Subtenant's
failure to cure a breach under subparagraph (i) above shall cause a
default by Sublandlord to occur under the Base Lease, Sublandlord shall
specifically have the right, upon giving Subtenant not less than three (3)
days prior written notice thereof, to cure such breach or default and be
reimbursed by Subtenant immediately upon invoice for all expenses incurred
by Sublandlord in connection therewith upon demand and presentation of
invoices therefor. All rights and remedies of Sublandlord herein
enumerated shall be cumulative and none shall exclude any other right or
remedy allowed by law or in equity, and said rights and remedies may be
exercised and enforced concurrently and whenever and as often as occasion
therefore arises.
15. Relationship of Parties. Subtenant recognizes that Sublandlord is not
the owner of the Subleased Premises, and that the Landlord is the party with
whom Subtenant would normally deal regarding matters concerning the Subleased
Premises and the Building, and that the Sublandlord shall have no obligation to
deliver or provide any services to the Tenant or the Subleased Premises except
to the extent and only to the extent Landlord delivers such services to
Sublandlord. Accordingly, in the event Subtenant desires any extra services (for
example, additional air-conditioning services other than those provided to the
Subleased Premises under the Base Lease, has any complaints concerning services
required to be provided by Landlord under the Base Lease to the Subleased
Premises; or the improvements thereto, or has any other matters which would
normally be discussed with a landlord, Subtenant agrees to contact Landlord
directly to handle such matters; it being the intention of the parties hereto
that, as to such matters, the only connection between Subtenant and Sublandlord
shall be (the flow-through of rights and obligations of Sublandlord under the
Base Lease, and (the payment of all amounts
6
<PAGE>
payable hereunder by Subtenant to Sublandlord as herein provided).
Notwithstanding the foregoing, Sublandlord agrees to use reasonable efforts to
enforce Landlord's obligations under the Base Lease in the event of a default by
Landlord thereunder. Subtenant also acknowledges that all of the covenants and
obligations of Sublandlord hereunder are expressly subject to the terms and
conditions of the Base Lease. In the event Subtenant requires any additional
services from Landlord for which additional costs are incurred and Subtenant
does not pay Landlord directly for such services, then Subtenant shall pay
Sublandlord such amounts incurred by Subtenant within ten (10) days following
receipt from Sublandlord of Landlord's invoice for such services. Sublandlord
represents and warrants to Subtenant that (i) there are no breaches or defaults
on the part of Sublandlord under the Base Lease; (ii) the Base Lease is in full
force and effect; and (iii) during the Term, Sublandlord will perform all of its
obligations and duties under the Base Lease and will not cause or permit any
breach or Event of Default under the terms of the Base Lease; provided Subtenant
performs all of its obligations under this Sublease. Sublandlord agrees that in
the event that a breach or an Event of Default by Sublandlord should arise under
the terms of the Base Lease, Subtenant shall have the right upon giving
Sublandlord not less than three (3) days prior written notice thereof, to cure
such breach or Event of Default on behalf of Sublandlord, and, in the event
Subtenant so cures the Event of Default, shall further have the right to offset
the reasonable expenses of such curative action against the Rent due hereunder.
16. Waiver of Subrogation. Anything in this Sublease to the contrary
notwithstanding, Sublandlord and Subtenant each hereby waive any and all rights
of recovery, claim, action or cause of action against the other, its officers,
directors, employees or agents for any damage to their respective property
located in the Subleased Premises or the Premises, regardless of cause or
origin, including the negligence of Sublandlord, Subtenant and such parties'
respective officers, directors, employees or agents, and each covenants that no
insurer or other third party shall hold any right of subrogation against such
other party on account thereof. The provisions of this Paragraph 16 shall
survive the expiration or termination of this release.
17. Holding Over. In the event Subtenant remains in possession of the
Subleased Premises after the expiration or earlier termination of this Sublease,
then Subtenant shall pay to Sublandlord a base rental equal to two hundred
percent (200%) of the Basic Rent payable prior to the expiration of the Term on
a monthly basis with no proration, as well as all other sums payable hereunder.
No holding over by Subtenant after the expiration or termination of this
Sublease shall be construed to extend or renew the Term or in any other manner
be construed as permission by Sublandlord to hold over. Subtenant shall
indemnify and hold Sublandlord harmless from and against any and all damages
(actual, consequential or otherwise), losses, costs and expenses, including
reasonable attorneys' fees, incurred by Sublandlord reason of such holding over.
18. Care of the Subleased Premises by Subtenant. Subtenant shall maintain
and repair the Subleased Premises in the manner required of Sublandlord by the
Base Lease and shall not commit or allow any waste to be committed on any
portion of the Subleased Premises. At the expiration or earlier termination of
this. Sublease, Subtenant shall deliver up the Subleased Premises to Sublandlord
in at least the same condition as of the date of this Sublease, excepting only
ordinary wear and tear and any casualty damage and/or repairs which are the
obligation of the Landlord under the Base Lease.
7
<PAGE>
19. Incorporation of Base Lease Terms. Except for Articles 1,3.1,3.2, 5,
8, 9, 12, 13, 26, 30, 37.1, 38, 39.1, 39.4, 40, 41.3, Exhibit B and to the
extent not otherwise inconsistent with the agreements and understandings
expressed in this Sublease or applicable only to the original parties to the
Base Lease, the terms, provisions, covenants and conditions of the Base Lease
are hereby incorporated into this Sublease by reference as fully as if
completely reproduced herein, and
a) The term "Landlord" as used therein shall refer to Sublandlord
hereunder and its successors and assigns; the term "Tenant" as used therein
shall refer to Subtenant hereunder; the term "Lease Term" as used therein shall
refer to the Term hereunder; and the term "Premises" as used therein shall refer
to Subleased Premises herein;
b) In any case where Landlord reserves the right to enter the
Subleased Premises, said right shall inure to the benefit of Sublandlord as well
as to Landlord;
c) Subtenant hereby expressly assumes and agrees to perform all of
the terms, obligations, covenants and conditions to be performed by Sublandlord
pursuant to the Base Lease, and not to do, suffer or permit anything to be done
which would result in a default under the Base Lease or cause the Base Lease to
be terminated or forfeited, and, accordingly, except as otherwise provided
herein, Subtenant shall be entitled to all of the rights and benefits of
Sublandlord as Tenant under the Base Lease with respect to the Subleased
Premises;
d) Sublandlord hereby expressly agrees not to do, suffer or permit
anything to be done which would result in a default under the Base Lease or
cause the Base Lease to be terminated or forfeited. In addition, in no event
shall any modification or amendment by Sublandlord to the Base Lease in any
manner affect the terms of this Sublease without the prior written consent of
Subtenant, which consent may be given or withheld in Subtenant's sole and
absolute discretion;
e) To the extent that any notice or consent is required under this
Sublease, Subtenant shall provide copies of all such notices to Landlord; and
f) Subtenant and Sublandlord mutually agree to promptly provide each
other with any notices received from Landlord which affect the Subleased
Premises.
g) Any non-liability, release, indemnity or hold harmless provision
in the Master Lease for the benefit of Landlord that is incorporated herein by
reference, shall be deemed to inure to the benefit of Sublandlord, Landlord, and
any other person intended to be benefited by said provision, for the purpose of
incorporation by reference in this Sublease. Any nonliability, release,
indemnity or hold harmless provision in the Base Lease for the benefit of Tenant
that is incorporated by reference shall be deemed to inure to the benefit of
Subtenant, and any other person intended to be benefited by this provision for
the purpose of incorporation by reference in a sublease.
h) In all provisions of the Base Lease (under the terms thereof and
without regard to modifications thereof for purposes of incorporation into this
Sublease) requiring the approval or consent of Landlord, Subtenant shall be
required to obtain the approval or consent of both Sublandlord and Landlord.
8
<PAGE>
i) In all provisions of the Base Lease requiring the Tenant to
submit, exhibit to, supply or provide Landlord with evidence, certificates, or
any other matter or thing, Subtenant shall be required to submit, exhibit to,
supply or provide, as the case may be, the same to both Landlord and
Sublandlord. In any such instance, Sublandlord shall determine if such evidence,
certificate or other matter or thing shall be satisfactory.
j) Sublandlord shall have no obligation to restore or rebuild any
portion of the Sublease Premises after any destruction or taking by eminent
domain.
k) In all provisions of the Master Lease requiring Tenant to
designate Landlord as an additional or named insured on its insurance policy,
Subtenant shall be required to so designate Landlord and Sublandlord on its
insurance policy.
20. Security Deposit. Upon the execution of this Sublease, Subtenant shall
deposit with Sublandlord $31,875, representing the Basic Rent for the first
month of the Term, and $131,586.39 (the "Security Deposit"), as security for the
faithful performance and observance by Subtenant of the terms, provisions,
agreements, covenants and conditions of this Sublease. The Security Deposit
shall not be considered an advance payment of Basic Rent or Additional Charges,
and the Security Deposit shall not be considered a measure of Sublandlord's
damages in case of the occurrence of any default under this Sublease. Subtenant
shall not be entitled to receive any interest on the Security Deposit and
Sublandlord may commingle the same with other monies of Sublandlord. In the
event Subtenant defaults in respect to any of the terms, provisions, agreements,
covenants and conditions of this Sublease including, but not limited to, the
payment of Basic Rent or Additional Charges, and provided Subtenant fails to
cure such default after notice from Sublandlord, Sublandlord may, at
Sublandlord's option, from time to time, without prejudice to any other remedy,
use, apply or retain the whole or any part of the Security Deposit not
theretofore applied to Basic Rent or Additional Charges to the extent necessary
to make good any arrears of Basic Rent or Additional Charges or any damage,
injury, expense or liability caused by such default. If Sublandlord shall ever
use the Security Deposit not theretofore applied to Basic Rent to pay the sums
described above, and if this Sublease has not terminated, Subtenant shall
immediately deposit with Sublandlord additional monies equal to the amount so
used within ten (10) days after request therefore. If Subtenant shall fully and
faithfully comply with all of the terms, provisions, agreements, covenants and
conditions of this Sublease, then the Security Deposit (or such amount as shall
not have been applied by Sublandlord) shall be returned to Subtenant within
thirty (30) days after the termination or expiration of this Sublease.
21. Notices. All notices or requests provided for hereunder shall be in
writing and shall be either delivered by hand or sent by United States
Registered or Certified Mail, return receipt requested, postage prepaid,
if to Sublandlord, to
Synopsys, Inc.
700 E. Middlefield Rd.
Mountain View, CA 94043
Attention: Ms. Jan Collinson
9
<PAGE>
Mr. Warren Wixen
Senior Vice President
Bailes & Associates, Inc
11601 Wilshire Blvd., Suite 1900
Los Angeles, CA 90025
Jonathan M. Kennedy, Esq.
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
or if for Subtenant at the Subleased Premises or, if prior to the commencement
hereof, if to Subtenant at the Subleased Premises: Attention to William S.
Reece, President, or, if prior to the commencement hereof, to William S. Reece,
President, HealthGate Data Corp., 380 Pleasant Street, Suite 230, Malden,
Massachusetts 02148, with copies of all such correspondence to be delivered to
Stephen M. Kane, Esq., Rich, May, Bilodeau Flaherty, P.C., 294 Washington
Street, Boston, Massachusetts 02108.
All such notices shall be deemed received either when hand delivered or three
(3) business days after being placed in the United States Mail in the manner set
forth above. The parties hereto shall have the right from time to time to change
their respective address by at least five (5) days prior written notice to the
other party.
22. Governing Law. THIS SUBLEASE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MASSACHUSETTS.
23. Interest on Subtenant's Obligations. All amounts owed by Subtenant to
Sublandlord under this Sublease shall bear interest from the date due until paid
at the lesser of the maximum, nonusurious rate permitted by law or eighteen
percent (18%) per annum, but the payment of such interest shall not excuse or
cure the Event of Default.
24. Severability. In the event that any one or more of the provisions
contained in this Sublease shall be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof; and this Sublease shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.
25. Attorneys' Fees. If any action at law or in equity, including an
action for declaratory relief, is brought to enforce or interpret the provision
of this Sublease, the prevailing party shall be entitled to recover reasonable
attorneys fees from the other party.
26. Amendments. This sublease may not be altered, changed or amended,
except by an instrument in writing executed by all parties hereto.
10
<PAGE>
27. Consents and Approvals. In any instance when Sublandlord's consent or
approval is required under this Sublease, Sublandlord's refusal to consent to or
approve any matter or thing shall be deemed reasonable if, among other matters,
such consent or approval is required under the provisions of the Base Lease
incorporated herein by reference but has not been obtained from Landlord.
Sublandlord agrees to use reasonable efforts, at no additional cost to
Sublandlord, to obtain such approval or consent from Landlord. Except as
otherwise provided herein, Sublandlord shall not unreasonably withhold, or delay
its consent to or approval of a matter if such consent or approval is required
under the provisions of the Base Lease and Landlord has consented to or approved
of such matter. If Subtenant shall seek the approval by or consent of
Sublandlord and Sublandlord shall fail or refuse to give such consent or
approval, Subtenant shall not be entitled to any damages for any withholding or
delay of such approval or consent by Sublandlord, it being agreed that
Subtenant's sole remedy in connection with an alleged wrongful refusal or
failure to approve or consent shall be an action for injunction or specific
performance and that said remedy of an action for injunction or specific
performance shall be available only in those cases where Sublandlord shall have
expressly agreed in this Sublease not to unreasonably withhold or delay its
consent.
28. NO REPRESENTATIONS OR WARRANTIES. SUBTENANT HEREBY EXPRESSLY
ACKNOWLEDGES AND AGREES THAT SUBLANDLORD HAS MADE NO REPRESENTATIONS OR
WARRANTIES TO SUBTENANT AS TO THE USE OR CONDITION OF THE SUBLEASED PREMISES OR
THE BUILDING OR AS TO THE ADEQUACY OF ANY EQUIPMENT (INCLUDING THE HEATING,
VENTILATING OR AIR CONDITIONING EQUIPMENT), EITHER EXPRESS OR IMPLIED, AND
SUBLANDLORD EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY THAT THE SUBLEASED PREMISES
ARE SUITABLE FOR SUBTENANT'S INTENDED COMMERCIAL PURPOSE OR ANY OTHER IMPLIED
WARRANTY REGARDING THE SUBLEASED PREMISES.
29. Quiet Enjoyment. Provided Subtenant has performed all of the terms,
covenants, agreements and conditions of this Sublease Agreement, Subtenant shall
peaceably and quietly hold and enjoy the Subleased Premises against Sublandlord
and all persons claiming by, through or under Sublandlord, for the Term herein
described, subject to the provisions and conditions of this Sublease and of the
Base Lease.
30. Condition. This Sublease (and the obligations of the parties
hereunder) is conditional upon Landlord consenting to the provisions of this
Sublease in writing. Any fees or changes imposed as part of the procurement of
Landlord's consent shall be borne by Sublandlord; provided, however, that
Subtenant will be solely responsible for any fees or charges associated with the
negotiation of additional provisions in any such consent which are requested by
Subtenant.
31. Furniture Purchase Agreement. Sublandlord and Subtenant have
additionally entered into that certain agreement attached hereto as Exhibit B
pursuant to which Subtenant will pay Sublandlord $115,000.00 to purchase from
Sublandlord certain furniture for use in the Subleased Premises, as more
particularly described therein.
11
<PAGE>
32. Entire Agreement. This Sublease constitutes the entire agreement
between Subtenant and Sublandlord and supersedes all prior agreements (whether
written or otherwise) which may exist between the parties with regard to the
lease and use of the Subleased Premises by Subtenant.
33. Consent by Landlord. This Sublease shall be effective only upon
Landlord's consent hereto.
34. Brokers. Subtenant acknowledges that Fallon Hines & O'Connor has, and
is, representing the Sublandlord and the Subtenant is being represented by
Spaulding & Slye (collectively, the "Brokers"). Additionally, Subtenant warrants
and represents that it has not dealt with any real estate brokers and/or
salesman in connection with the negotiation or execution of this Sublease other
than Brokers and no such broker or salesman has been involved in connection with
this Sublease. Broker is being compensated pursuant to a separate agreement with
Sublandlord. Subtenant agrees to defend, indemnify and hold harmless the
Sublandlord from and against any and all costs, expenses, attorneys' fees or
liability for any compensation, commission and charges claimed by any real
estate broker and/or salesman (other than Brokers), due to acts of Subtenant or
Subtenant's representatives, including but not limited to Subtenant's broker.
EXECUTED in multiple counterparts, each of which shall have the force and
effect of an original, as of this 17 day of February, 1999.
SUBLANDLORD:
SYNOPSYS, INC.,
a Delaware corporation
By: /s/ Ernst W. Hirt
-------------------------------------------
Name: ERNST W. HIRT
-----------------------------------------
Title: SR. V.P., HUMAN RESOURCES AND FACILITIES
----------------------------------------
SUBTENANT:
HEALTHGATE DATA CORPORATION
a Delaware corporation
By: /s/ William S. Reece
-------------------------------------------
Name: WILLIAM S. REECE
-----------------------------------------
Title: CEO
----------------------------------------
12
<PAGE>
EXHIBIT A to Sublease
EXHIBIT A to the lease is a diagram of the floor plan to the Subleased Premises.
<PAGE>
EXHIBIT B
This Agreement for the Sale of Goods ("Agreement") made and effective this
February 4, 1999, by and between Synopsys, Inc., a Delaware Corporation
("Seller") and Health Gate Data, a Delaware Corporation ("Buyer"). Seller agrees
to sell to Buyer, and Buyer agrees to purchase from Seller, certain tangible
personal property.
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:
1. Sale.
Seller agrees to sell, transfer and convey to Buyer, and Buyer agrees to
purchase the following tangible personal property (the "Goods"): used office
furniture, cabling and computer racks as described in Attachment A, attached
hereto and by this reference incorporated herein.
2. Price.
Buyer shall pay Seller for the Goods the sum of $115,000. Buyer shall make
payment of the purchase price in full within thirty (30) days following delivery
of the Goods by Seller as provided herein, subject to Buyer's right of
inspection as set forth in Section 4 below. In the event that the purchase price
is not timely paid, in addition to its other remedies, Seller may impose, and
Buyer shall pay, a late payment charge equal to ten percent (10%) of the overdue
amount each time.
3. [INTENTIONALLY OMITTED]
4. Warranty.
BUYER ACKNOWLEDGES AND AGREES THAT THE GOODS ARE SOLD "AS IS". SELLER MAKES NO
WARRANTY TO BUYER WITH RESPECT TO THE GOODS AND BUYER DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE WARRANTY OF
THE ORIGINAL MANUFACTURER OF THE GOODS SHALL NOT PASS TO THE BUYER.
5. Transfer of Title.
The earlier to occur of March 1, 1999 or date of occupancy of Healthgate in the
Subleased Premises (as such term is defined in that certain Sublease of even
date herewith between Seller, as Sublandlord and Buyer, as Subtenant).
6. Limitation of Liability.
In no event shall Seller be liable for any special, indirect, incidental or
consequential damages arising out of or connected with this Agreement or the
Goods, regardless of whether a claim is based on contract, tort, strict
liability or otherwise, nor shall Buyer's damages exceed the amount of the
purchase price of the Goods.
<PAGE>
7. Taxes.
Buyer shall pay or reimburse Seller as appropriate for any sales, use, excise or
other tax imposed or levied with respect to the payment of the purchase price
for the Goods or the conveyance of title in the Goods to Buyer. In no event
shall Buyer be responsible for any tax imposed upon Seller based upon Seller's
income or for the privilege of doing business.
8. Notices.
Any notice required by this Agreement or given in connection with it, shall be
in writing and shall be given to the appropriate party by personal delivery or
by certified mail, postage prepaid, or recognized overnight delivery services.
If to Seller:
Synopsys, Inc.
700 East Middlefield Road
Mountain View, CA 94043
Contact: Rebecca Scavone
If to Buyer:
HealthGate Data Corp.
380 Pleasant St.
Suite 230
Malden, MA 02148-8123
Contact: Sandra Sartell
9. Governing Law.
This Agreement shall be construed and enforced in accordance with the laws of
the state of Massachusetts.
10. Final Agreement.
This Agreement terminates and supersedes all prior understandings or agreements
on the subject matter hereof. This Agreement may be modified only by a further
writing that is duly executed by both parties.
11. Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be
invalid or unenforceable, then this Agreement, including all of the remaining
terms, will remain in full force and effect as if such invalid or unenforceable
term had never been included.
12. Headings.
Headings used in this Agreement are provided for convenience only and shall not
be used to construe meaning or intent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
Synopsys, Inc.
By: __________________________________ By: _________________________________
Authorized Seller's Representative Authorized Buyer's Representative
<PAGE>
INVENTORY OF FURNITURE IN
HARDWALL OFFICES AT BURLINGTON OFF.
------------------------------------------------------------------------
RM #1) 1-DESK 64"x30"
1-CREDENZA 64"x20"
1-36" Rd TABLE
1-TASK CHAIR
1-SIDE CHAIR
RM #2) 1-DESK 64x30
1-36" Rd TABLE
1-42" 2 drwr LAT
1-36" BOOKCASE-3 sh.
2-TASK CHAIRS
1-SIDE CHAIR
RM #3) 1-DESK 64"x30"
1-CREDENZA 64x20
2-SIDE CHAIR
1-TASK CHAIR
RM #4) 1-DESK 64x30
1-36" 2 drwr LAT
1-36" Rd TABLE
1-36" BOOKCASE-3 sh
1-TASK CHAIR
2-SIDE CHAIR
RM #5) 1-DESK 64"x30"
1-CREDENZA 64x20
1-36" Rd TABLE
1-36" 2 drwr LAT
2-36" BOOKCASE-2 sh.
1-TASK CHAIR
2-SIDE CHAIR
RM #6) 1-DESK 64x30
1-36" Rd TABLE
1-36" BOOKCASE-2 sh.
RM #7) 1-DESK 64x30
1-CREDENZA 64x20
1-36" BOOKCASE-2 sh
2-SIDE CHAIR
1-TASK CHAIR
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
ATTACHMENT A
To
EXHIBIT B
<PAGE>
RM #8) 1-DESK 64x30
1-CREDENZA 64x20
1-36" BOOKCASE-3 sh
1-30" 2 drwr LAT.
1-TASK CHAIR
1-SIDE CHAIR
RM #9) 1-DESK 64x30
1-CREDENZA 64x20
1-36" 2 drwr LAT.
1-30" BOOKCASE-3 sh
1-36" BOOKCASE-2 sh.
1-30"x60" TABLE
3-SIDE CHAIR
1-TASK CHAIR
RM #10) 1-DESK 64x30
1-36" 2 drwr LAT
1-36" BOOKCASE-2 sh.
1-36" BOOKCASE-3 sh.
1-36" Rd TABLE
3-SIDE CHAIR
1-TASK CHAIR
RM #11) 1-DESK 64x30
2-2 drwr LAT 36"
1-36" BOOKCASE-2 sh.
1-36" BOOKCASE-3 sh.
1-36" Rd TABLE
2-SIDE CHAIR
1-TASK CHAIR
RM #12) 1-DESK 64x30
1-CREDENZA 64x20
1-36" Rd TABLE
1-36" BOOKCASE-3 sh.
1-SIDE CHAIR
1-TASK CHAIR
1-36" BOOKCASE-2 sh.
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CONF. ROOMS
RM #21) 1-CONF. TABLE 14'x54"
MAIN RM 1-48" Rd TABLE
1-48"x48" MARKER BOARD CAB.
34-SIDE CHAIRS
CONF 1-CONF. TABLE 12'x48"
RM # 22) 1-48"x48" MARKER BOARD CAB.
1-36" 2 drwr LAT
4-SLEDBASE CHAIRS
7-TASK CHAIRS
#23 TRAINING RM)
10-48"x24" KINETICS TABLES
9-48"x30" KINETICS TABLES
1-60"x30" KINETICS TABLES
#24 BREAK RM
IN TRAINING)
2-48" Rd TABLES
8-CHAIRS
#25 LOBBY) 5-LOBBY CHAIRS
2-36" Rd LOBBY TABLES
#26 VIDEO CONF. RM)
12-SIDECHAIRS
1-CREDENZA 74"x20"
1-CONF. TABLE 84"x156x30"
[GRAPHIC]
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
#27 DEMO RM.)
9-430 HAWORTH FREESTANDING TABLES
1-48" Rd TABLE
-48" 2 drwr LAT.
8-SIDE CHAIRS
3-TASK CHAIRS
#28 COPY AREA)
1-36" 2 drwr LAT FILE
2-4 drwr VERT. FILE
#29 MAIN BREAK RM.)
3-30"x60" TABLE
12-CHAIRS
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CUBE #1) 2-430 WS
1-4' CORNER
1-4' SHELF
1-4' FD
2-4' T.L.
1-WSSP
1-12,12 PED
1-6612 PED
1-416 TB
1-KEYBOARD
1-SIDE CHAIR
1-TASK CHAIR
CUBE #2) 2-430 WS
1-CORNER 4'
1-4' SHELF
1-4' FD
2-4' TL
1-416 TB
1-12,12 PED
1-6612 PED
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
1-WSSP
CUBE #3) 2-430 WS
1-4' CORNER
1-4' SHELF
1-4' FD
2-4' TL
1-416 TB
1-6612 PED
1-AKP
2-TASK CHAIR
0-SIDE CHAIR
CUBE #4) 2-430 WS
1-4' CORNER
1-4' SHELF
1-4' FD
2-4' TL
1-416 TB
2-1212 PED
1-6612 PED
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
1-WSSP
1-36" BOOKCASE - 2 sh.
1-42" 2 drwr LAT.
CUBE #5) 2-430 WS
1-4' CORNER
1-4' SHELF
1-4' FD
2-4' TL
1-WSSP
1-AKP
2-1212 PED
1-6612 PED
1-416TB
1-SIDE CHAIR
1-TASK CHAIR
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
#7) 2-430 WKS
1-CORNER 4'
1-END SUPPORT
1-4' SH shelf
1-4' FD
1-T.B.
2-4' T.L.
2-S.CHAIR side
1-T.CHAIR Task
2-1212 PEDS
1-6612 PEDS
1-AKP
#8) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' SH
1-4' F.D.
1-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#9) 2-430 WKS
1-CORNER
1-END SPPT
1-4' SH
1-4' F.D.
1-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
2-AKPS
#10) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' SH
1-4' F.D.
2-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#11) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' SH
1-4' F.D.
2-T.B.
2-4' T.L.
2-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#12) 3-430 WKS
1-CORNER 4'
1-END SPPT
1-4' SH
1-4' F.D.
1-T.B.
2-4' T.L.
1-S.CH
1-T.CH
3-1212 PEDS
1-6612 PEDS
1-AKP
#13) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' SH
1-4' F.D.
1-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#14) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#15) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
2-AKPS
#16) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CUBE #23) 2-430 WS
1-4' CORNER
1-WSSP
1-4' FD
1-4' SHELF
2-416 TB
2-1212 PED
1-6612 PED
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
1-36" BOOKCASE 2 sh.
CUBE #22) 2-430 WS
1-4' CORNER
1-WSSP
1-4' SHELF
1-4' FD
2-4' TL
1-416 TB
1-1212 PED
1-6612 PED
1-AKP
1-TASK CHAIR
1-42" 2 drwr LAT.
CUBE #21) 2-430 WS
1-4' CORNER
1-WSSP
1-4' FD
1-4' SHELF
2-4' T.L.
2-416 TB
1-1212 PED
1-6612 PED
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
1-36" BOOKCASE - 2 sh.
CUBE #50) 2-430 WS
MARYLIN 1-4' CORNER
1-330 WS
1-WSSP
2-4' FD
2-4' T.L.
1-1212 PED
1-6612 PED
2-416 TB
1-AKP
2-SIDE CHAIR
1-TASK CHAIR
1-30" 2 drwr LAT
1-36" BOOKCASE - 2 sh.
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
#17) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#18) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
0-T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#19) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
0-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#20) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-4' S.H.
1-S.CH
2-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#26) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#27) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
2-6612 PEDS
1-AKP
#28) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
2-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#29) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
2-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#30) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#31) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
#32) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#33) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
2-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#34) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#35) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#36) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#37) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#38) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#39) 2-430 WKS
1-CORNER 4'
1-END SPPT
0-S.H.
1-4' F.D.
1-4' T.B.
1-4' T.L.
1-S.CH
1-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
#40) 2-430 WKS
1-CORNER 4'
1-END SPPT
1-4' S.H.
1-4' F.D.
1-4' T.B.
2-4' T.L.
1-S.CH
3-T.CH
2-1212 PEDS
1-6612 PEDS
1-AKP
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CUBE #43) 1-330 WS
1-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' T.L.
1-416 TB.
1-6612 PED
1-3612 PED
1-WSSP
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
CUBE #42) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' T.L.
1-W.S.S.P.
1-6612 PED
1-3612 PED
1-416 T.B.
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
CUBE #41) 2-430 WS
1-4' CORNER
1-WSSP
1-4' FD
1-4' SHELF
1-416 TB
1-6612 PED
1-1212 PED
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
CUBE #25) 2-430 WS
1-4' CORNER
1-4' F.D.
1-4' SHELF
1-416 TB
1-W.S.S.P.
1-1212 PED
1-6,6,12 PED
1-SIDE CHAIR
1-TASK CHAIR
1-AKP
CUBE #24) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' TL
2-1212 PEDS
1-6612 PEDS
1-WSSP
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
1-36" BOOKCASE 2 sh.
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CUBE #48) 2-430 WS
1-4' CORNER
1-4' F.D.
1-4' SHELF
2-4' T.L.
1-WSSP
1-12,12 PED
1-6,6,12 PED
1-416 TB
1-TASK CHAIR
1-SIDE CHAIR
CUBE #47) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' TL
1-WSSP
1-1212 PED
1-6612 PED
1-416 TB
1-AKP
1-TASK CHAIR
1-SIDE CHAIR
CUBE #46) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
1-416 TB
2-4' T.L.
1-1212 PED
1-6612 PED
1-WSSP
1-AKP
1-SIDE CHAIR
1-TASK CHAIR
CUBE #45) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' T.L.
1-6612 PED
1-4' T.B.
1-AKP
1-TASK CHAIR
CUBE #44) 2-430 WS
1-4' CORNER
1-4' FD
1-4' SHELF
2-4' T.L.
1-WSSP
1-6,6,12 PED
1-3,6,12 PED
1-416 TB
1-SIDE CHAIR
1-TASK CHAIR
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
CUBE #49 2-530 WS
RECEPTION) 2-1212 PED
2-6612 PED
3-5' T.L.
1-AKP
3-TASK CHAIR
1-730 WS
3-515 CTSE
________________________________________________________________________________
PROJECT:
Integrated Services ____________________________________________
33415 Western Avenue DESCRIPTION:
Union City, CA 94587 ____________________________________________
(510) 487-7701 o Fax (510) 471-3349 JOB# DATE: SCALE: DRAWN BY:
________________________________________________________________________________
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of April 5, 1999 between
HealthGate Data Corp., a Delaware corporation (the "Company"), GE Capital Equity
Investments, Inc., a Delaware corporation (the "Purchaser"), and Blackwell
Science, Ltd., an English company ("Blackwell"). Except as otherwise indicated,
capitalized terms used herein are defined in Section 7 hereof.
WHEREAS, the Company desires to sell to the Purchaser and Blackwell
shares of its Series E Redeemable Convertible Preferred Stock, $.01 par value
("Series E Preferred"), upon the terms and conditions contained herein; and
WHEREAS, the Purchaser and Blackwell desire to purchase shares of
Series E Preferred Stock;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. AUTHORIZATION OF THE PREFERRED STOCK. The Company has, or
before each of the respective Closings (as defined in Section 2) will have,
duly authorized the sale and issuance of, pursuant to the terms of this
Agreement, 720,757 shares of its Series E Preferred, having the rights,
restrictions, privileges and preferences set forth in the Amendment to the
Amended and Restated Certificate of Incorporation of the Company in the form
set forth in EXHIBIT A attached hereto (the "Amendment to the Certificate of
Incorporation"). As used herein, "Certificate of Incorporation" shall mean
the Company's Amended and Restated Certificate of Incorporation, as amended
by all prior amendments to the Amended and Restated Certificate of
Incorporation and by the Amendment to the Certificate of Incorporation. The
Series E Preferred is convertible into shares of the Company's Common Stock
as provided in the Amendment to the Certificate of Incorporation. The Company
has, or before the Initial Closing (as defined in Section 2.1) will have,
adopted and filed the Amendment to the Certificate of Incorporation with the
Secretary of State of the State of Delaware.
2. PURCHASE AND SALE OF SERIES E PREFERRED. At the Initial
Closing, the Company will (i) sell to the Purchaser, and the Purchaser will
purchase from the Company, 87,364 shares of Series E Preferred at a price of
U.S. $11.4463 per share, for the total purchase price of U.S. $999,994.55
(the "Initial Shares") and (ii) issue to Blackwell 174,729 shares of Series E
Preferred (the "Conversion Shares") in exchange for the delivery by Blackwell
to the Company of its Convertible Bridge Promissory Note dated September 29,
1998 in the original principal amount of $2 million (the "Note"). Following
and subject to the satisfaction, or waiver by the Purchaser, of the
conditions to the Second Closing (as defined in Section 2.1) set forth in
Section 3, at the Second Closing, the Company will (i) sell to the Purchaser,
and the Purchaser will purchase from the Company 458,664 shares of Series E
Preferred at a price of U.S. $11.4463 per share, for the total purchase price
of $5,250,005.74 (the "Additional Shares" and collectively with the Initial
Shares, the "GE Shares").
- 1 -
<PAGE>
2.1 THE CLOSINGS. The closing of the purchase and sale of
the Initial Shares (the "Initial Closing") and the conversion of the Note
into Conversion Shares will take place at the offices of the Company's
counsel, Rich, May, Bilodeau & Flaherty, P.C., 294 Washington Street, Boston,
Massachusetts, at 10:00 a.m. on the first business day after all conditions
to the obligation of the Purchaser or Blackwell, as the case may be, to
purchase the shares to be purchased by it at the Initial Closing (other than
conditions to be satisfied at the Initial Closing) have been satisfied, or
waived by the Purchaser or Blackwell, as the case may be, or at such other
place or on such other date as may be mutually agreeable to the Company,
Blackwell and the Purchaser (the "Initial Closing Date"). The closing of the
purchase and sale of the Additional Shares (the "Second Closing" and
collectively with the Initial Closing, the "Closings") will take place at the
offices of the Company's counsel, Rich, May, Bilodeau & Flaherty, P.C., 294
Washington Street, Boston, Massachusetts, at 10:00 a.m. on the first business
day after all the conditions to the obligation of the Purchaser to purchase
the Additional Shares (other than conditions to be satisfied at the Second
Closing) have been satisfied, or waived by the Purchaser (the "Second Closing
Date" and collectively with the Initial Closing Date, the "Closing Dates").
At the Initial Closing, the Company will deliver to (i) the Purchaser a
certificate or certificates evidencing the Initial Shares to be purchased by
the Purchaser, registered in the Purchaser's name, against payment by wire
transfer of immediately available funds to the Company's account of U.S.
$999,994.55 and (ii) Blackwell a certificate or certificates evidencing the
Conversion Shares to be converted by Blackwell, registered in Blackwell's
name, against the return and cancellation of the Note. At the Second Closing,
the Company will deliver to the Purchaser a certificate or certificates
evidencing the Additional Shares to be purchased by the Purchaser, registered
in the Purchaser's name, against payment by wire transfer of immediately
available funds to the Company's account of U.S. $5,250,005.74.
3. CONDITIONS OF THE PURCHASER'S AND BLACKWELL'S OBLIGATION AT THE
INITIAL CLOSING. The obligation of the Purchaser and Blackwell to purchase
and pay for the Initial Shares and Conversion Shares, respectively, is
subject to the satisfaction or waiver by the Purchaser or Blackwell, as the
case may be, on the date of the Initial Closing of the following conditions:
3.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in Section 6 hereof will be true, complete and
correct in all material respects at and as of the Initial Closing as though
then made.
3.2 AMENDMENT OF THE COMPANY'S CERTIFICATE OF
INCORPORATION. The Company's Certificate of Incorporation will be amended
to include the provisions set forth in EXHIBIT A attached hereto, will be in
full force and effect at the Initial Closing as so amended and will not have
been further amended or modified.
3.3 REGISTRATION AGREEMENT AND STOCKHOLDERS AGREEMENT.
The Company, Blackwell and the Purchaser will have entered into a
Registration Agreement, in substantially the form set forth in EXHIBIT B
attached hereto (the "Registration Agreement"), and the Registration
Agreement will be in full force and effect as of the Initial Closing and the
Company shall have obtained requisite consents and waivers from the
stockholders of the Company who are entitled to registration rights. The
Company, the Purchaser, Blackwell and the other parties thereto will have
entered into an amended Stockholders Agreement, in substantially the form set
forth in EXHIBIT F attached hereto (the "Stockholders Agreement").
- 2 -
<PAGE>
3.4 OPINION OF THE COMPANY'S COUNSEL. The Purchaser and
Blackwell will have received from Rich, May, Bilodeau & Flaherty, P.C.,
counsel for the Company, its opinion, which shall be in the form set forth in
EXHIBIT C attached hereto and which will be addressed to the Purchaser and
Blackwell and dated the date of the Initial Closing.
3.5 CLOSING DOCUMENTS. The Company will have delivered
to the Purchaser and Blackwell all of the following documents:
(i) an Officer's Certificate, dated the date of the
Initial Closing, stating that the conditions specified in
Section 1 and Sections 3.1 through 3.3, inclusive, have been
fully satisfied;
(ii) certified copies of the resolutions (a) duly
adopted by the Company's board of directors authorizing the
execution, delivery and performance of this Agreement, the
Stockholders Agreement, the Registration Agreement and each of
the other agreements contemplated hereby, the Certificate of
Incorporation, the issuance and sale of the Series E
Preferred, the reservation for issuance upon conversion of the
Series E Preferred of an additional 720,757 shares of Common
Stock, and all other transactions contemplated by this
Agreement and (b) duly adopted by the Company's stockholders
approving the Amendment to Certificate of Incorporation;
(iii) certified copies of the Certificate of
Incorporation and the Company's bylaws, each as in effect as
of the Initial Closing; and
(iv) such other documents relating to the
transactions contemplated by this Agreement as the Purchaser
or its counsel may reasonably request.
3.6 PROCEEDINGS. All corporate and other proceedings
taken or required to be taken in connection with the transactions
contemplated hereby to be consummated at or prior to the Initial Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Purchaser and the Purchaser's counsel.
3.7 COMPLIANCE WITH LAWS. No statute, rule, regulation,
order or decree shall be in effect which prohibits the consummation of the
transactions to be performed at the Initial Closing.
3.8 GOVERNMENTAL OR THIRD PARTY CONSENTS. Any consents,
approvals or filings of or with any governmental authority or third party
required in connection with the transactions contemplated by this Agreement
will have been obtained or made. All consents and waivers required to be
obtained from any stockholders of the Company in connection with the
transactions contemplated hereby shall have been obtained.
3.9 MATERIAL ADVERSE EVENTS. There will not have occurred
any event or events which, singly or in the aggregate, have or would
reasonably be expected to have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of the
Company and its Subsidiaries.
- 3 -
<PAGE>
3.10 PETRA CAPITAL LOAN. The Loan and Security Agreement
dated as of March 16, 1998, by and between the Company and Petra Capital,
L.L.C. shall have been amended to permit the issuance of "Senior Debt" in an
amount equal to the Company's stockholders' equity and to delete the
requirement that William Reece remain Chief Executive Officer of the Company.
The Registration Rights Agreement dated as of March 26, 1998, by and between
the Company and Petra Capital, L.L.C. shall have been amended to prohibit any
sale or disposition of shares of capital stock of the Company by Petra
Capital for 180 days following the consummation of a Public Offering.
3.11 AMENDMENT TO PURCHASE AGREEMENTS. The Company
shall have entered into an amendment to the Purchase Agreements between the
Company and certain of its stockholders, in the form attached hereto as
EXHIBIT E.
3.12 INTEREST ON BLACKWELL NOTE. In connection with the
exchange of the Note for the Conversion Shares, the Company shall pay to
Blackwell all interest accrued on the Note in cash concurrently with the
INITIAL Closing.
3.13 SIMULTANEOUS CLOSING. The purchase by the Purchaser
of the Initial Shares and by Blackwell of the Conversion Shares shall occur
simultaneously.
CONDITIONS OF THE COMPANY'S OBLIGATION AT THE INITIAL
CLOSING. The obligation of the Company to issue and sell Series E Preferred
Stock at the Initial Closing is subject to the satisfaction on or before the
date of the Initial Closing of the following conditions:
3.14 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Purchaser contained in Section 8.4 hereof will be true
and correct in all material respects at and as of the Initial Closing as
though then made.
3.15 STOCKHOLDERS AGREEMENT. The Company, the Purchaser,
Blackwell and the other parties thereto will have entered into the
Stockholders Agreement substantially in the form attached hereto as EXHIBIT F.
3.16 AMENDMENT TO PURCHASE AGREEMENT. The Company shall
have entered into an amendment to the Purchase Agreements between the Company
and certain of its stockholders, in the form attached hereto as EXHIBIT E.
3.17 PROCEEDINGS. All corporate and other proceedings
taken or required to be taken in connection with the transactions
contemplated hereby to be consummated at or prior to the Initial Closing and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Company and the Company's counsel.
3.18 GOVERNMENTAL OR THIRD PARTY CONSENTS. Any consents,
approvals or filings of or with any governmental authority or third party
required in connection with the transactions contemplated by this Agreement
will have been obtained or made. All consents and waivers required to be
obtained from any stockholders of the Company in connection with the
transactions contemplated hereby shall have been obtained.
- 4 -
<PAGE>
CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE SECOND
CLOSING. The obligation of the Purchaser to purchase and pay for the
Additional Shares at the Second Closing is subject to the satisfaction or
waiver by the Purchaser, on the date of the Second Closing, of each of the
conditions set forth in Section 3.1 through 3.11 as though each such
condition referred to the date of the Second Closing and of the following
additional conditions:
3.19 NEJM AGREEMENTS. Agreements by and between the NEW
ENGLAND JOURNAL OF MEDICINE ("NEJM") and the Company, as summarized in the
term sheet dated as of February 17, 1999, to host and distribute online the
NEJM and related consumer content ("NEJM Agreements"), will have been
executed on terms reasonably satisfactory to the Purchaser, and such
agreements will be in full force and effect.
4. COVENANTS. The rights of the Purchaser and Blackwell under
Article 4 (other than Sections 4.1(vii), 4.3 (last sentence thereof), 4.8 and
4.11) shall terminate at such time as the Purchaser or Blackwell,
respectively, no longer owns any shares of Series E Preferred.
4.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company will deliver to the Purchaser (so long as the Purchaser holds any
Series E Preferred) and to Blackwell (so long as Blackwell holds any Series E
Preferred) and to each transferee of the Purchaser or Blackwell who has
acquired and holds 100,000 shares of Series E Preferred (a "Qualified
Transferee")
(i) as soon as available but in any event within 30
days after the end of each monthly accounting period in each
fiscal year, (a) unaudited consolidated statements of income
and cash flows and changes in consolidated financial position
of the Company and its Subsidiaries for such monthly period
and for the period from the beginning of the fiscal year to
the end of such monthly period and consolidated balance sheets
of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the
annual budget and to the corresponding period in the preceding
fiscal year, all prepared in accordance with generally
accepted accounting principles, consistently applied, and (b)
a management summary of the month's events including new
business development, material legal matters, bookings,
backlogs, staffing levels, and sales projections;
(ii) accompanying the statements referred to in
subparagraph (i), an Officer's Certificate stating that there
is no Event of Noncompliance in existence and that there has
occurred no event of default under any other material
agreement to which the Company or any of its Subsidiaries is a
party or, if any Event of Noncompliance or any such event of
default exists, specifying the nature and period of existence
thereof, and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto;
(iii) as soon as practicable and in any event within
90 days after the end of each fiscal year, audited
consolidated statements of income and cash flows and changes
in financial position of the Company and its Subsidiaries for
such fiscal year, and consolidated balance sheets of the
Company and its Subsidiaries as of the
- 5 -
<PAGE>
end of such fiscal year, setting forth in each case
comparisons to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles,
consistently applied, and accompanied by, with respect to the
consolidated portions of such statements, an audit opinion by
a Big Five public accounting firm selected by the Company;
(iv) promptly upon receipt thereof, a copy of the
annual management letter of the Company's independent
accountants to the Company's board of directors and any
additional reports, management letters or other detailed
information concerning significant aspects of the Company's
operations and financial affairs given to the Company by its
independent accountants (and not otherwise contained in other
materials provided hereunder);
(v) at least 30 days prior to the end of each fiscal
year, an annual operating budget prepared on a monthly basis
for the Company and its Subsidiaries for the succeeding fiscal
year (displaying anticipated statements of income, changes in
financial position and balance sheets) and an annual budget
for capital expenditures of the Company and its Subsidiaries,
which budgets shall be approved by the Company's board of
directors, and promptly upon preparation thereof any other
significant budgets which the Company prepares, and any
revisions of such annual or other budgets;
(vi) promptly (but in any event within five business
days) after the discovery or receipt of notice of any Event of
Noncompliance, any event of default under any material
agreement to which it or any of its Subsidiaries is a party,
or any other material adverse event or circumstance affecting
the Company or any Subsidiary (including the filing of any
material litigation against the Company or any Subsidiary
which, if determined adversely, would have a material adverse
effect on the business, assets, financial condition, results
of operations or prospects of the Company and its Subsidiaries
taken as a whole), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken and propose to take
with respect thereto;
(vii) promptly upon transmission thereof, copies of
the Company's Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Reports on Form 8-K and Annual Reports to
Stockholders filed with the Securities and Exchange
Commission; and
(viii) with reasonable promptness, such other
information and financial data concerning the Company as any
Person entitled to receive materials under this Section 4.1
may reasonably request.
Except as otherwise required by law or judicial order or decree or by any
governmental regulatory agency or authority, the Purchaser and each Person
receiving information regarding the Company pursuant to Sections 4.1 or 4.2 will
use commercially reasonable efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Person may
- 6 -
<PAGE>
disclose any financial information regarding the Company and its Subsidiaries
in connection with the transfer of Series E Preferred or Underlying Common
Stock if such Person's transferee agrees in writing to be bound by the
provisions hereof. As a condition to disclosure of such information to any
Person other than the Purchaser, the Company may request receipt of written
confirmation by such Person that such Person will abide by the foregoing
confidentiality provisions.
4.2 INSPECTION OF PROPERTY. The Company will permit any
representatives designated by any Person (so long as such Person holds
100,000 shares of Series E Preferred) upon reasonable notice and during
normal business hours, to (i) visit and inspect any of the properties of the
Company, (ii) examine the corporate and financial records of the Company and
make copies thereof or extracts therefrom and (iii) discuss the affairs,
finances and accounts of the Company and its Subsidiaries with the directors,
officers, key employees and independent accountants of the Company, in each
case subject to the confidentiality provisions of the last subsection of
Section 4.1 and provided that such visits, inspections, examinations and
discussions will be at such Person's expense and will not unreasonably
interfere with the Company's normal business operations and that the Company
will not be required to disclose hereunder any technical proprietary
information relating to its business.
4.3 BOARD OF DIRECTORS. At or prior to each of the
respective Closings, the Company will have caused stockholders (including the
Purchaser) to enter into the Stockholders Agreement in the form of Exhibit F
attached hereto providing for, INTER ALIA, (i) fixing the number of directors
of the Company at seven and (ii) electing a designee of the Purchaser as a
director of the Company. Effective with the closing of the Public Offering,
unless otherwise agreed by the Purchaser, the Company shall cause its Board
of Directors to nominate, and shall recommend for election as a Class III
director of the Company, one designee of the Purchaser.
4.4 RESTRICTIONS. The Company will not, without the
consent of holders of at least 66-2/3% of the Series E Preferred, from and
after the date hereof:
(i) redeem, purchase or otherwise acquire, or permit any
Subsidiary to redeem, purchase or otherwise acquire, any of the
Company's equity securities or any securities exercisable for,
exchangeable for or convertible into such equity securities, except
pursuant to the terms and provisions of the Certificate of
Incorporation, and except for the repurchase of Common Stock from
employees under agreements requiring such employees to sell their
shares of Common Stock to the Company upon termination of employment;
(ii) unless approved by the Company's board of directors,
make, or permit any Subsidiary to make, any loans or advances to,
guarantees for the benefit of, or Investments in, any Person (other
than a wholly-owned Subsidiary), except for (a) advances to employees
in the ordinary course of business and (b) Investments having a stated
maturity no greater than one year from the date the Company makes such
Investment in obligations of the United States government or any agency
thereof or obligations guaranteed by the United States government,
certificates of deposit of commercial banks having combined capital and
surplus of at least $50 million, commercial paper with a rating of at
least "Prime-1" according to Moody's Investors Service, Inc. or
money-market funds with assets of at least $25 million;
- 7 -
<PAGE>
(iii) liquidate or dissolve or effect a recapitalization or
reorganization in any form of transaction (except as otherwise
permitted by this Agreement);
(iv) enter into, or permit any of its Subsidiaries to enter
into, any agreement or instrument, which by its terms would restrict
the Company's ability to perform any of its obligations pursuant to the
terms of this Agreement, the Registration Agreement, the Certificate of
Incorporation, the Stockholders Agreement or the Company's bylaws
(including, without limitation, all obligations relating to making
redemptions of the Series E Preferred);
(v) except as contemplated by this Agreement, (a) make any
amendment to the Certificate of Incorporation or the Company's bylaws,
unless such amendment is approved by a majority of the Company's board
of directors, or (b) file any resolution of the board of directors or a
certificate of designation with the Secretary of State of the State of
Delaware containing any provisions which would adversely affect the
rights of the holders of the Series E Preferred or the Underlying
Common Stock under this Agreement, the Certificate of Incorporation,
the Company's bylaws, the Stockholders Agreement or the Registration
Agreement or (c) issue any Series E Preferred to any person other than
the Purchaser or its nominee or transferee;
(vi) directly or indirectly, or permit any Subsidiary to
directly or indirectly, enter into, amend or terminate any contract,
arrangement or transaction with a Related Party, except for the payment
of salary and benefits entered into in the ordinary course of business;
(vii) increase the compensation paid to any of the Company's
officers, except pursuant to any employment agreement or arrangement as
in existence as of the Initial Closing, or enter into any new or
amended employment agreement or arrangement with any officer of the
Company, unless such increase, agreement or arrangement is approved by
a majority of the disinterested members of the Compensation Committee
of the Company;
(viii) increase the authorized size of its board of directors
above seven members;
(ix) incur, assume or otherwise suffer to exist any Debt
except (x) Debt reflected on the Company's and its Subsidiaries'
unaudited consolidated balance sheet dated as of December 31, 1998 and
delivered to the Purchaser and Blackwell in connection with the
issuance of Series E Preferred, or (y) "Senior Debt" (as defined in the
Loan and Security Agreement by and between the Company and Petra
Capital, LLC, dated March 26, 1998) in an amount up to the amount of
the Company's stockholders' equity (for purposes of this Agreement,
"Debt" means, without duplication, (a) all obligations for borrowed
money and all obligations evidenced by bonds, debentures, notes or
other similar instruments on which interest charges are customarily
paid, (b) all obligations, contingent of otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of the Company or its
Subsidiaries, (c) all capitalized lease obligations (to the extent
required by generally accepted accounting principles to be included on
the balance sheets) and (d) all obligations (contingent or otherwise)
to
- 8 -
<PAGE>
guarantee, purchase or otherwise acquire, or otherwise assure a
creditor against loss in respect of, Debt of another person);
(x) sell, lease or exchange, or permit any Subsidiary to
sell, lease or exchange, any assets of the Company and/or any
Subsidiary representing in the aggregate more than 10% of the Company's
Consolidated Net Worth, except for sales in the ordinary course of
business;
(xi) acquire (including pursuant to a merger or
consolidation), or permit any Subsidiary to acquire, all or any
substantial portion of the business or assets of any Person, where the
acquisition involves an aggregate consideration of more than $2
million, unless (i) such transaction has been approved by the holders
of 66 2/3% of the outstanding shares of Series E Preferred and (ii)
after giving effect to such transaction or series of transactions, the
Company would be in compliance with the covenants set forth in Section
4.4 hereof;
(xii) declare, pay or set aside any dividends or
distributions on any class of stock; or
(xiii) engage in any business or line of business other than
the hosting, development and provision of interactive health and
wellness information solutions and related electronic commerce.
4.5 EQUITY SECURITY RESTRICTIONS.
(i) The Company will not, without the consent of holders of
at least 66-2/3% of the Series E Preferred outstanding, authorize,
issue or enter into any agreement providing for the issuance
(contingent or otherwise) of any notes or debt securities containing
equity features (including, without limitation, any notes or debt
securities convertible into or exchangeable or exercisable for equity
securities, issued in connection with the issuance of equity securities
or containing profit participation features), or any equity securities
(or any securities convertible into, or exchangeable or exercisable
for, any equity securities) ranking senior as to dividends or upon
liquidation to the Common Stock.
(ii) Except as expressly contemplated by this Agreement, the
Company will not authorize, issue or enter into any agreement providing
for the issuance (contingent or otherwise) of any New Securities (or
any securities convertible into, or exchangeable or exercisable for,
any New Securities) unless:
(A) The Company delivers written notice (the "Right
of First Offer Notice") of such proposed issue to the holders
of Series E Preferred (i) at least 15 days prior to such
proposed issue or to the execution of any agreement to issue
any such securities, if the aggregate offering price of such
proposed issue shall be $2.5 million or less, or (ii) at least
30 days prior to such proposed issue or to the execution of
any agreement to issue any such securities, if the aggregate
offering price of such proposed issue shall be more than $2.5
million. The Right of First Offer Notice will set forth in
reasonable detail the terms and conditions of such
- 9 -
<PAGE>
proposed issue, and will be deemed to be an offer to the
holders of Series E Preferred to purchase on a pro rata basis
based on the number of shares of Series E Preferred owned by
each such holder any or all of the securities described in the
Right of First Offer Notice, at the same price and on the same
terms as those set forth in the Right of First Offer Notice;
(B) The holders of Series E Preferred shall be
entitled to purchase on a pro rata basis based on the number
of shares of Series E Preferred owned by each such holder such
amount of the securities described in the Right of First Offer
Notice as shall be set forth in a notice to the Company in
writing (i) within 15 days after receipt of the Right of First
Offer Notice, if the aggregate offering price of such proposed
issue shall be $2.5 million or less, or (ii) within 30 days
after receipt of the Right of First Offer Notice, if the
aggregate offering price of such proposed issue shall be more
than $2.5 million. The holders of Series E Preferred shall
have until the later of (1) 30 days (50 days in the case of an
issue in excess of $2.5 million) after the date of the Right
of First Offer Notice and (2) 10 days after the receipt of all
required governmental and third party consents and approvals
to consummate the purchase of such amount of the securities
described in the Right of First Offer Notice as it timely
elected to purchase; and
(C) If any Series E Preferred holder declines to
exercise its rights under this paragraph (ii) in whole or in
part, the other Series E Preferred holders shall be entitled
to purchase on a pro rata basis based on the number of shares
of Series E Preferred owned by each such holder such amount of
securities declined by such Series E Preferred holder. Once
all the Series E Preferred holders exercise or decline to
exercise their rights under this paragraph (ii), the Company
shall be entitled, subject to paragraph (iii) below and
without limiting the rights of the holders of Series E
Preferred under any other provision of this Agreement, the
Certificate of Incorporation or by-laws of the Company, the
Shareholders Agreement or the Registration Rights Agreement,
to issue the securities not purchased by the holders of Series
E Preferred on the terms and conditions set forth in the Right
of First Offer Notice (and in no event on terms less favorable
to the Company), but no later than 90 days after the date of
the Right of First Offer Notice.
(iii) Except as expressly contemplated by this Agreement and
subject to the rights of the holders of Series E Preferred under
paragraph (ii) above, the Company will not authorize, issue or enter
into any agreement providing for the issuance (contingent or otherwise)
of any New Securities (or any securities convertible into, or
exchangeable or exercisable for, any New Securities) unless:
(A) The Company delivers written notice (the "Equity
Notice") of such issue or agreement to issue to the holders of
Series E Preferred and each Qualified Transferee at least 15
days prior to such proposed issue, but in any event not more
than 15 days after entering into any agreement to issue any
such securities. The Equity Notice will set forth in
reasonable detail the terms and conditions of such proposed
issue, and will be deemed to be an offer to the holders of
Series E Preferred and each Qualified Transferee to purchase
their respective Allotments (as
- 10 -
<PAGE>
defined in (B) below) of the securities described in the
Equity Notice, at the same price and on the same terms as
those set forth in the Equity Notice;
(B) Each holder of Series E Preferred and each
Qualified Transferee shall be entitled to purchase up to the
amount of the securities described in the Equity Notice equal
to the product of (i) the number that results from dividing
the number of shares of Underlying Common Stock held by such
holder of Series E Preferred or Qualified Transferee
immediately prior to the proposed issue by the number of
shares of Common Stock outstanding on a Fully Diluted Basis
immediately prior to the proposed issue, and (ii) the number
of such securities proposed to be issued by the Company, after
subtracting any of such securities purchased by the holders of
Series E Preferred pursuant to paragraph (ii) above (its
"Allotment");
(C) Each holder of Series E Preferred and each
Qualified Transferee shall inform the Company in writing
within 15 days after receipt of the Equity Notice whether it
elects to purchase all or any part of its Allotment, and shall
have until the latest of (i) the closing of the sale of the
securities described in the Equity Notice, (ii) 30 days after
the date of the Equity Notice and (iii) 10 days after the
receipt of all required governmental and third party consents
and approvals to consummate the purchase of such part of its
Allotment as it timely elected to purchase;
(iv) The provisions of Sections 4.5(ii) and (iii) shall not
apply to New Securities issued (i) pursuant to the acquisition of
another corporation or other entity by the Company by merger, share
exchange, purchase of substantially all of the assets, or
reorganization, (ii) to employees, consultants, officers or directors
pursuant to an equity incentive plan approved by the Board, (iii) in
amounts less than $500,000 in any single transaction (a "Minor
Transaction") where the purchase price is not less than the then
applicable Conversion Price per share (as defined in the Amendment to
the Certificate of Incorporation); provided that the aggregate amount
of all Minor Transactions shall not exceed $1.5 million or (iv) in a
Public Offering.
(v) The Company shall not issue the 108,935 shares of Series E
Preferred Stock that will remain authorized but unissued under the
Amendment to the Certificate of Incorporation upon the issuance of
720,757 shares of Series E Preferred Stock pursuant to this Purchase
Agreement.
4.6 AFFIRMATIVE COVENANTS. The Company will, and will
cause each Subsidiary to:
(i) at all times cause to be done all things reasonably
necessary to maintain, preserve and renew its corporate existence and
all material licenses, authorizations and permits necessary to the
conduct of its businesses;
(ii) maintain and keep its properties in good repair, working
order and condition, ordinary wear and tear excepted, and from time to
time make all necessary or desirable
- 11 -
<PAGE>
repairs, renewals and replacements, so that its businesses may be
properly and advantageously conducted at all times, except where the
failure to so comply would not have a material adverse effect on the
business, assets, financial condition, results of operations or
prospects of the Company and its Subsidiaries taken as a whole;
(iii) pay and discharge when payable all taxes, assessments
and governmental charges imposed upon its properties or upon the income
or profits therefrom (in each case before the same become delinquent
and before penalties accrue thereon) and all claims for labor,
materials or supplies which if unpaid might by law become a lien upon
any of its property, to the extent to which the failure to so pay or
discharge might reasonably be expected to have a material adverse
effect upon the business, assets, financial condition, results of
operations or prospects of the Company and its Subsidiaries taken as a
whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect
thereto;
(iv) comply with all other obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express
or implied, as such obligations become due to the extent to which the
failure to so comply might reasonably be expected to have a material
adverse effect upon the business, assets, financial condition, results
of operations or prospects of the Company and its Subsidiaries taken as
a whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect
thereto;
(v) comply with all applicable laws, rules, regulations and
orders of all domestic and foreign governmental authorities, including,
without limitation, the Foreign Corrupt Practices Act and environmental
laws or regulations or requirements, the violation of which might
reasonably be expected to have a material adverse effect upon the
business, assets, financial condition, results of operations or
prospects of the Company and its Subsidiaries taken as a whole;
(vi) apply for and use its best efforts to continue in force
with responsible insurance companies adequate insurance covering risks
of such types and in such amounts as are customary for corporations of
similar size engaged in similar lines of business and, without limiting
the foregoing, maintain "key man" life insurance covering William S.
Reece (so long as such individual is an employee of the Company) and
naming the Company as beneficiary in the amount of $1,000,000 for such
policy, the proceeds of which will be available for general corporate
purposes of the Company; and
(vii) maintain proper books of record and account which fairly
present its financial condition and results of operations and make
provisions on its financial statements for all such proper reserves as
in each case are required in accordance with generally accepted
accounting principles, consistently applied.
- 12 -
<PAGE>
4.7 COMPLIANCE WITH AGREEMENTS. The Company will use its
best efforts to perform and observe (i) all of its obligations to each holder
of the Series E Preferred and all of its obligations to each holder of the
Underlying Common Stock set forth in the Certificate of Incorporation (as
amended prior to the Initial Closing) and the Company's bylaws and (ii) all
of its obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
4.8 CURRENT PUBLIC INFORMATION. At all times after the
Company has filed a registration statement with the Securities and Exchange
Commission pursuant to the requirements of either the Securities Act or the
Securities Exchange Act, the Company will file all reports required to be
filed by it under the Securities Act and the Securities Exchange Act and the
rules and regulations adopted by the Securities and Exchange Commission
thereunder, and will take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to Rule 144
adopted by the Securities and Exchange Commission under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission.
4.9 RESERVATION OF COMMON STOCK. The Company will at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon the conversion of the
Series E Preferred, the number of shares of Common Stock issuable upon the
conversion of all outstanding Series E Preferred. All shares of Series E
Preferred and Common Stock which are so issuable will, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company will take all such actions as may be necessary
to assure that all such shares of Series E Preferred and Common Stock may be
so issued without violation of any applicable law or governmental regulation
or any requirements of any domestic securities exchange upon which shares of
stock may be listed (except for official notice of issuance which will be
promptly transmitted by the Company upon issuance).
4.10 PROPRIETARY RIGHTS. The Company will, and will cause
each Subsidiary to, use its best efforts to possess and maintain all material
Proprietary Rights which the Company deems necessary to the conduct of their
respective businesses and own all right, title and interest in and to, or
have a valid license or right for, all material Proprietary Rights used by
the Company or any Subsidiary in the conduct of their respective businesses.
4.11 PUBLIC DISCLOSURES. The Company will not, nor will it
permit any Subsidiary to, disclose the Purchaser's name or identity as an
investor in the Company in any press release or other public announcement or
in any document or material filed with any governmental entity, without the
prior written consent of the Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of
competent jurisdiction in which case prior to making such disclosure the
Company will use reasonable efforts to give written notice to the Purchaser
describing in reasonable detail the proposed content of such disclosure and
will permit the Purchaser to review and comment upon the form and substance
of such disclosure.
4.12 USE OF PROCEEDS. The proceeds received by the Company
in connection with the sale of the Shares will be used by the Company for
general corporate purposes, including for working capital, acquisitions and
debt reduction.
- 13 -
<PAGE>
4.13 CONTENT RESTRICTIONS. Neither the Company nor any of
its Subsidiaries will host, display, provide or aggregate non-healthcare
information on its proprietary and customer websites that might be considered
pornographic, lewd or obscene in nature. The Purchaser and Blackwell
acknowledge that future issues of "Healthy Sexuality" which are consistent
with the format, content and tone of issues prior to the date of this
Agreement shall not constitute a breach of this Section 4.13.
4.14 STATUS OF DIVIDENDS.
(i) The Company will not (i) in any income tax return or
claim for refund of income tax or other submission to the Internal Revenue
Service claim a deduction in respect of amounts paid or payable under the
Series E Preferred, whether as interest or pursuant to any other statutory
provision or regulation now in effect or hereafter enacted or adopted, except
to the extent that any such deduction shall not, in the opinion of counsel
satisfactory to the Purchaser, operate to jeopardize the availability to the
Purchaser of the dividends received deduction (the "Dividends Received
Deduction") provided by Section 243(a)(l) of the Code, or any successor
provision or any similar or corresponding provision under federal law
(collectively, the "Dividends Deduction Laws"), (ii) in any report to
stockholders, or to any governmental body having jurisdiction over the
Company, including, without limitation, any reports or returns required by
Section 6042 of the Code, or otherwise, treat the Series E Preferred other
than as equity capital or the dividends paid thereon other than as dividends
paid on equity capital unless required to do so by a governmental body having
jurisdiction over the accounts of the Company or by a change in application
or interpretation of or a change in generally accepted accounting principles
required as a result of action by an authoritative accounting
standards-setting body, or (iii) except to the extent permitted in clause (i)
above, take any action which would result in the dividends paid by the
Company on the Series E Preferred out of the Company's current or accumulated
earnings and profits being ineligible for the Dividends Received Deduction
provided by any Dividends Deduction Laws. Except as contemplated by the
preceding clause (a)(iii), in the event that the Company has reasonable cause
to believe that dividends paid by the Company on the Series E Preferred out
of the Company's current or accumulated earnings and profits will not be
treated as eligible for the Dividends Received Deduction provided by any
Dividends Deduction Laws, or any successor provision, the Company will at the
Purchaser's request join with the Purchaser in the submission to the Internal
Revenue Service of a request for a ruling that dividends paid on the Series E
Preferred will be so eligible for federal income tax purposes. The expenses
of each party incurred in connection with any such submission will be borne
by such party; provided that the Company agrees that it will pay all expenses
reasonably incurred in connection with any such submission necessitated or
caused by a breach of this Agreement by the Company.
(ii) Notwithstanding the foregoing, nothing contained
herein shall be deemed to preclude the Company from claiming a deduction with
respect to such dividends (i) if the Code shall be hereafter amended or
regulations shall be hereafter promulgated to make it clear that dividends on
the Series E Preferred should not be treated as dividends for federal income
tax purposes, or (ii) in the absence of such an amendment or promulgation and
after a submission by the Purchaser (in which the Company shall join if so
requested pursuant to this section) of a request for ruling or technical
advice, if the Internal Revenue Service shall rule or advise that dividends
on the Series E Preferred should not be treated as dividends for federal
income tax
- 14 -
<PAGE>
purposes or (iii) to avoid the running of the statute of
limitations with respect to the taxable year for which the deduction is
claimed, if the Internal Revenue Service provides formal or informal notice
to the Company upon audit or otherwise that such dividends on the Series E
Preferred should not be treated as dividends for Federal income tax purposes.
(iii) In the event (i) of a Final Determination (as defined
below) that, due to any reason other than an act or failure to act of the
Purchaser, dividends on the Series E Preferred are not eligible for the
Dividends Received Deduction, (ii) any Dividends Deduction Laws or any
corresponding state or local laws are amended to reduce below 70% or eliminate
or otherwise limit the Dividends Received Deduction available to the Purchaser
below 70%, or (iii) dividends on the Series E Preferred do not constitute, in
whole or in part, a dividend for federal income tax purposes, the Company shall
pay to the Purchaser with respect to each such dividend payment, no later than
the Payment Due Time (as defined below), an additional payment (the "Gross-Up
Payment") such that the net amount of such Gross-Up Payment retained by the
Purchaser after payment by the Purchaser of any federal, state and local income
tax actually imposed upon such Gross-Up Payment shall equal the sum of (A) the
excess of (x) the federal, state, and local income tax payable by the Purchaser
with respect to such dividend in its taxable year in which the dividend was paid
over (y) the federal, state and local income tax which would have been payable
by the Purchaser in its taxable year in which the dividend was paid if the event
described in (i), (ii) or (iii) had not occurred and (B) any interest or
penalties actually payable by the Purchaser with respect to the amount referred
to in subclause (x) above to the Internal Revenue Service or any other
applicable taxing authority by reason of such events. The calculation required
pursuant to the preceding sentence shall be made assuming that the Purchaser
pays taxes at the highest marginal federal income tax rate in effect during such
year, unless the Purchaser is subject to the tax imposed by Section 55 of the
Code in such year in which case such calculation will be made by considering its
actual federal income tax position for such year.
(iv) A "Final Determination" with respect to a federal tax
liability shall mean (i) a decision, judgment, decree or other order by any
court of competent jurisdiction, which decision, judgment, decree or other order
has become final, or (ii) a closing agreement entered into under Section 7121
(or any successor to such Section) of the Code or any other settlement agreement
entered into in connection with an administrative or judicial proceeding and
consented to by the Purchaser. The "Payment Due Time" shall mean 5:00 p.m.
Eastern time, of the day two banking days before the date on which expires the
period allowed by applicable law for timely payment of the tax liability imposed
on the related dividend payment.
4.15 ERISA. Neither the Company nor any Subsidiary shall
incur any material liability with respect to retiree medical or death
benefits or unfunded benefits payable after termination of employment. All
employee benefit plans and arrangements maintained or contributed to by the
Company, any Subsidiary or any ERISA Affiliate shall be maintained in
compliance in all material respects with all applicable law, including any
reporting requirements. With respect to any plan maintained by or contributed
to by the Company or any Subsidiary, neither the Company nor any Subsidiary
will fail to make any contribution due from it under the terms of such plan
or as required by law. An "ERISA Affiliate" for purposes of this Section is
any trade or business, whether or not incorporated, which, together with the
Company, is under common control, as described in Section 414(b) or (c) of
the Code.
- 15 -
<PAGE>
4.16 BEST EFFORTS. The Company will take or cause to be
taken all actions and make or cause to be made all filings necessary or
appropriate in connection with the communication of the transactions
contemplated by this agreement and the performance of the Company's
obligations hereunder.
5. TRANSFER OF RESTRICTED SECURITIES.
(i) Restricted Securities are transferable pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 of
the Securities and Exchange Commission (or any similar rule then in
force) if such rule is available, (c) to any Affiliate of the Purchaser
or Blackwell and (d) subject to the conditions specified in
subparagraph (ii) below, any other legally available means of transfer;
(ii) In connection with the transfer of any Restricted
Securities (other than a transfer described in Section 5(i)(a), (b) or
(c) above), the holder thereto will deliver written notice to the
Company describing in reasonable detail the transfer or proposed
transfer, together with an opinion of counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters (an
"Approved Counsel") to the effect that such transfer of Restricted
Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of an Approved
Counsel that no subsequent transfer of such Restricted Securities will
require registration under the Securities Act, the Company will
promptly upon such contemplated transfer deliver new certificates for
such Restricted Securities which do not bear the Securities Act legend
set forth in Section 8.4. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend,
the holder thereof will not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be
bound by the conditions contained in this Section and Section 8.4.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As a material inducement to the Purchaser to enter into this Agreement and
purchase the Series E Preferred and to Blackwell to exchange its $2,000,000 note
for the Series E Preferred, the Company hereby represents and warrants to
Purchaser and Blackwell as of the date of this Agreement and as of each of the
respective Closing Dates (unless made as of a specific date) that:
6.1 ORGANIZATION AND CORPORATE POWER. Each of the
Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is incorporated and is duly qualified to do business in every jurisdiction in
which its ownership of property or its conduct of business requires it to
qualify. The Company has all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own and operate
its properties, to carry on its business as now conducted and presently
proposed to be conducted and to carry out the transactions contemplated by
this Agreement. The copies of the Company's and each Subsidiary's charter
documents and bylaws, which have been furnished to the Purchaser's counsel,
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
- 16 -
<PAGE>
6.2 CAPITAL STOCK AND RELATED MATTERS. As of each of the
respective Closings and immediately thereafter, the authorized capital stock
of the Company will consist of (i) 1,000 shares of Series A Convertible
Preferred Stock, $.01 par value (the "Series A Preferred"), 1,000 of which
are issued and outstanding, (ii) 1,000 shares of Series B Convertible
Preferred Stock, $.01 par value (the "Series B Preferred"), 1,000 of which
are issued and outstanding, (iii) 1,000 shares of the Series C Convertible
Preferred Stock, $.01 par value (the "Series C Preferred"), 1,000 of which
are issued and outstanding, (iv) 1,667 shares of the Series D Convertible
Preferred Stock, $.01 par value (the "Series D Preferred"), 1,667 of which
are issued and outstanding, (v) 829,692 shares of Series E Preferred, none of
which are issued and outstanding prior to the Initial Closing and (vi)
20,000,000 shares of Common Stock, of which 1,146,895 shares are issued and
outstanding, 304,950 shares have been reserved for issuance upon conversion
of the Series A Preferred and 399,400 shares have been reserved for issuance
upon conversion of the Series B Preferred and 138,650 shares have been
reserved for issuance upon conversion of the Series C Preferred and 335,100
shares have been reserved for issuance upon conversion of the Series D
Preferred and 720,757 shares have been reserved for issuance by all necessary
corporate action upon conversion of the Series E Preferred. The 720,757
shares of Common Stock reserved for issuance upon conversion of the Series E
Preferred will represent, as of each Closing, in excess of 18.6% of the
Company's Common Stock and options on a Fully-Diluted Basis, as set forth in
EXHIBIT D hereto. As of each Closing, neither the Company nor any Subsidiary
will have outstanding any stock or securities convertible or exchangeable for
any shares of its capital stock, nor will it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock, except for
the Series A Preferred, the Series B Preferred, the Series C Preferred, the
Series D Preferred, and the Series E Preferred and except for the Option
Shares and shares, or any options, rights or warrants to purchase shares, of
capital stock of the Company issued to members of the board of directors,
employees, consultants and advisors of the Company as more fully set forth on
SCHEDULE 6.2 attached hereto. As of each Closing, neither the Company nor any
Subsidiary will be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock,
except pursuant to the Certificate of Incorporation. As of each Closing, all
of the outstanding shares of the Company's capital stock will be validly
issued, fully paid and nonassessable.
6.3 SUBSIDIARIES. Except as set forth on SCHEDULE 6.3
attached hereto, the Company does not own or hold any rights to acquire any
shares of stock or any other security or interest in any other Person.
6.4 AUTHORIZATION: NO BREACH. The execution, delivery and
performance of this Agreement, the Registration Agreement, the Stockholders
Agreement, and all other agreements contemplated hereby and thereby, the
transactions contemplated hereby and thereby and the filing of the Amendment
to the Amended and Restated Certificate of Incorporation have been duly
authorized by the Company and are within the corporate power and authority of
the Company. This Agreement, the Registration Agreement, the Stockholders
Agreement and all other agreements contemplated hereby have been duly
executed and delivered by the Company and each constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms;
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally. The execution and delivery by the
Company of this Agreement, the Registration Agreement, the Stockholders
Agreement and all other agreements contemplated hereby and thereby, the
offering, sale and
- 17 -
<PAGE>
issuance of the Series E Preferred hereunder, the issuance of the Common
Stock upon conversion of the Series E Preferred, the filing of the Amendment
to the Certificate of Incorporation and the fulfillment of and compliance
with the respective terms hereof and thereof by the Company, do not and will
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation
of any lien, security interest, charge or encumbrance upon the Company's or
any Subsidiary's capital stock or assets pursuant to, (iv) give any third
party the right to accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption or other
action by or notice to any court or administrative or governmental body
pursuant to, the Certificate of Incorporation or bylaws of the Company or any
Subsidiary, or any law, statute, rule or regulation to which the Company or
any Subsidiary is subject, or any agreement, instrument, order, judgment or
decree to which the Company or any Subsidiary is subject.
6.5 FINANCIAL STATEMENTS; BOOKS AND RECORDS. Attached
hereto as SCHEDULE 6.5 are the audited consolidated balance sheets of the
Company and its Subsidiaries as of December 31, 1996 and 1995 and the
unaudited consolidated balance sheets of the Company and its Subsidiaries as
of December 31, 1997 and December 31, 1998 (the December 31, 1998 balance
sheet being referred to herein as the "Latest Balance Sheet"), and the
related audited consolidated statements of income and cash flows for each of
the years ended December 31, 1996 and 1995 and the unaudited consolidated
statements of income and cash flows for the years ended December 31, 1997 and
December 31, 1998. Such financial statements (including the notes thereto, if
any) were prepared in accordance with GAAP, are accurate and complete in all
material respects, are in accordance with the books and records of the
Company, and in the case of unaudited statements, subject to changes
resulting from normal year end adjustments (none of which would, alone or in
the aggregate, be materially adverse to the Company's and its Subsidiaries'
financial condition). All the books, records and accounts of the Company and
its Subsidiaries are in all material respects true and complete, are
maintained in accordance with good business practice and all laws applicable
to its business, and accurately present and reflect in all material respects
all of the transactions therein described. The Company has previously
delivered to the Purchaser true, correct and complete texts of all of the
minutes relating to meetings of the stockholders, board of directors and
committees of the board of directors of the Company and each Subsidiary since
their respective dates of incorporation. The audited consolidated balance
sheets of the Company as of December 31, 1997 and December 31, 1998 and the
audited consolidated statements of income and cash flows for the years ended
December 31, 1997 and December 31, 1998 will be consistent in all material
respects with the unaudited consolidated financial statements of the Company
as of and for the same period. The Company shall provide to the Purchaser and
Blackwell its audited consolidated balance sheets as of December 31, 1998 and
its audited consolidated statements of income and cash flows for the year
ended December 31, 1998 within 30 days of the Initial Closing.
Notwithstanding the foregoing, the unaudited financial statements do not
presently reflect any non-cash compensation charges relating to stock option
grants to employees and consultants. Audited financial statements for the
years ended December 31, 1997 and December 31, 1998 will include such
non-cash compensation charges.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the
Company nor any of its Subsidiaries has any material obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known to the Company, whether due or to become due) arising out of
transactions entered into at or
- 18 -
<PAGE>
prior to each Closing, or any action or inaction at or prior to each Closing,
or any state of facts existing at or prior to each Closing, other than: (i)
liabilities set forth on the Latest Balance Sheet (including the notes
thereto), (ii) liabilities and obligations which have arisen after the date
of the Latest Balance Sheet in the ordinary course of business (none of which
is a liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) or in connection with the transactions
described in this Agreement and (iii) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
6.7 NO MATERIAL ADVERSE CHANGE. Since January 1, 1998,
there has been no material adverse change in the Company's business, assets,
financial condition, results of operations, prospects, employee relations,
customer relations or otherwise.
6.8 ABSENCE OF CERTAIN DEVELOPMENTS.
(i) Except as set forth on SCHEDULE 6.8 or except as
expressly contemplated by this Agreement, since January 1, 1998,
neither the Company nor any Subsidiary has:
(a) issued any bonds or other debt securities or
any equity securities;
(b) borrowed any amount or incurred or become
subject to any liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(c) discharged or satisfied any lien or encumbrance
or paid any obligation or liability, other than current liabilities
paid in the ordinary course of business;
(d) declared or made any payment or distribution of
cash or other property to its stockholders with respect to its stock or
purchased or redeemed any shares of its capital stock;
(e) mortgaged or pledged any of its properties or
assets or subjected them to any lien, security interest, charge or
other encumbrance, except liens for current property taxes not yet due
and payable;
(f) sold, assigned or transferred any of its
tangible assets, except in the ordinary course of business, or
cancelled any debts or claims;
(g) sold, assigned or transferred any patents,
trademarks, service marks, trade names, copyrights, trade secrets or
other intangible assets, or disclosed any proprietary confidential
information to any Person;
(h) suffered any extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of
business or consistent with past practice;
(i) made capital expenditures or commitments
therefor that aggregate in excess of $100,000;
- 19 -
<PAGE>
(j) entered into any other transaction other than in
the ordinary course of business or entered into any other material
transaction, whether or not in the ordinary course of business;
(k) made any loans or advances to, guarantees for
the benefit of, or any Investments in, any officer, director, employee
or stockholder of the Company or any Persons in excess of $25,000;
(l) made any charitable contributions or pledges;
(m) suffered any damage, destruction or casualty
loss exceeding in the aggregate $50,000, whether or not covered by
insurance; or
(n) made any Investment in or taken steps to
incorporate any Subsidiary.
(ii) Neither the Company nor any Subsidiary has at any time
made any payment for political contributions or made any bribes,
kickback payments or other illegal payments.
6.9 ASSETS. The Company and each Subsidiary have good and
marketable title to, or a valid and subsisting leasehold interest in, the
properties and assets used by them, located on their premises or shown on the
Latest Balance Sheet or acquired thereafter, free and clear of all liens,
security interests, charges and encumbrances, except as disclosed on the
Latest Balance Sheet (including the notes thereto) or SCHEDULE 6.9. The
Company's and each Subsidiary's buildings, equipment and other tangible
assets are in good operating condition in all material respects and are fit
for use in the ordinary course of business.
6.10 TAX MATTERS. The Company and each Subsidiary have
filed or caused to be filed all tax returns which they are required to file;
all such returns are true and correct in all material respects; the Company
and each Subsidiary have paid all taxes owed by them or which they are
obligated to withhold from amounts owing to any employee, creditor or third
party; neither the Company nor any Subsidiary has waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to a tax assessment or deficiency; the assessment of any additional
taxes for periods for which returns have been filed is not expected; and
there are no material unresolved questions or claims concerning the Company's
or any Subsidiary's tax liability. The Company and its Subsidiaries have paid
or caused to be paid, or have established reserves that the Company
reasonably believes to be adequate, for all federal income tax liabilities
and state income tax liabilities applicable to the Company or any of its
Subsidiaries for all fiscal years which have not been examined and reported
on by the taxing authorities. For the purpose of this Agreement, "tax" or
"taxes" means any federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, transfer,
gains, license, excise, employment, payroll, withholding, value added,
estimated, alternative or add on minimum tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional
amount imposed by any governmental authority.
- 20 -
<PAGE>
6.11 CONTRACTS AND COMMITMENTS.
(i) Except as set forth on SCHEDULE 6.11 or as expressly
contemplated by this Agreement, as of each Closing, neither the Company
nor any Subsidiary is a party to any written or oral:
(a) pension, profit sharing, stock option, employee
stock purchase or other plan providing for deferred or other
compensation to employees or any other employee benefit plan, or any
contract with any labor union;
(b) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis or contract relating to loans to officers,
directors or affiliates;
(c) agreement or indenture relating to the borrowing
of money or the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of the Company and its
Subsidiaries;
(d) guarantee of any obligation;
(e) contract under which the Company or Subsidiary
has advanced or loaned any Person amounts in the aggregate exceeding
$10,000;
(f) lease or agreement under which the Company or
any Subsidiary is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $100,000;
(g) lease or agreement under which the Company 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
Company or any Subsidiary;
(h) contract or group of related contracts with the
same party or group of affiliated parties the performance of which
involves a consideration in excess of $100,000;
(i) assignment, license, indemnification or
agreement with respect to any intangible property (including, without
limitation, any patent, trademark, trade name, copyright, know-how,
trade secret or confidential information) other than in the ordinary
course of business;
(j) warranty agreement with respect to its services
rendered or its products sold or leased;
(k) agreement under which it has granted any Person
any registration rights (including piggyback rights);
- 21 -
<PAGE>
(l) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world or imposing
any obligation of exclusivity upon the Company or any Subsidiary or
requiring the Company or any Subsidiary to provide preferred or most
favored nations terms to any client or customer;
(m) sales agency or brokerage agreement;
(n) agreement or arrangement with any Related Party;
(o) agreement imposing any indemnity obligation upon
the Company or any Subsidiary; or
(p) any other agreement which is material to its
operations and business prospects or involves a consideration in excess
of $100,000 annually.
(ii) The Company and each Subsidiary have performed all
material obligations required to be performed by them and are not in
default under or in material breach of nor in receipt of any claim of
default or breach under any material agreement or other material
instrument to which the Company or any Subsidiary is subject; no event
has occurred which with the passage of time or the giving of notice or
both would result in a material default, breach or event of
noncompliance under any material agreement or other material instrument
to which the Company or any Subsidiary is subject; neither the Company
nor any Subsidiary has any present expectation or intention of not
fully performing all such obligations; neither the Company nor any
Subsidiary has knowledge of any breach or anticipated breach by the
other parties to any contract or commitment to which it is a party.
6.12 PROPRIETARY RIGHTS. The Company and its Subsidiaries
possess all material Proprietary Rights necessary to the present and
contemplated conduct of their respective businesses and (i) the Company and
its Subsidiaries own all right, title, and interest in and to all of such
Proprietary Rights, (ii) there have been no claims made against the Company
or any Subsidiary for the assertion of the invalidity, abuse, misuse, or
unenforceability of any of such rights, and there are, to the best of the
Company's knowledge, no grounds for the same, (iii) neither the Company nor
any Subsidiary has received a notice of conflict with the asserted rights of
others within the last five years, and (iv) the conduct of the Company's and
each Subsidiary's business has not, to the best of the Company's knowledge,
infringed any such rights of others. Each employee or consultant of the
Company or any Subsidiary is a party to a confidentiality agreement relating
to the business of the Company and its Subsidiaries. Each technical employee
or consultant of the Company or any Subsidiary, excluding consultants who are
hired by the Company for their intellectual property expertise in a
particular topic distinct from the Company's business, is a party to an
invention assignment agreement relating to the business of the Company and
its Subsidiaries.
6.13 LITIGATION, ETC. Except as set forth in SCHEDULE
6.13, there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of the Company's knowledge, threatened against
or affecting the Company or any Subsidiary at law or in equity, or before or
by any governmental department, commission, board, bureau, agency or
instrumentality; neither the Company nor any Subsidiary is subject to any
arbitration proceedings under collective bargaining agreements or otherwise
or, to the best of the Company's knowledge, any governmental
- 22 -
<PAGE>
investigations or inquiries (including inquiries as to the qualification to
hold or receive any license or permit); and, to the best of the Company's
knowledge, there is no basis for any of the foregoing. Neither the Company
nor any of its Subsidiaries is in default in any material respect with
respect to any judgment, order, writ, injunction, decree or award.
6.14 BROKERAGE. Except for the fees of Dain Rauscher Wessels
previously disclosed to the Purchaser, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company or any Subsidiary; provided, however, that
this representation excludes any claim arising out of or due to any action of
the Purchaser. The Company will pay, and hold the Purchaser harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any
such claim.
6.15 GOVERNMENTAL CONSENT, ETC. No permit, consent,
approval or authorization of, or declaration to or filing with, any
governmental authority is required in connection with the valid execution,
delivery and performance by the Company of this Agreement or the other
agreements contemplated hereby, or the consummation by the Company of any
other transactions contemplated hereby or thereby.
6.16 INSURANCE. Each insurance policy maintained by the
Company with respect to its properties, assets and businesses is in full
force and effect. The Company is not in default with respect to its
obligations under any insurance policy maintained by it. The Company and its
Subsidiaries maintain insurance in such amounts (to the extent available in
the public market), including self-insurance, retainage and deductible
arrangements, and of such a character as is reasonable for companies of a
comparable size engaged in the same or similar business.
6.17 EMPLOYEES AND ERISA.
(i) The Company is not aware that any executive or key
employee of the Company or any Subsidiary or any group of employees of
the Company or any Subsidiary has any plans to terminate employment
with the Company or any Subsidiary, the Company and each Subsidiary
have complied in all material respects with all laws relating to the
employment of labor, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of
social security and other taxes, and the Company is not aware that it
or any Subsidiary has any material labor relations problems.
(ii) Neither the Company, its Subsidiaries nor any of their
respective employees is a party to any consulting or employment
agreements containing any non-compete or confidentiality provisions
relating to the present or proposed business activities of the Company
and its Subsidiaries;
(iii) Neither the Company nor any Subsidiary presently
maintains or contributes to, or ever has maintained or contributed to,
any "employee benefit plan," as such term is defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to which the Company is required to file
Internal Revenue Service
- 23 -
<PAGE>
Form 5500, and neither the Company nor any Subsidiary presently
contributes to or ever has contributed to any "multiemployer plan,"
as such term is defined in Section 3 of ERISA.
6.18 COMPLIANCE WITH LAWS. Neither the Company nor any
Subsidiary is in violation of any domestic or foreign law or any regulation
or requirement, including without limitation, the Foreign Corrupt Practices
Act, which violation might reasonably be expected to have a material adverse
effect upon the business, assets, financial condition, result of operations
or prospects of the Company and its Subsidiaries, and neither the Company nor
any Subsidiary has received notice of any such violation.
6.19 DISCLOSURE. Neither this Agreement nor any of the
schedules, attachments, written statements, documents, certificates or other
items prepared or supplied to the Purchaser by or on behalf of the Company
with respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading. There is no fact which
the Company has not disclosed to the Purchaser in writing and of which any of
its officers, directors or executive employees is aware and which could
reasonably be anticipated to have a material adverse effect upon the existing
or expected financial condition, operating results, assets, customer
relations, employee relations or business prospects of the Company and its
Subsidiaries.
6.20 POSSESSION OF FRANCHISES, LICENSES, ETC.
. The Company and its Subsidiaries possess all franchises, certificates,
licenses, permits and other authorizations from governmental or political
subdivisions or regulatory authorities that are necessary in any material
respect to the Company or any of its Subsidiaries for the ownership, maintenance
and operation of their respective properties and assets, and neither the Company
nor any of its Subsidiaries is in violation of any thereof in any material
respect.
6.21 HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT.
Neither the Company nor any Subsidiary is: (i) a "public utility company" or
a "holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) a "public utility," as defined in the Federal Power Act, as
amended, or (iii) an "investment company" or an "affiliated person" thereof
or an "affiliated person" of any such "affiliated person," as such terms are
defined in the Investment Company Act of 1940, as amended.
6.22 ENVIRONMENTAL AND OTHER REGULATIONS. The Company
and its Subsidiaries are in compliance with all applicable federal, state,
local and foreign laws and regulations relating to protection of the
environment and human health, and are in compliance in all material respects
with all other applicable federal, state, local and foreign laws and
regulations, including, without limitation, those relating to equal
employment opportunity and employment safety. There are no claims, notices,
civil, criminal or administrative actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the best knowledge of the Company,
threatened against the Company or any Subsidiary that are based on or related
to any environmental matters, including any disposal of hazardous substances
at any place, or the failure to have any required environmental permits, and
- 24 -
<PAGE>
there are no past or present conditions that are likely to give rise to any
liability or other obligations of the Company or any Subsidiary under any
environmental laws.
6.23 PROJECTIONS. All projections furnished in writing by
the Company (i) have been prepared by management of the Company after a
careful analysis of all material data, (ii) are based on reasonable
assumptions by management of the Company and (iii) represent the best
estimate by management of the Company, based upon current reasonable
assumptions, as to the financial performance of the Company and its
Subsidiaries for the periods indicated, but do not represent any guarantee or
assurance of the future financial results of the Company and its Subsidiaries.
6.24 YEAR 2000.
(i)(a) COMPANY'S PRODUCTS AND SERVICES:
(1) All of the Company's and its
Subsidiaries' Products and Services will be Year 2000
Compliant.
(2) If the Company or any Subsidiary is
obligated to repair or replace Products or Services previously
provided by the Company or any Subsidiary that are not Year
2000 Compliant in order to meet contractual obligations, to
avoid other liability, to avoid misrepresentations claims, or
to satisfy any other obligations or requirements, the Company
and its Subsidiaries will have repaired or replaced those
Products and Services to make them Year 2000 Compliant.
(b) COMPANY'S INTERNAL MIS SYSTEMS AND
FACILITIES. All of the Internal MIS Systems and Facilities
will be Year 2000 compliant.
(c) SUPPLIERS. All vendors of products or services
to the Company and its Subsidiaries, and their respective
products, services and operations, will be in all material
aspects Year 2000 Compliant. To the knowledge of the Company
after a reasonably diligent investigation, each such vendor
will continue to furnish its products or services to the
Company and its Subsidiaries, without interruption or material
delay, on and after January 1, 2000.
(ii) The Company has furnished the Purchaser with true,
correct and complete copies of any customer agreements and other
materials and correspondence in which Company has furnished (or could
be deemed to have furnished) assurances as to the performance and/or
functionality of the Company's and its Subsidiaries' Products or
Services on or after January 1, 2000.
(iii) The Company has furnished the Purchaser with a
true, correct and complete copy of any internal investigations,
memoranda, budget plans, forecasts or reports concerning the Year 2000
Compliant status of the products, services, operations, systems,
supplies and facilities of the Company and its Subsidiaries and their
respective vendors.
- 25 -
<PAGE>
(iv) The design of the products, services and other
item(s) at issue to ensure compliance with the foregoing warranties and
representations includes proper date/time data century recognition and
recognition of 1999 and 2000, calculations that accommodate single
century and multi-century formulae and date/time values before, on,
after, and spanning January 1, 2000, and date/time data interface
values that reflect the century, 1999, and 2000. In particular, but
without limitation, (i) no value for current date/time will cause any
error, interruption, or decreased performance in or for such
product(s), service(s), and other item(s), (ii) all manipulations of
date and time related data (including calculating, comparing,
sequencing, processing and outputting) will produce correct results for
all valid dates and times when used independently or in combination
with other products, services, and/or items, (iii) date/time elements
in interfaces and data storage will specify the century to eliminate
date ambiguity without human intervention, including leap year
calculations, (iv) where any date/time element is represented without a
century, the correct century will be unambiguous for all manipulations
involving that element, (v) authorization codes, passwords and zaps
(purge functions) will function normally and in the same manner during,
prior to, on, and after January 1, 2000, including the manner in which
they function with respect to expiration dates and CPU serial numbers,
and (vi) the Company's and its Subsidiaries' supply of the product(s),
service(s), and other item(s) will not be interrupted, delayed,
decreased, or otherwise affected by the advent of the year 2000.
6.25 CLOSING DATES. The representations and warranties of
the Company contained in this Section 6 and elsewhere in this Agreement and
all information contained in any exhibit, schedule or attachment hereto or in
any writing delivered by, or on behalf of, the Company to the Purchaser
(except for representations, warranties and information made as of a
specified date) will be true and correct in all material respects on the date
of each of the Closings as though then made.
7. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Company's common stock, $.01 par
value per share, having the rights set forth in Article 4 of the Certificate of
Incorporation.
"CONSOLIDATED NET WORTH" means the consolidated stockholders'
equity of the Company determined in accordance with generally accepted
accounting principles consistently applied.
"CONVERTIBLE SECURITIES" means evidences of indebtedness,
capital shares or other securities which are convertible into or exchangeable
for, with or without payment of additional consideration, shares of Common
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event.
- 26 -
<PAGE>
"EVENT OF NONCOMPLIANCE" means any instance of the Company's
failure, under the provisions of the Certificate of Incorporation, to perform
its obligations to the holders of Series A Preferred, Series B Preferred, Series
C Preferred or Series D Preferred.
"FACILITIES" means any facilities or equipment used by the
Company or its Subsidiaries in any location, including HVAC systems, mechanical
systems, elevators, security systems, fire suppression systems,
telecommunications systems, fax machines, copy machines, and equipment, whether
or not owned by the Company or its Subsidiaries.
"FULLY DILUTED BASIS" means the number of shares of Common
Stock outstanding, plus (x) the number of shares of Common Stock into which all
outstanding Convertible Securities of the Company would be convertible and (y)
the number of shares of Common Stock which would be issuable upon the exercise
of all warrants, rights or options to purchase shares of Common Stock then
outstanding.
"GAAP" means the generally accepted accounting principles in the
United States.
"INTERNAL MIS SYSTEMS" means any computer software and systems
(including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of business by or on behalf
of the Company or its Subsidiaries, including the Company's and its
Subsidiaries' payroll, accounting, billing/receivables, inventory, asset
tracking, customer service, human resources, and e-mail systems.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any note, stock,
securities or other ownership interest in any other Person and (ii) any capital
contribution by such Person to any other Person.
"NEW SECURITIES" mean any equity security of the Company other
than Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred or Common Stock outstanding on the date of this
Agreement or Common Stock issued on the conversion of any of the foregoing
series of Preferred Stock.
"OFFERING PRICE" means the price at which a share of the
Company's Common Stock will be offered at the Public Offering.
"OFFICER'S CERTIFICATE" means a certificate signed by the
Company's president or its chief financial officer, stating that (i) the officer
signing such certificate has made or has caused to be made such investigations
as are necessary in order to permit him to verify the accuracy of the
information set forth in such certificate and (ii) to the best of such officer's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"PERSON" means an individual, a partnership, a corporation,
limited liability company, limited liability partnership, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
- 27 -
<PAGE>
"PRODUCTS" means any products offered or furnished by the
Company or any of its Subsidiaries, or any predecessor in interest of the
Company or any of its Subsidiaries, currently or at any time in the past,
including without limitation each item of hardware, software, or firmware; any
system, equipment, or products consisting of or containing one or more thereof;
and any and all enhancements, upgrades, customizations, modifications, and
maintenance thereto.
"PROPRIETARY RIGHTS" means any patents, registered and common
law trademarks, service marks, trade names, copyrights, licenses and other
similar rights (including, without limitation, know-how, trade secrets and other
confidential information) and applications for each of the foregoing, if any.
"PUBLIC OFFERING" means the closing of a firm commitment for
an initial public offering underwritten by a nationally recognized investment
bank pursuant to an effective registration statement under the Securities Act
covering the offer and sale of the Company's Common Stock to the public at an
aggregate net offering price of not less than $20 million, an implied Company
equity value of at least $100,000,000 and an Offering Price that results in a
minimum annualized compounded rate of return of 20% to the Purchaser.
"RELATED PARTY" means any officer, director or beneficial
holder of 5% or more of the outstanding shares of capital stock of the Company,
any spouse, former spouse, child, parent, parent of a spouse, sibling or a
grandchild of any such officer, director or beneficial holder of the Company,
and any Affiliate of any of the foregoing persons.
"RESTRICTED SECURITIES" means (i) the Series E Preferred
issued hereunder, (ii) the Common Stock issued upon conversion of the Series E
Preferred and (iii) any securities issued with respect to the securities
referred to in clauses (i) or (ii) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities will cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been transferred
pursuant to Rule 144 or become eligible for sale pursuant to Rule 144(k) (or any
similar rule then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in Section 8.4 have been delivered by the Company in accordance with
Section 5(ii). Whenever any particular securities cease to be Restricted
Securities, the holder thereof will be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in Section 8.4.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental
body or agency succeeding to the functions thereof.
- 28 -
<PAGE>
"SERVICES" means any services offered or furnished by the
Company or any of its Subsidiaries, or any predecessor in interest of the
Company or any of its Subsidiaries, currently or at any time in the past.
"SUBSIDIARY" means any corporation of which the securities
having a majority of the ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries;
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable upon conversion of the Series E Preferred or upon exercise of the
Option or conversion of Series E Preferred received upon exercise of the Option
and (ii) any Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. Any Person who holds Series E Preferred will be deemed
to be the holder of the Underlying Common Stock obtainable upon conversion of
the Series E Preferred, regardless of any restriction on the conversion of the
Series E Preferred. As to any particular shares of Underlying Common Stock, such
shares will cease to be Underlying Common Stock when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) been distributed to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (c) ceased to be Restricted Securities other than for the
reasons set forth in clauses (a) and (b).
"YEAR 2000 COMPLIANT" means that (1) the products, services,
or other item(s) at issue accurately process, provide and/or receive all
date/time data (including calculating, comparing, sequencing, processing and
outputting) within, from, into, and between centuries (including the twentieth
and twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (2) neither the performance nor the functionality nor the
Company's or any of its Subsidiaries' provision of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on, after,
or spanning January 1, 2000.
8. MISCELLANEOUS.
8.1 EXPENSES; INDEMNIFICATION.
(i) The Company agrees to pay the Purchaser for (a) all
reasonable outside legal and consulting fees of the Purchaser in
connection with this Agreement and the consummation of all transactions
contemplated hereby together with the costs and expenses described in
the immediately succeeding clause (b) of this paragraph (i), up to a
maximum amount of $65,000, (b) all costs and expenses of the Purchaser
in connection with the consummation of the transactions contemplated
hereby relating to due diligence, the preparation of documents and the
closing of such transactions, (c) all costs and expenses relating to
any future amendment or supplement to this Agreement or any of the
Securities (or any proposal by the Company for such amendment or
supplement) whether or not consummated or any waiver or consent with
respect thereto (or any proposal for such waiver or consent) whether or
not consummated, and (d) all costs and expenses of
- 29 -
<PAGE>
the Purchaser or Blackwell relating to the enforcement of the rights
granted under this Agreement, the agreements contemplated hereby and
the Certificate of Incorporation, if the Company is found to have
breached its obligations under any such agreement.
(ii) The Company further agrees to indemnify and save
harmless the Purchaser and Blackwell and its respective officers,
directors, partners, employees, trustees and agents, each person who
controls the Purchaser or Blackwell within the meaning of the
Securities Act or the Exchange Act, from and against any and all costs,
expenses, damages or other liabilities resulting from any breach of any
representation, warranty, covenant or agreement set forth in this
Agreement, and the agreements contemplated hereby by the Company or any
legal, administrative or other proceedings brought by any third party
arising out of the transactions contemplated hereby and thereby;
provided that, if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws.
(iii) The indemnified party under this Section 8.1 will,
promptly after the receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be
sought from the Company on account of an indemnity agreement contained
in this Section 8.1, notify the Company in writing of the commencement
thereof. The omission of any indemnified party so to notify the Company
of any such action shall not relieve the Company from any liability
which it may have to such indemnified party except to the extent the
Company shall have been prejudiced by the omission of such indemnified
party so to notify the Company, pursuant to this Section 8.1 In case
any such action shall be brought against any indemnified party and it
shall notify the Company of the commencement thereof, the Company shall
be entitled to participate therein and, to the extent that it may wish,
to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the Company to such
indemnified party of its election so to assume the defense thereof, the
Company will not be liable to such indemnified party under this Section
8.1 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof nor for any
settlement thereof entered into without the consent of the Company;
provided that (i) if the Company shall elect not to assume the defense
of such claim or action or (ii) if the indemnified party reasonably
determines (x) that there may be a conflict between the positions of
the Company and of the indemnified party in defending such claim or
action or (y) that there may be legal defenses available to such
indemnified party different from or in addition to those available to
the Company, then separate counsel for the indemnified party shall be
entitled to participate in and conduct the defense, in the case of (i)
and (ii)(x), or such different defenses, in the case of (ii)(y), and
the Company shall be liable for any reasonable legal or other expenses
incurred by the indemnified party in connection with the defense.
8.2 REMEDIES. Each holder of Series E Preferred will have
all rights and remedies set forth in this Agreement and the Certificate of
Incorporation and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any
- 30 -
<PAGE>
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
8.3 TERMINATION; TERMINATION FEE. This Agreement may be
terminated by the Purchaser or the Company with respect to the Additional
Shares at any time after 60 days from the date of this Agreement if the
Second Closing has not theretofore occurred; provided that a party shall not
be entitled to terminate this Agreement as it relates to the Additional
Shares if the failure of the Second Closing to occur results from a breach of
this Agreement by such party. Without limiting the rights of the Purchaser to
receive a break-up fee pursuant to the Letter of Interest dated January 21,
1999 (the "Letter of Interest") if this Agreement is terminated, unless the
failure of the Second Closing to occur results from a breach of this
Agreement by the Purchaser, the Company shall pay the Purchaser a termination
fee of $125,000 (inclusive of all of the Purchaser's reasonable costs and
expenses incurred in connection with such transaction, including, but not
limited to, due diligence expenses and attorney's fees); provided that the
Company shall not be obligated to pay a termination fee hereunder if the
Company pays the break-up fee provided in the Letter of Interest. In the
event of any such termination, except as provided in this Section 8.3,
neither party shall have any obligation under this Agreement or arising from
such termination, except for willful breaches of this Agreement.
8.4 PURCHASER'S AND BLACKWELL'S INVESTMENT & OTHER
REPRESENTATIONS. Each of the Purchaser and Blackwell (each, an
"Investor") hereby severally and not jointly represents and warrants as
follows:
(i) INVESTMENT. Such Investor is acquiring the Restricted
Securities purchased hereunder or acquired pursuant hereto for its own account
for investment and not with a view to, or for sale in connection with, any
public distribution thereof, nor with any present intention of distributing or
selling the same to the public; and the Purchaser is aware of the restrictions
and limitations affecting its right and ability to sell or transfer such
securities; provided that nothing contained herein will prevent such Investor
and subsequent holders of Restricted Securities from transferring such
securities in compliance with the provisions of Section 5 hereof.
(ii) AUTHORITY. Such Investor has full power and authority to
enter into and to perform this Agreement in accordance with its terms. Such
Investor has not been organized, reorganized or recapitalized specifically for
the purpose of investing in the Company.
(iii) ACCREDITED INVESTOR. Such Investor is an Accredited
Investor within the definition set forth in Securities Act Rule 501(a).
(iv) RESTRICTIVE LEGEND. Each certificate for Series E
Preferred will be imprinted with a legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate is
subject to the conditions specified in the Purchase Agreement,
dated as of __________, 1999 between the issuer (the
"Company") and an investor, and the Company reserves the right
to refuse the transfer of such securities until such
- 31 -
<PAGE>
conditions have been fulfilled with respect to such transfer.
A copy of such conditions will be furnished by the Company to
the holder hereof upon written request and without charge."
"The voting rights and the transfer of the shares represented
by this certificate are subject to a Stockholders Agreement,
__________, 1999, by and among the issuer (the "Company"), the
holder and other stockholders of the Company. A copy of the
Stockholders Agreement will be furnished by the Company to the
holder hereof upon written request and without charge."
(v) ORGANIZATION AND CORPORATE POWER. Such Investor is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction or organization. Such Investor has all requisite corporate
power and authority to carry out the transactions contemplated by this
Agreement.
(vi) AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and all other agreements and the transactions
contemplated hereby have been duly authorized by such Investor. This Agreement
and all other agreements contemplated hereby each constitutes a valid and
binding obligation of such Investor, enforceable in accordance with its terms;
except as enforcement thereof may be limited by any applicable bankruptcy,
reorganization, insolvency, moratorium, or similar laws affecting rights of
creditors generally. The execution and delivery by such Investor of this
Agreement and all other agreements contemplated hereby and thereby and the
fulfillment of and compliance with the respective terms hereof and thereof by
such Investor, do not and will not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) result in a violation of, or (iii)
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to, the
charter or bylaws of such Investor, or any law, statute, rule or regulation to
which such Investor is subject, or any agreement, instrument, order, judgment or
decree to which such Investor is subject.
(vii) BROKERAGE. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon such Investor or any of its subsidiaries; provided,
however, that this representation excludes any claim arising out of or due to
any action of the Company. Such Investor will pay, and hold the Company harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
(viii) GOVERNMENTAL CONSENT, ETC. No permit, consent, approval
or authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and performance
by such Investor of this Agreement or the other agreements contemplated hereby,
or the consummation by such Investor of any other transactions contemplated
hereby or thereby.
(ix) RISK. Such Investor understands that the operation of
the Company's business is subject to numerous risks and that the Preferred
Stock is a speculative investment that involves a high degree of risk of loss
of the entire investment therein. Such Investor is cognizant of
- 32 -
<PAGE>
and understands such risks, including those set forth in the September 1998
Confidential Private Placement Memorandum under the caption "Risk Factors".
(x) DUE DILIGENCE. Such Investor has been allowed, upon
request, to examine any document or agreement listed in the Schedules hereto,
and has had the opportunity to obtain any information concerning the Company,
including the opportunity to ask questions of and receive answers from
authorized representatives of the Company concerning this investment.
(xi) CLOSING DATES. The representations and warranties of
such Investor contained in this Section 8.4 and elsewhere in this Agreement
will be true and correct in all material respects on the date of each of the
respective Closings as though then made.
8.5 CONSENT TO AMENDMENTS. Except as otherwise
expressly provided herein, the provisions of this Agreement may be amended
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company has obtained
the written consent of the registered holders of not less than 66 2/3% of the
outstanding Series E Preferred; provided that if there is no Series E
Preferred outstanding, the provisions of this Agreement may be amended and
the Company may take any action herein prohibited, only if the Company has
obtained the written consent of the holders of not less than 66 2/3% of the
Underlying Common Stock. No other course of dealing between the Company and
the holder of any Series E Preferred or Underlying Common Stock or any delay
in exercising any rights hereunder or under the Certificate of Incorporation
will operate as a waiver of any rights of any such holders. For purposes of
this Agreement, shares of Series E Preferred and Underlying Common Stock held
by the Company or any Subsidiaries will not be deemed to be outstanding.
8.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by any
party in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the shares of Series E Preferred,
regardless of any investigation made by or on behalf of any party, but shall
expire upon the earlier of (i) a fully completed Public Offering by the
Company or (ii) two years after the date of each respective Closing.
8.7 SUCCESSORS AND ASSIGNS. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. This Agreement may be assigned by each Investor
to any transferee of any shares of Series E Preferred. This Agreement may not
be assigned by the Company.
8.8 SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such which may be hereafter declared invalid, void or unenforceable.
- 33 -
<PAGE>
8.9 COUNTERPARTS. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the counterparts
have been signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
8.10 DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
8.11 GOVERNING LAW; CONSENT TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE
COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT
OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND
AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH
COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS
AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT
AGAINST IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF
AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER
IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.12 PUBLICITY. Each of the parties hereto agrees that it
will make no statement regarding the transactions contemplated hereby which
is inconsistent with any press release agreed to by the parties hereto.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with any regulatory body, make such statements
with respect to the transactions contemplated hereby as each may be advised
is legally necessary upon advice of its counsel.
8.13 NOTICES. All notices, demands or other
communications to be given or delivered under or by reason of the provisions
of this Agreement will be in writing and will be deemed to have been given
when delivered personally or mailed by certified or registered mail,
- 34 -
<PAGE>
return receipt requested and postage prepaid, to the recipient. Such notices,
demands and other communications will be sent
To the Company:
HealthGate Data Corp.
25 Corporate Drive, Suite 310
Burlington, MA 01803
Attention: William S. Reece, Chief Executive Officer
Telephone: (781) 685-4000
Fax: (781) 685-4040
With a copy to:
Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Telephone: (617) 482-1360
Fax: (617) 556-3889
To Purchaser:
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: General Counsel
Fax: (203) 357-3047
With a copy to:
Warren de Wied, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Fax: (212) 859-4000
To Blackwell:
Blackwell Science, Ltd.
Osney Mead, Oxford
OX2 OEL, United Kingdom
Fax: 011 44 1865721205
with a copy to:
John Taylor Williams, Esq.
- 35 -
<PAGE>
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108-3190
Fax: (617) 227-4420
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
- 36 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
HEALTHGATE DATA CORP. GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ WILLIAM S. REECE By: /s/ Richard J. Miller
---------------------------------- ------------------------------
William S. Reece Name: Richard J. Miller
Chairman and President Title: Senior Vice President
BLACKWELL SCIENCE, LTD.
By: /s/ Jonathan J. G. Conibear
Name: Jonathan J. G. Conibear
Title: Executive Director
- 37 -
<PAGE>
4/5/99
Exhibit A
Certificate of Amendment of
Amended and Restated Certificate of Incorporation
of HealthGate Data Corp.
[Previously filed in Exhibit 3.1 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit B
Registration Agreement
[Previously filed in Exhibit 4.7 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit C
Rich, May, Bilodeau & Flaherty, P.C. form of Opinion
<PAGE>
RMB&F DRAFT
4/6/99
April __, 1999
GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, CT 06927
Blackwell Science, Ltd.
Osney Mead, Oxford OX2 OEL
United Kingdom
Re: HealthGate Data Corp.
Ladies and Gentlemen:
We have acted as counsel to HealthGate Data Corp., a Delaware corporation
(the "Company"), in connection with the issuance and sale to (a) GE Capital
Equity Investments, Inc. ("Purchaser") of 87,364 shares (the "Initial Shares")
of the Company's Series E Redeemable Convertible Preferred Stock, par value $.01
per share (the "Series E Preferred Stock"), and (b) Blackwell Science, Ltd.
("Blackwell") of 174,729 shares of the Company's Series E Preferred Stock (the
"Conversion Shares"). This opinion is being furnished to each of you pursuant to
Section 3.4 of that certain Stock Purchase Agreement, dated as of April 5, 1999
(the "Stock Purchase Agreement"), among the Company, Purchaser and Blackwell. In
connection with this transaction, (i) the Company and each of you have also
entered into that certain Registration Agreement dated as of April 7, 1999 (the
"Registration Agreement"), and (ii) the Company, each of you and stockholders
representing a majority of the outstanding shares of each of the Company's
classes of stock have also entered into that certain Amended and Restated
Stockholders Agreement dated as of April 7, 1999 (the "Stockholders Agreement").
Terms used herein without definition shall have the meanings ascribed to them in
the Stock Purchase Agreement.
We have examined the originals or certified, conformed or reproduction
copies of all such records, agreements, instruments and documents as we have
deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to our opinion, we have relied
upon statements or certificates of public officials, officers or representatives
of the Company and others.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as presently
conducted, to enter into and perform the Stock Purchase Agreement,
the Stockholders Agreement and the Registration Agreement, and to
carry out the transactions contemplated thereby. The Company is duly
qualified to do business and is in good standing in the Commonwealth
of Massachusetts, the only United States jurisdiction in which, to
our knowledge, the Company currently owns property or conducts its
business.
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $.01 (the "Common Stock"), of
which 1,146,895 shares are issued and outstanding prior to the
Initial Closing and 720,757 of which have been reserved for issuance
upon conversion of the Series E Preferred Stock, and 834,629 shares
of Preferred Stock, par value $.01 (the "Preferred Stock"), 1,000
shares of which are designated "Series A
<PAGE>
Convertible Preferred Stock," all of which are issued and
outstanding, 1,000 shares of which are designated "Series B
Convertible Stock," all of which are issued and outstanding, 1,000
shares of which are designated "Series C Convertible Preferred
Stock," all of which are issued and outstanding, 1,667 of which are
designated "Series D Convertible Preferred Stock," all of which are
issued and outstanding, and 829,962 of which are designated "Series
E Redeemable Convertible Preferred Stock," none of which are issued
and outstanding prior to the Initial Closing. Effective immediately
after the Initial Closing, 262,093 shares of Series E Preferred
Stock will be issued and outstanding. There are no other authorized
classes of capital stock of the Company other than those set forth
in this paragraph. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and validly
issued and are fully paid and non-assessable. Except as contemplated
by the Stock Purchase Agreement or the Company's Amended and
Restated Certificate of Incorporation, as amended, and except as set
forth on Schedule 6.2 to the Stock Purchase Agreement, to our
knowledge, (i) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase or
acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) there is not any commitment of the Company to
issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares
of the Company's capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay
any dividend or make any other distribution in respect thereof.
3. The issuance, sale and delivery of the Initial Shares and the
Conversion Shares by the Company in accordance with the Stock
Purchase Agreement have been duly authorized by all necessary
corporate action on the part of the Company, and such Initial Shares
and Conversion Shares when so issued, sold and delivered against
payment therefor in accordance with the provisions of the Stock
Purchase Agreement, and the Common Stock to be issued upon
conversion of the Initial Shares and the Conversion Shares will be
duly and validly issued, fully paid and non-assessable.
4. The execution, delivery and performance by the Company of the Stock
Purchase Agreement, the Registration Agreement, the Stockholders
Agreement and the Amendment to Purchase Agreements and Registration
Agreements have been duly authorized by all necessary corporate
action, and each such agreement has been duly executed and delivered
by the Company. Each such agreement constitutes the valid and
binding obligation of the Company, and is enforceable against the
Company.
5. The execution, delivery and performance of the Stock Purchase
Agreement and the Registration Agreement, and the offer, issuance
and sale of the Initial Shares and the Conversion Shares under the
Stock Purchase Agreement, will not conflict with, or result in any
breach of any of the terms, conditions, or provisions of, or
constitute a default under, the Amended and Restated Certificate of
Incorporation or Bylaws of the Company, each as amended to date, or
any material indenture, lease, agreement or other instrument known
to us to which the Company is a party or by which it or any of its
properties are bound or any decree, judgment or order specifically
naming the Company and known to us.
6. Except as obtained and in effect at the Closing, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with any governmental authority
is required on the part of the Company in connection with the
execution and delivery of the Stock Purchase Agreement, or the
offer, issuance, sale and delivery of the Initial Shares and the
Conversion Shares, or the other transactions to be consummated at
the Initial Closing pursuant to the Stock Purchase Agreement.
7. The offer, issuance and sale of the Initial Shares and the
Conversion Shares pursuant to the Stock Purchase Agreement are
exempt, and the issuance of Common Stock upon conversion
<PAGE>
of the Initial Shares and Conversion Shares will be exempt, from
registration under the Securities Act of 1933, as amended.
We express no opinion as to compliance with applicable anti-fraud
provisions of federal securities laws. We express no opinion as to compliance
with applicable state securities laws.
The opinions expressed herein are subject to the effect of generally
applicable rules of law that: (a) limit or affect the enforcement of provisions
of any contract that purport to require a waiver of the obligations of good
faith and fair dealing; (b) provide that forum selection clauses are not
necessarily binding on the courts in the forum selected; (c) limit the
enforceability of waivers of the right to trial by jury or rights to notice or
other rights or benefits conferred by operation of law; (d) limit the
availability of a remedy where another remedy has been elected or limit waivers
of remedies or defenses; (e) limit the enforceability of provisions releasing,
exculpating or exempting a party from, or requiring indemnification of a party
for, liability for its own action or inaction or on public policy grounds; (f)
where less than all of a contract may be unenforceable, limit the enforceability
of the balance of such contract to circumstances in which the unenforceable
portion is not an essential part of the agreed upon exchange under such
contract; and (g) govern and afford judicial discretion regarding the
entitlement to attorneys' fees and other costs.
The opinions on enforceability expressed herein are subject further to the
effect of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting the rights of creditors and
secured parties generally, and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), as well
as possible limitations upon the exercise of remedial or procedural provisions
contained in the Stock Purchase Agreement, the Stockholders Agreement or the
Registration Agreement, provided, that such limitations do not, in our opinion,
subject to the other qualifications contained in this opinion letter, make the
remedies and procedures that will be afforded to the Purchaser inadequate for
the practical realization of the principal benefits purported to be provided to
the Purchaser by the Stock Purchase Agreement, the Stockholders Agreement and
the Registration Agreement (subject to the effect of any judicial or other
delays in the availability of such remedies). Notwithstanding the foregoing,
however, we express no opinion as to the enforceability of Section 6 of the
Registration Agreement.
Whenever our opinion with respect to the existence or absence of facts is
indicated to be based on our knowledge or awareness, we are referring to the
actual knowledge or awareness of Rich, May, Bilodeau & Flaherty, P.C. attorneys
who have given substantive attention to such matters during the course of such
representation, which knowledge or awareness has been obtained by such attorneys
in their capacity as such and is intended to signify that in the course of such
representation, no information has come to their attention which has given them
actual knowledge or awareness of the existence or absence of such facts, and
that we have undertaken no independent investigation either within our firm,
with our clients, or with any other person to determine the existence or absence
of such facts.
We are members of the bar of the Commonwealth of Massachusetts and do not
hold ourselves out as competent to opine as to matters of law governed by other
states. Accordingly, our opinions are limited to the laws of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware, and the
laws of the federal government of the United States. To the extent that any of
the laws of New York or other laws govern any of the matters as to which we
express an opinion herein, we have assumed, with your permission, that the law
of such jurisdiction is, in all material respects, the same as that of the law
of the Commonwealth of Massachusetts.
This opinion is rendered only to the addressees and is solely for their
benefit in connection with the transactions contemplated by the Stock Purchase
Agreement, and may not be relied upon by any other person for any purpose
without the prior written consent of the undersigned.
Very truly yours,
RICH, MAY, BILODEAU & FLAHERTY, P.C.
<PAGE>
Exhibit D to Series E Stock Purchase Agreement
HealthGate Data Corp.
Series E Preferred Stock
Calculations of Shares and Conversion Price
Common Stock 1,146,895 (Includes 1,345 exercised options)
Series A 304,880
Series B 399,401
Series C 138,653
Series D 335,098
Subtotal 2,324,927
Options 485,180 (428,580-Plan; 56,600 Non Plan)
Petra Warrant 114,950
Subtotal 600,130
Available Options 220,075 (650,000-428,580-1,345)
Subtotal 3,145,132
Conversion Price : 36,000,000/3,145,132=11.4463
Post-Closing
Amount Percentage
Initial Series E
Shares for GE 87,364 $999,994.55 2.26%
Later Series E Shares
for GE 458,664 $5,250,005.74 11.86%
Series E Shares for
Blackwell 174,729 $2,000,000.55 4.52%
Total Series E 720,757
Total Post-Closing
Shares Fully Diluted 3,865,889
<PAGE>
Exhibit E
Amendment and Waiver To
Stock Purchase Agreements and Registration Agreements
[Previously filed in Exhibit 4.8 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit F
Amended and Restated Stockholders Agreement
[Previously filed in Exhibit 4.9 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Schedule 6.2
to
Series E Preferred Stock Purchase Agreement
Capitalization of HealthGate
Attached hereto is HealthGate Data Corp.'s 3-page Capitalization Table (as
of February 3, 1999) which includes a listing of outstanding options, rights and
warrants to purchase shares of capital stock of the Company.
Additionally, as part of the transaction fee payable to Dain Rauscher
Wessels ("DRW") as financial advisor and placement agent, HealthGate has agreed
to issue DRW a warrant to purchase shares of stock at the same price paid in the
offering in an amount equal to one percent (1%) of the shares sold in the
offering to new investors.
<PAGE>
HealthGate Data Corp.
Capitalization Table (as of February 3, 1999)
<TABLE>
<CAPTION>
SERIES A STOCK SERIES B STOCK
COMMON
STOCK Series A As Series B As
Number Stockholder Name Stock Converted(1) Stock Converted(2)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 10 3,049
- -----------------------------------------------------------------------------------------------------------------------------
2 Abdollahi, Farah
- -----------------------------------------------------------------------------------------------------------------------------
Account Management Corporation Profit
3 Sharing Plan 50 15,244
- -----------------------------------------------------------------------------------------------------------------------------
4 Badash, Michelle
- -----------------------------------------------------------------------------------------------------------------------------
5 Baranoski, Amy
- -----------------------------------------------------------------------------------------------------------------------------
6 Blackwell Science, Ltd.
- -----------------------------------------------------------------------------------------------------------------------------
7 Blackwell Wissenschafts-Verlag GmbH
- -----------------------------------------------------------------------------------------------------------------------------
8 Blair, Tina M., M.D. 2,550 250 76,220
- -----------------------------------------------------------------------------------------------------------------------------
9 Blake, Gregory
- -----------------------------------------------------------------------------------------------------------------------------
10 Blazewicz, Robert J. 70
- -----------------------------------------------------------------------------------------------------------------------------
11 Bolivar, Cynthia
- -----------------------------------------------------------------------------------------------------------------------------
12 Brassard, Kevin
- -----------------------------------------------------------------------------------------------------------------------------
13 Brown, Laurie
- -----------------------------------------------------------------------------------------------------------------------------
14 Brown, Stephen L. and Arleen C.
- -----------------------------------------------------------------------------------------------------------------------------
15 Buradagunta, Syam
- -----------------------------------------------------------------------------------------------------------------------------
16 Cabanas, Lazaro
- -----------------------------------------------------------------------------------------------------------------------------
17 Capotosto, Christopher
- -----------------------------------------------------------------------------------------------------------------------------
18 Carchidi, Joseph
- -----------------------------------------------------------------------------------------------------------------------------
19 Ciancarelli, John
- -----------------------------------------------------------------------------------------------------------------------------
20 Clark, Jeffrey S. 6,650
- -----------------------------------------------------------------------------------------------------------------------------
21 Cohen, Lori-Anne
- -----------------------------------------------------------------------------------------------------------------------------
22 Crans, Dwight B.
- -----------------------------------------------------------------------------------------------------------------------------
23 Cunningham, Lynne
- -----------------------------------------------------------------------------------------------------------------------------
24 de Castro, Edson 8,550
- -----------------------------------------------------------------------------------------------------------------------------
25 Dearing, Jeff
- -----------------------------------------------------------------------------------------------------------------------------
26 deRoetth, Christopher 20 6,098
- -----------------------------------------------------------------------------------------------------------------------------
27 deRoetth, Louisa 10 3,049
- -----------------------------------------------------------------------------------------------------------------------------
28 deRoetth, Peter 50 15,244
- -----------------------------------------------------------------------------------------------------------------------------
29 DeVivo, Robert
- -----------------------------------------------------------------------------------------------------------------------------
30 DeWolf, Nicholas
- -----------------------------------------------------------------------------------------------------------------------------
31 Egan, Christopher
- -----------------------------------------------------------------------------------------------------------------------------
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
32 Declaration of Trust dated March 29, 1995
- -----------------------------------------------------------------------------------------------------------------------------
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
33 Trust dated June 29, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Egan, Richard, Trustee of the 1986 Richard
J. Egan Trust under Declaration of Trust
34 dated May 27, 1986
- -----------------------------------------------------------------------------------------------------------------------------
35 Evans, Steaurt
- -----------------------------------------------------------------------------------------------------------------------------
36 Fambrough, Ray
- -----------------------------------------------------------------------------------------------------------------------------
37 Foss, Donald A.
- -----------------------------------------------------------------------------------------------------------------------------
38 Fransceschelli, Denise
- -----------------------------------------------------------------------------------------------------------------------------
39 Friend, David 54,200 150 45,732
- -----------------------------------------------------------------------------------------------------------------------------
40 Glenn, Robert
- -----------------------------------------------------------------------------------------------------------------------------
41 Harman, Paul
- -----------------------------------------------------------------------------------------------------------------------------
42 Henigan, Nardy
- -----------------------------------------------------------------------------------------------------------------------------
43 Hopp, Michael
- -----------------------------------------------------------------------------------------------------------------------------
44 Horgen, Chris H.
- -----------------------------------------------------------------------------------------------------------------------------
45 Israel, Mark
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES C STOCK SERIES D STOCK
Total Percentage
Series C As Series D As Shares of Total
Number Stockholder Name Stock Converted(3) Stock Converted(4) Outstanding Outstanding
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 3,049 0.13%
- ---------------------------------------------------------------------------------------------------------------------------
2 Abdollahi, Farah 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
Account Management Corporation Profit
3 Sharing Plan 15,244 0.66%
- ---------------------------------------------------------------------------------------------------------------------------
4 Badash, Michelle 0 0.00%
- -------------------------------------------------------------------------0
==========================================================-------------------------------------------------------------------
6 Blackwell Science, Ltd. 1,333 267,958 267,958 11.53%
- ---------------------------------------------------------------------------------------------------------------------------
7 Blackwell Wissenschafts-Verlag GmbH 334 67,140 67,140 2.89%
- ---------------------------------------------------------------------------------------------------------------------------
8 Blair, Tina M., M.D. 78,770 3.39%
- ---------------------------------------------------------------------------------------------------------------------------
9 Blake, Gregory 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
10 Blazewicz, Robert J. 70 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
11 Bolivar, Cynthia 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
12 Brassard, Kevin 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
13 Brown, Laurie 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
14 Brown, Stephen L. and Arleen C. 20 2,773 2,773 0.12%
- ---------------------------------------------------------------------------------------------------------------------------
15 Buradagunta, Syam 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
16 Cabanas, Lazaro 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
17 Capotosto, Christopher 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
18 Carchidi, Joseph 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
19 Ciancarelli, John 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
20 Clark, Jeffrey S. 6,650 0.29%
- ---------------------------------------------------------------------------------------------------------------------------
21 Cohen, Lori-Anne 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
22 Crans, Dwight B. 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
23 Cunningham, Lynne 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
24 de Castro, Edson 8,550 0.37%
- ---------------------------------------------------------------------------------------------------------------------------
25 Dearing, Jeff 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
26 deRoetth, Christopher 6,098 0.26%
- ---------------------------------------------------------------------------------------------------------------------------
27 deRoetth, Louisa 3,049 0.13%
- ---------------------------------------------------------------------------------------------------------------------------
28 deRoetth, Peter 25 4,853 20,097 0.86%
- ---------------------------------------------------------------------------------------------------------------------------
29 DeVivo, Robert 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
30 DeWolf, Nicholas 50 6,933 6,933 0.30%
- ---------------------------------------------------------------------------------------------------------------------------
31 Egan, Christopher 25 3,466 3,466 0.15%
- ---------------------------------------------------------------------------------------------------------------------------
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
32 Declaration of Trust dated March 29, 1995 25 3,466 3,466 0.15%
- ---------------------------------------------------------------------------------------------------------------------------
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
33 Trust dated June 29, 1994 25 3,466 3,466 0.15%
- ---------------------------------------------------------------------------------------------------------------------------
Egan, Richard, Trustee of the 1986 Richard
J. Egan Trust under Declaration of Trust
34 dated May 27, 1986 25 3,466 3,466 0.15%
- ---------------------------------------------------------------------------------------------------------------------------
35 Evans, Steaurt 20 2,773 2,773 0.15%
- ---------------------------------------------------------------------------------------------------------------------------
36 Fambrough, Ray 20 2,773 2,773 0.12%
- ---------------------------------------------------------------------------------------------------------------------------
37 Foss, Donald A. 50 6,933 6,933 0.30%
- ---------------------------------------------------------------------------------------------------------------------------
38 Fransceschelli, Denise 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
39 Friend, David 99,932 4.30%
- ---------------------------------------------------------------------------------------------------------------------------
40 Glenn, Robert 20 2,773 2,773 0.12%
- ---------------------------------------------------------------------------------------------------------------------------
41 Harman, Paul 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
42 Henigan, Nardy 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
43 Hopp, Michael 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
44 Horgen, Chris H. 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
45 Israel, Mark 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Common
Stock Stock
Number Stockholder Name Warrants Options F/D Total F/D%
=============================================================================================
<S> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 3,049 0.13%
- ---------------------------------------------------------------------------------------------
2 Abdollahi, Farah 1,000 1,000 0.03%
- ---------------------------------------------------------------------------------------------
Account Management Corporation Profit
3 Sharing Plan 15,244 0.52%
- ---------------------------------------------------------------------------------------------
4 Badash, Michelle 2,000 2,000 0.07%
- ---------------------------------------------------------------------------------------------
5 Baranoski, Amy 500 500 0.02%
- ---------------------------------------------------------------------------------------------
6 Blackwell Science, Ltd. 10,000 277,958 9.50%
- ---------------------------------------------------------------------------------------------
7 Blackwell Wissenschafts-Verlag GmbH 67,140 2.30%
- ---------------------------------------------------------------------------------------------
8 Blair, Tina M., M.D. 10,000 88,770 3.03%
- ---------------------------------------------------------------------------------------------
9 Blake, Gregory 1,500 1,500 0.05%
- ---------------------------------------------------------------------------------------------
10 Blazewicz, Robert J. 4,080 4,150 0.14%
- ---------------------------------------------------------------------------------------------
11 Bolivar, Cynthia 500 500 0.02%
- ---------------------------------------------------------------------------------------------
12 Brassard, Kevin 1,500 1,500 0.05%
- ---------------------------------------------------------------------------------------------
13 Brown, Laurie 500 500 0.02%
- ---------------------------------------------------------------------------------------------
14 Brown, Stephen L. and Arleen C. 2,773 0.09%
- ---------------------------------------------------------------------------------------------
15 Buradagunta, Syam 1,000 1,000 0.03%
- ---------------------------------------------------------------------------------------------
16 Cabanas, Lazaro 2,000 2,000 0.07%
- ---------------------------------------------------------------------------------------------
17 Capotosto, Christopher 1,500 1,500 0.05%
- ---------------------------------------------------------------------------------------------
18 Carchidi, Joseph 20,000 20,000 0.68%
- ---------------------------------------------------------------------------------------------
19 Ciancarelli, John 2,500 2,500 0.09%
- ---------------------------------------------------------------------------------------------
20 Clark, Jeffrey S. 6,650 0.23%
- ---------------------------------------------------------------------------------------------
21 Cohen, Lori-Anne 500 500 0.02%
- ---------------------------------------------------------------------------------------------
22 Crans, Dwight B. 6,000 6,000 0.21%
- ---------------------------------------------------------------------------------------------
23 Cunningham, Lynne 1,000 1,000 0.03%
- ---------------------------------------------------------------------------------------------
24 de Castro, Edson 26,000 34,550 1.18%
- ---------------------------------------------------------------------------------------------
25 Dearing, Jeff 1,000 1,000 0.03%
- ---------------------------------------------------------------------------------------------
26 deRoetth, Christopher 6,098 0.21%
- ---------------------------------------------------------------------------------------------
27 deRoetth, Louisa 3,049 0.10%
- ---------------------------------------------------------------------------------------------
28 deRoetth, Peter 20,097 0.69%
- ---------------------------------------------------------------------------------------------
29 DeVivo, Robert 1,000 1,000 0.03%
- ---------------------------------------------------------------------------------------------
30 DeWolf, Nicholas 6,933 0.24%
- ---------------------------------------------------------------------------------------------
31 Egan, Christopher 3,466 0.12%
- ---------------------------------------------------------------------------------------------
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
32 Declaration of Trust dated March 29, 1995 3,466 0.12%
- ---------------------------------------------------------------------------------------------
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
33 Trust dated June 29, 1994 3,466 0.12%
- ---------------------------------------------------------------------------------------------
Egan, Richard, Trustee of the 1986 Richard
J. Egan Trust under Declaration of Trust
34 dated May 27, 1986 3,466 0.12%
- ---------------------------------------------------------------------------------------------
35 Evans, Steaurt 2,773 0.09%
- ---------------------------------------------------------------------------------------------
36 Fambrough, Ray 2,773 0.09%
- ---------------------------------------------------------------------------------------------
37 Foss, Donald A. 6,933 0.24%
- ---------------------------------------------------------------------------------------------
38 Fransceschelli, Denise 2,500 2,500 0.09%
- ---------------------------------------------------------------------------------------------
39 Friend, David 10,000 109,932 3.76%
- ---------------------------------------------------------------------------------------------
40 Glenn, Robert 2,773 0.09%
- ---------------------------------------------------------------------------------------------
41 Harman, Paul 20,000 20,000 0.68%
- ---------------------------------------------------------------------------------------------
42 Henigan, Nardy 2,000 2,000 0.07%
- ---------------------------------------------------------------------------------------------
43 Hopp, Michael 2,500 2,500 0.09%
- ---------------------------------------------------------------------------------------------
44 Horgen, Chris H. 10,000 10,000 0.34%
- ---------------------------------------------------------------------------------------------
45 Israel, Mark 61,250 61,250 2.09%
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HealthGate Data Corp.
Capitalization Table (as of February 3, 1999)
<TABLE>
<CAPTION>
SERIES A STOCK SERIES B STOCK
COMMON
STOCK Series A As Series B As
Number Stockholder Name Stock Converted(1) Stock Converted(2)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
46 Jobes, Elizabeth
- ----------------------------------------------------------------------------------------------------------------------------
47 Kagels, Scott
- ----------------------------------------------------------------------------------------------------------------------------
48 Keller, Brad
- ----------------------------------------------------------------------------------------------------------------------------
49 Koton, Phyllis 16,000
- ----------------------------------------------------------------------------------------------------------------------------
50 Kudsi, Bashar
- ----------------------------------------------------------------------------------------------------------------------------
51 LaFond, John P. 1,275
- ----------------------------------------------------------------------------------------------------------------------------
52 Latzko, Lara Elizabeth Gale
- ----------------------------------------------------------------------------------------------------------------------------
53 Lawson, Ricky D. 200,000
- ----------------------------------------------------------------------------------------------------------------------------
54 Madnik, Stuart E.
- ----------------------------------------------------------------------------------------------------------------------------
55 Maguire, Jean
- ----------------------------------------------------------------------------------------------------------------------------
56 Malone, Thomas W.
- ----------------------------------------------------------------------------------------------------------------------------
57 Manuel, Barry M. 225,000
- ----------------------------------------------------------------------------------------------------------------------------
58 Manuel, Barry M., Trustee u/a 7/5/90 25,000
- ----------------------------------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/90 f/b/o
Elizabth A. Manuel and her children f/b/o Jill
59 E. Manuel and her children 25,000
- ----------------------------------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/91 f/b/o
60 William Manuel and his children 25,000
- ----------------------------------------------------------------------------------------------------------------------------
61 Marino, Roger M. 60 18,293
- ----------------------------------------------------------------------------------------------------------------------------
62 Martin, Ron
- ----------------------------------------------------------------------------------------------------------------------------
63 McCullogh, Josephine
- ----------------------------------------------------------------------------------------------------------------------------
64 McMahon, Gail
- ----------------------------------------------------------------------------------------------------------------------------
65 Miller, Ray W.
- ----------------------------------------------------------------------------------------------------------------------------
66 Miller, William
- ----------------------------------------------------------------------------------------------------------------------------
67 Morville, Victoria
- ----------------------------------------------------------------------------------------------------------------------------
68 Nelson, William G. 54,200 150 45,732
- ----------------------------------------------------------------------------------------------------------------------------
69 Michols Research Corporation 3,400 1,000 399,401
- ----------------------------------------------------------------------------------------------------------------------------
70 Norris, Nathan
- ----------------------------------------------------------------------------------------------------------------------------
71 Oberoi, Rohan
- ----------------------------------------------------------------------------------------------------------------------------
72 Pace, Maria
- ----------------------------------------------------------------------------------------------------------------------------
73 Paller, Marsha 100 30,488
- ----------------------------------------------------------------------------------------------------------------------------
74 Petra Capital LLC (5)
- ----------------------------------------------------------------------------------------------------------------------------
75 Pignature, Dean
- ----------------------------------------------------------------------------------------------------------------------------
76 Price, Duane
- ----------------------------------------------------------------------------------------------------------------------------
77 Reece, Plenny R. and Mary Joan 5,000
- ----------------------------------------------------------------------------------------------------------------------------
78 Reece, William S. 495,000
- ----------------------------------------------------------------------------------------------------------------------------
79 Relman, Arnold S.
- ----------------------------------------------------------------------------------------------------------------------------
80 Ritter, Michael J.
- ----------------------------------------------------------------------------------------------------------------------------
81 Ritter, Shirley J.
- ----------------------------------------------------------------------------------------------------------------------------
82 Rosenfield, Donald
- ----------------------------------------------------------------------------------------------------------------------------
83 Rosenfield, Nancy
- ----------------------------------------------------------------------------------------------------------------------------
84 Rutstein, James
- ----------------------------------------------------------------------------------------------------------------------------
85 Sarsany, Kevin
- ----------------------------------------------------------------------------------------------------------------------------
86 Sartell, Sandra
- ----------------------------------------------------------------------------------------------------------------------------
87 Schuler, Christopher J. 5 1,524
- ----------------------------------------------------------------------------------------------------------------------------
88 Schuler, James K. 35 10,671
- ----------------------------------------------------------------------------------------------------------------------------
89 Schuler, Mark J. 5 1,524
- ----------------------------------------------------------------------------------------------------------------------------
90 Schuler, Patricia 5 1,524
- ----------------------------------------------------------------------------------------------------------------------------
91 Smith, Michael
- ----------------------------------------------------------------------------------------------------------------------------
92 Stinson, Robert
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES C STOCK SERIES D STOCK
Total Percentage
Series C As Series D As Shares of Total
Number Stockholder Name Stock Converted(3) Stock Converted(4) Outstanding Outstanding
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
46 Jobes, Elizabeth 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
47 Kagels, Scott 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
48 Keller, Brad 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
49 Koton, Phyllis 16,000 0.69%
- -----------------------------------------------------------------------------------------------------------------------------------
50 Kudsi, Bashar 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
51 LaFond, John P. 1,275 0.05%
- -----------------------------------------------------------------------------------------------------------------------------------
52 Latzko, Lara Elizabeth Gale 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
53 Lawson, Ricky D. 200,000 8.60%
- -----------------------------------------------------------------------------------------------------------------------------------
54 Madnik, Stuart E. 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
55 Maguire, Jean 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
56 Malone, Thomas W. 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
57 Manuel, Barry M. 225,000 9.68%
- -----------------------------------------------------------------------------------------------------------------------------------
58 Manuel, Barry M., Trustee u/a 7/5/90 25,000 1.08%
- -----------------------------------------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/90 f/b/o
Elizabth A. Manuel and her children f/b/o Jill
59 E. Manuel and her children 25,000 1.08%
- -----------------------------------------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/91 f/b/o
60 William Manuel and his children 25,000 1.08%
- -----------------------------------------------------------------------------------------------------------------------------------
61 Marino, Roger M. 50 6,933 25,226 1.09%
- -----------------------------------------------------------------------------------------------------------------------------------
62 Martin, Ron 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
63 McCullogh, Josephine 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
64 McMahon, Gail 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
65 Miller, Ray W. 15 2,080 2,080 0.09%
- -----------------------------------------------------------------------------------------------------------------------------------
66 Miller, William 20 2,773 2,773 0.12%
- -----------------------------------------------------------------------------------------------------------------------------------
67 Morville, Victoria 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
68 Nelson, William G. 99,932 4.30%
- -----------------------------------------------------------------------------------------------------------------------------------
69 Michols Research Corporation 425 58,926 461,727 19.86%
- -----------------------------------------------------------------------------------------------------------------------------------
70 Norris, Nathan 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
71 Oberoi, Rohan 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
72 Pace, Maria 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
73 Paller, Marsha 30,488 1.31%
- -----------------------------------------------------------------------------------------------------------------------------------
74 Petra Capital LLC (5) 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
75 Pignature, Dean 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
76 Price, Duane 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
77 Reece, Plenny R. and Mary Joan 5,000 0.22%
- -----------------------------------------------------------------------------------------------------------------------------------
78 Reece, William S. 495,000 21.29%
- -----------------------------------------------------------------------------------------------------------------------------------
79 Relman, Arnold S. 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
80 Ritter, Michael J. 10 1,387 1,387 0.06%
- -----------------------------------------------------------------------------------------------------------------------------------
81 Ritter, Shirley J. 10 1,387 1,387 0.06%
- -----------------------------------------------------------------------------------------------------------------------------------
82 Rosenfield, Donald 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
83 Rosenfield, Nancy 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
84 Rutstein, James 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
85 Sarsany, Kevin 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
86 Sartell, Sandra 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
87 Schuler, Christopher J. 1,524 0.07%
- -----------------------------------------------------------------------------------------------------------------------------------
88 Schuler, James K. 35 4,853 15,524 0.67%
- -----------------------------------------------------------------------------------------------------------------------------------
89 Schuler, Mark J. 1,524 0.07%
- -----------------------------------------------------------------------------------------------------------------------------------
90 Schuler, Patricia 1,524 0.07%
- -----------------------------------------------------------------------------------------------------------------------------------
91 Smith, Michael 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
92 Stinson, Robert 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Common
Stock Stock
Number Stockholder Name Warrants Options F/D Total F/D%
==================================================================================================
<S> <C> <C> <C> <C> <C>
46 Jobes, Elizabeth 500 500 0.02%
- --------------------------------------------------------------------------------------------------
47 Kagels, Scott 500 500 0.02%
- --------------------------------------------------------------------------------------------------
48 Keller, Brad 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
49 Koton, Phyllis 16,000 0.55%
- --------------------------------------------------------------------------------------------------
50 Kudsi, Bashar 1,000 1,000 0.03%
- --------------------------------------------------------------------------------------------------
51 LaFond, John P. 1,275 0.04%
- --------------------------------------------------------------------------------------------------
52 Latzko, Lara Elizabeth Gale 500 500 0.02%
- --------------------------------------------------------------------------------------------------
53 Lawson, Ricky D. 30,000 230,000 7.86%
- --------------------------------------------------------------------------------------------------
54 Madnik, Stuart E. 6,000 6,000 0.21%
- --------------------------------------------------------------------------------------------------
55 Maguire, Jean 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
56 Malone, Thomas W. 6,000 6,000 0.21%
- --------------------------------------------------------------------------------------------------
57 Manuel, Barry M. 5,600 230,600 7.88%
- --------------------------------------------------------------------------------------------------
58 Manuel, Barry M., Trustee u/a 7/5/90 25,000 0.85%
- --------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/90 f/b/o
Elizabth A. Manuel and her children f/b/o Jill
59 E. Manuel and her children 25,000 0.85%
- --------------------------------------------------------------------------------------------------
Manuel, Barry M., Trustee u/a 7/5/91 f/b/o
60 William Manuel and his children 25,000 0.85%
- --------------------------------------------------------------------------------------------------
61 Marino, Roger M. 25,226 0.86%
- --------------------------------------------------------------------------------------------------
62 Martin, Ron 3,000 3,000 0.10%
- --------------------------------------------------------------------------------------------------
63 McCullogh, Josephine 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
64 McMahon, Gail 500 500 0.02%
- --------------------------------------------------------------------------------------------------
65 Miller, Ray W. 2,080 0.07%
- --------------------------------------------------------------------------------------------------
66 Miller, William 2,773 0.09%
- --------------------------------------------------------------------------------------------------
67 Morville, Victoria 500 500 0.02%
- --------------------------------------------------------------------------------------------------
68 Nelson, William G. 99,932 3.42%
- --------------------------------------------------------------------------------------------------
69 Michols Research Corporation 461,727 15.79%
- --------------------------------------------------------------------------------------------------
70 Norris, Nathan 2,000 2,000 0.07%
- --------------------------------------------------------------------------------------------------
71 Oberoi, Rohan 1,500 1,500 0.05%
- --------------------------------------------------------------------------------------------------
72 Pace, Maria 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
73 Paller, Marsha 30,488 1.04%
- --------------------------------------------------------------------------------------------------
74 Petra Capital LLC (5) 114,950 114,950 3.93%
- --------------------------------------------------------------------------------------------------
75 Pignature, Dean 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
76 Price, Duane 1,000 1,000 0.03%
- --------------------------------------------------------------------------------------------------
77 Reece, Plenny R. and Mary Joan 5,000 0.17%
- --------------------------------------------------------------------------------------------------
78 Reece, William S. 75,000 570,000 19.49%
- --------------------------------------------------------------------------------------------------
79 Relman, Arnold S. 15,000 15,000 0.51%
- --------------------------------------------------------------------------------------------------
80 Ritter, Michael J. 1,387 0.05%
- --------------------------------------------------------------------------------------------------
81 Ritter, Shirley J. 1,387 0.05%
- --------------------------------------------------------------------------------------------------
82 Rosenfield, Donald 6,000 6,000 0.21%
- --------------------------------------------------------------------------------------------------
83 Rosenfield, Nancy 6,000 6,000 0.21%
- --------------------------------------------------------------------------------------------------
84 Rutstein, James 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
85 Sarsany, Kevin 55,000 55,000 1.88%
- --------------------------------------------------------------------------------------------------
86 Sartell, Sandra 3,750 3,750 0.13%
- --------------------------------------------------------------------------------------------------
87 Schuler, Christopher J. 1,524 0.05%
- --------------------------------------------------------------------------------------------------
88 Schuler, James K. 15,524 0.53%
- --------------------------------------------------------------------------------------------------
89 Schuler, Mark J. 1,524 0.05%
- --------------------------------------------------------------------------------------------------
90 Schuler, Patricia 1,524 0.05%
- --------------------------------------------------------------------------------------------------
91 Smith, Michael 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
92 Stinson, Robert 1,000 1,000 0.03%
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
HealthGate Data Corp.
Capitalization Table (as of February 3, 1999)
<TABLE>
<CAPTION>
SERIES A STOCK SERIES B STOCK
COMMON
STOCK Series A As Series B As
Number Stockholder Name Stock Converted(1) Stock Converted(2)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
93 Tabatabaie, Hamid
- ----------------------------------------------------------------------------------------------------------------------------
94 Thurber, Robert
- ----------------------------------------------------------------------------------------------------------------------------
95 Turbow, Gerald T.
- ----------------------------------------------------------------------------------------------------------------------------
96 Vreeland, Amy
- ----------------------------------------------------------------------------------------------------------------------------
97 Westervelt, Jane
- ----------------------------------------------------------------------------------------------------------------------------
98 Wheeler, Langdon B. 50 15,244
- ----------------------------------------------------------------------------------------------------------------------------
99 Williams, Robert and Linda 50 15,244
- ----------------------------------------------------------------------------------------------------------------------------
100 Yamani, Fatameh
============================================================================================================================
Totals 1,146,895 1,000 304,880 1,000 399,401
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SERIES C STOCK SERIES D STOCK
Total Percentage
Series C As Series D As Shares of Total
Number Stockholder Name Stock Converted(3) Stock Converted(4) Outstanding Outstanding
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
93 Tabatabaie, Hamid 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
94 Thurber, Robert 20 2,773 2,773 0.12%
- -----------------------------------------------------------------------------------------------------------------------------------
95 Turbow, Gerald T. 15 2,080 2,080 0.09%
- -----------------------------------------------------------------------------------------------------------------------------------
96 Vreeland, Amy 0 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
97 Westervelt, Jane 50 6,933 6,933 0.30%
- -----------------------------------------------------------------------------------------------------------------------------------
98 Wheeler, Langdon B. 15,244 0.66%
- -----------------------------------------------------------------------------------------------------------------------------------
99 Williams, Robert and Linda 35 4,853 20,097 0.86%
- -----------------------------------------------------------------------------------------------------------------------------------
100 Yamani, Fatameh 0 0.00%
===================================================================================================================================
Totals 1,000 138,653 1,667 335,098 2,324,927 100.00%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Common
Stock Stock
Number Stockholder Name Warrants Options F/D Total F/D%
==================================================================================================
<S> <C> <C> <C> <C> <C>
93 Tabatabaie, Hamid 41,000 41,000 1.40%
- --------------------------------------------------------------------------------------------------
94 Thurber, Robert 2,773 0.09%
- --------------------------------------------------------------------------------------------------
95 Turbow, Gerald T. 2,080 0.07%
- --------------------------------------------------------------------------------------------------
96 Vreeland, Amy 2,500 2,500 0.09%
- --------------------------------------------------------------------------------------------------
97 Westervelt, Jane 6,933 0.24%
- --------------------------------------------------------------------------------------------------
98 Wheeler, Langdon B. 15,244 0.52%
- --------------------------------------------------------------------------------------------------
99 Williams, Robert and Linda 20,097 0.69%
- --------------------------------------------------------------------------------------------------
100 Yamani, Fatameh 1,500 1,500 0.05%
==================================================================================================
Totals 114,950 485,180 2,925,057 100.00%
</TABLE>
(1) Converted based on result of multiplying number of shares of Series A
Stock owned by $500 liquidation value per share, and dividing that result
by $1.64 conversion price.
(2) Converted based on result of multiplying number of shares of Series B
Stock owned by $1,600 liquidation value per share, and dividing that
result by $4.006 conversion price.
(3) Converted based on result of multiplying number of shares of Series C
Stock owned by $1,000 liquidation value per share, and dividing that
result by $7.2124 conversion price.
(4) Converted based on result of multiplying number of shares of Series D
Stock owned by $1,500 liquidation value per share, and dividing that
result by $7.462 conversion price.
(5) Excluding additional 139,400 if debt outstanding on 3/2000, 3/2001 or
3/2002.
<PAGE>
4/5/99
Schedule 6.3
to
Series E Preferred Stock Purchase Agreement
Subsidiaries
The following corporations are wholly-owned subsidiaries of HealthGate
Data Corp.:
- HealthGate Europe Ltd, a United Kingdom limited company; and
- HealthGate Acquisition Corp. (formerly known as AHN.com, Inc.), a
Delaware corporation (this is an inactive "shell" corporation).
<PAGE>
4/5/99
Schedule 6.5
to
Series E Preferred Stock Purchase Agreement
Financial Statements of HealthGate
Attached hereto are the following financial statements:
Audited Financial Statements:
Balance Sheets as of December 31, 1996 and December 31, 1995
Statements of Operations for the years ended December 31, 1996, December 31,
1995 and for the period from inception (February 8, 1994) through December 31,
1996
Statement of Changes in Redeemable Preferred Stock and Stockholders' Equity
(Deficit) for the years ended December 31, 1996, December 31, 1995 and December
31, 1994
Statement of Cash Flows Increase (Decrease) in Cash and Cash Equivalents for the
years ended December 31, 1996, December 31, 1995 and for the period from
inception (February 8, 1994) through December 31, 1996
Notes to Financial Statements
Copies of audited financial statements for the following unaudited financial
statements are in Registrant's Registration on Form S-1 (No. 333-76899)
Unaudited Financial Statements:
Balance Sheets as of December 31, 1997 and December 31, 1998
Statements of Operations for the years ended December 31, 1997 and December 31,
1998
Statement of Cash Flows for the years ended December 31, 1997 and December 31,
1998
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,155,726 $ 104,820
Accounts receivable 63,818 674
Prepaid expenses and other current assets 54,617 29,933
----------- -----------
Total current assets 1,274,161 135,427
Fixed assets, net 485,416 443,339
Other assets 31,658 33,528
----------- -----------
$ 1,791,235 $ 612,294
=========== ===========
Liabilities, Redeemable Preferred Stock and
Stockholders' Equity
Current liabilities:
Current portion of capital lease obligation $ 189,151 $ 174,673
Deferred revenue 16,603 --
Accounts payable 423,694 102,628
Accrued expenses 59,643 73,971
----------- -----------
Total current liabilities 689,091 351,272
----------- -----------
Long-term portion of capital lease obligation 79,244 172,362
----------- -----------
Redeemable preferred stock and stockholders' equity:
Series A redeemable convertible preferred stock, $.01 par value;
1,000 shares authorized, issued and outstanding at December 31,
1996 and 1995, at issuance cost plus accretion 524,575 454,310
Series B redeemable convertible preferred stock, $.01 par value;
1,000 shares authorized, 1,000 and 250 shares issued and outstanding
at December 31, 1996 and 1995, respectively, at issuance cost plus accretion 1,727,876 390,905
Series C redeemable convertible preferred stock, $.01 par value;
1,000 shares authorized, issued and outstanding at
December 31, 1996, at issuance cost plus accretion 1,021,492 --
Series D redeemable convertible preferred stock, $.01 par value;
1,667 shares authorized, 1,000 shares issued and outstanding
at December 31, 1996, at issuance cost plus accretion 1,488,662 --
Common stock, $.01 par value; 100,000 shares authorized,
22,912 and 22,911 shares issued and outstanding at December 31,
1996 and 1995, respectively 229 229
Additional paid-in capital 168,410 168,258
Deficit accumulated during the development stage (3,908,344) (918,518)
Deferred compensation -- (6,524)
----------- -----------
Total redeemable preferred stock and stockholders' equity 1,022,900 88,660
----------- -----------
Commitments (Note 9) -- --
----------- -----------
$ 1,791,235 $ 612,294
=========== ===========
</TABLE>
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Statement of Operations
- --------------------------------------------------------------------------------
Period from
inception
(February 8,
Year ended 1994) through
December 31, December 31,
1996 1995 1996
Revenue $ 408,244 $ 1,202 $ 409,446
Cost of revenue 491,550 14,788 506,338
----------- ----------- -----------
(83,306) (13,586) (96,892)
----------- ----------- -----------
Operating expenses:
Research and development 980,373 447,338 1,439,711
Sales and marketing 1,080,187 97,740 1,177,927
General and administrative 567,822 252,154 846,512
----------- ----------- -----------
Total operating expenses 2,628,382 797,232 3,464,150
----------- ----------- -----------
Loss from operations (2,711,688) (810,818) (3,561,042)
----------- ----------- -----------
Interest income 9,548 4,605 14,153
Interest expense (24,045) (9,056) (33,101)
----------- ----------- -----------
Net loss $(2,726,185) $ (815,269) $(3,579,990)
=========== =========== ===========
The accompanying notes are an integral part
<PAGE>
HealthGate Data Corp.
Statement of Changes in Redeemable Preferred Stock and Stockholders' Equity
(Deficit)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series A redeemable Series B redeemable Series C redeemable
convertible convertible convertible
preferred stock preferred stock preferred stock
Carrying Carrying Carrying
Shares value Shares value Shares value
<S> <C> <C> <C> <C> <C> <C>
[ILLEGIBLE] of Series B Preferred stock 750 1,200,000
[ILLEGIBLE] of Series C Preferred stock, net of
[ILLEGIBLE] costs of $22,009 1,000 977,991
[ILLEGIBLE] of Series D Preferred stock, net of
[ILLEGIBLE] costs of $24,242
[ILLEGIBLE] of common stock option
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
redemption value 70,265 136,971 43,501
[ILLEGIBLE] loss
------ --------- ------ ----------- ------ -----------
Balance, December 31, 1996 1,000 $ 524,575 1,000 $ 1,727,876 1,000 $ 1,021,492
====== ========= ====== =========== ====== ===========
<CAPTION>
Series D redeemable Deficit
convertible Accumulated
preferred stock Common stock Additional during the
Carrying Par paid-in development Deferred
Shares value Shares Value capital stage compensation
<S> <C> <C> <C> <C> <C> <C> <C>
6,524
[ILLEGIBLE] of Series B Preferred stock
[ILLEGIBLE] of Series C Preferred stock, net of
[ILLEGIBLE] costs of $22,009
[ILLEGIBLE] of Series D Preferred stock, net of
[ILLEGIBLE] costs of $24,242 1,000 1,475,758
[ILLEGIBLE] of common stock option 1 152
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
redemption value 12,904 (263,641)
[ILLEGIBLE] loss (2,726,185)
------ ----------- ------- ------ ---------- ------------ ------------
Balance, December 31, 1996 1,000 $ 1,488,662 22,912 $ 229 $ 168,410 $ (3,908,344) $ --
====== =========== ======= ====== ========== ============ ============
<CAPTION>
Total
redeemable
preferred stock
and
stockholders'
equity
(deficit)
<S> <C>
6,524
[ILLEGIBLE] of Series B Preferred stock 1,200,000
[ILLEGIBLE] of Series C Preferred stock, net of
[ILLEGIBLE] costs of $22,009 977,991
[ILLEGIBLE] of Series D Preferred stock, net of
[ILLEGIBLE] costs of $24,242 1,475,758
[ILLEGIBLE] of common stock option 152
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
redemption value
[ILLEGIBLE] loss (2,726,185)
------------
Balance, December 31, 1996 $ 1,022,900
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Statement of Changes in Redeemable Preferred Stock and Stockholders' Equity
(Deficit)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series A redeemable Series B redeemable Series C redeemable
convertible convertible convertible
preferred stock preferred stock preferred stock
Carrying Carrying Carrying
Shares value Shares value Shares value
<S> <C> <C> <C> <C> <C> <C>
[ILLEGIBLE] issuance of common stock $ $ $
[ILLEGIBLE] of common stock
[ILLEGIBLE] of common stock to employees
[ILLEGIBLE] of common stock options
[ILLEGIBLE]
------ --------- ------ ----------- ------ -----------
[ILLEGIBLE], December 31, 1996
[ILLEGIBLE] of Series A preferred stock and common
[ILLEGIBLE] with anti-dilution provisions
(Note 4), net [ILLEGIBLE] issuance costs of $26,312 1,000 398,688
[ILLEGIBLE] of Series B preferred stock, net of
[ILLEGIBLE] costs of $18,186 250 381,814
[ILLEGIBLE] of common stocks under anti-dilution
[ILLEGIBLE]
[ILLEGIBLE] of common stocks to employees and
[ILLEGIBLE]
[ILLEGIBLE] common stock options
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
[ILLEGIBLE] value 55,622 9,091
------ --------- ------ ----------- ------ -----------
December 31, 1995 1,000 454,310 250 390,905
<CAPTION>
Series D redeemable Deficit
convertible Accumulated
preferred stock Common stock Additional during the
Carrying Par paid-in development
Shares value Shares Value capital stage
<S> <C> <C> <C> <C> <C> <C>
[ILLEGIBLE] issuance of common stock $ 20,000 $ 200 $ 14,800 $
[ILLEGIBLE] of common stock 133 1 4,986
[ILLEGIBLE] of common stock to employees 320 3 11,997
[ILLEGIBLE] of common stock options 4,122
[ILLEGIBLE] (38,536)
------ ---------- ------- ------ --------- ----------
[ILLEGIBLE], December 31, 1994 20,453 204 35,905 (38,536)
[ILLEGIBLE] of Series A preferred stock and common
[ILLEGIBLE] with anti-dilution provisions
(Note 4), net [ILLEGIBLE] issuance costs of $26,312 1,524 15 74,985
[ILLEGIBLE] of Series B preferred stock, net of
[ILLEGIBLE] costs of $18,186
[ILLEGIBLE] of common stocks under anti-dilution
[ILLEGIBLE] 473 5 (5)
[ILLEGIBLE] of common stocks to employees and
[ILLEGIBLE] 461 5 24,253
[ILLEGIBLE] common stock options 33,120
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
[ILLEGIBLE] value (64,713)
(815,269)
------ ---------- ------- ------ --------- ----------
December 31, 1995 22,911 229 168,258 (918,518)
<CAPTION>
Total
redeemable
preferred stock
and
stockholders'
Deferred equity
compensation (deficit)
<S> <C> <C>
[ILLEGIBLE] issuance of common stock $ $ 15,000
[ILLEGIBLE] of common stock 4,987
[ILLEGIBLE] of common stock to employees 12,000
[ILLEGIBLE] of common stock options 4,122
[ILLEGIBLE] (38,536)
------------ -----------
[ILLEGIBLE], December 31, 1994 (2,427)
[ILLEGIBLE] of Series A preferred stock and common
[ILLEGIBLE] with anti-dilution provisions
(Note 4), net [ILLEGIBLE] issuance costs of $26,312 473,688
[ILLEGIBLE] of Series B preferred stock, net of
[ILLEGIBLE] costs of $18,186 381,814
[ILLEGIBLE] of common stocks under anti-dilution
[ILLEGIBLE]
[ILLEGIBLE] of common stocks to employees and
[ILLEGIBLE] 24,258
[ILLEGIBLE] common stock options (6,524) 26,596
[ILLEGIBLE] of cumulative dividends on redeemable
convertible preferred stock and accretion to
[ILLEGIBLE] value
(815,269)
------------ -----------
December 31, 1995 (6,524) 88,660
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
inception
(February 8,
Year ended 1994) through
December 31, December 31,
1996 1995 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,726,185) $ (815,269) $(3,579,990)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 197,900 45,824 243,724
Compensation expense for stock and options issued 6,524 50,854 73,500
Changes in assets and liabilities:
Accounts receivable (63,144) (674) (63,818)
Prepaid expenses and other current assets (24,684) (29,633) (54,617)
Other assets 1,870 (33,528) (31,658)
Deferred revenue 16,603 -- 16,603
Accounts payable 321,066 102,422 423,694
Accrued expenses (14,328) 69,789 59,643
----------- ----------- -----------
Net cash used in operating activities (2,284,378) (610,215) (2,912,919)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets (152,824) (98,351) (251,175)
----------- ----------- -----------
Cash flows from financing activities:
Payment of capital lease obligations (165,793) (43,777) (209,570)
Proceeds from issuance of preferred and common stock,
net of issuance costs 3,653,901 855,502 4,529,390
Proceeds from notes payable -- -- 2,500
Principal payments on notes payable -- (2,500) (2,500)
----------- ----------- -----------
Net cash provided by financing activities 3,488,108 809,225 4,319,820
----------- ----------- -----------
Net increase in cash and cash equivalents 1,050,906 100,659 1,155,726
Cash and cash equivalents, beginning of period 104,820 4,161 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 1,155,726 $ 104,820 $ 1,155,726
=========== =========== ===========
</TABLE>
Supplemental disclosure of cash flow information
During the years ended December 31, 1996 and 1995, the Company paid
approximately $24,000 and $9,000, respectively, for interest.
Supplemental disclosure of non-cash financing activities
During the years ended December 31, 1996 and 1995, the Company entered into
capital leases totaling approximately $87,000 and $391,000, respectively, for
certain computer equipment.
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Nature of Business and Summary of Significant Accounting Policies
HealthGate Data Corp. (the "Company") was incorporated in the state of
Delaware on February 8, 1994. The Company was formed to develop and market
biomedical and health care related information systems to institutions and
individuals through the Internet and other media.
The Company's primary activities since incorporation have been business
and financial planning, raising capital and research and product
development. The Company is considered a development stage enterprise as
defined in Statement of Financial Accounting Standards ("SFAS") No. 7,
"Accounting and Reporting by Development Stage Enterprises."
Significant accounting polices followed in the preparation of the
financial statements are as follows:
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. The
Company invests its excess cash in a money market fund backed by U.S.
Government securities. Accordingly, this investment is subject to minimal
credit and market risk.
At December 31, 1996 and 1995, the Company's cash equivalents are
classified as available for sale, and include $ 1,133,505 and $100,000,
respectively, in money market funds. These securities are stated at cost,
which approximates fair market value.
Fixed Assets
Fixed assets are recorded at cost and depreciated over their estimated
useful lives using the straight-line method. Fixed assets held under
capital leases which involve a transfer of ownership are amortized over
the estimated useful life of the asset. Other fixed assets held under
capital leases are amortized over the shorter of the lease life or the
estimated useful life of the asset. Repairs and maintenance costs are
expensed as incurred.
Software Development Costs
The Company incurs software development costs for the planning, design and
improvement of systems which support content and delivery of the Company's
services. SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," requires capitalization of such
software development costs incurred subsequent to the establishment of
technological feasibility of the software and the completion of all other
research and development activities associated with the systems. Costs
eligible for capitalization were insignificant in 1996 and 1995.
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
Revenue Recognition
The Company derives revenue primarily from user subscriptions and
transaction based fees, and from the sale of advertisements under
short-term contracts. Revenue from user subscriptions is recognized
ratably over the subscription period, and from usage fees when the service
is provided.
Advertising revenue is recognized as the related impressions are
displayed, provided that no significant Company obligations remain and
collection of the resulting receivable is probable. To date, the durations
of the Company's advertising commitments have ranged from one month to
three months. Company obligations typically include guarantees of minimum
number of "impressions", or times that an advertisement appears in page
views downloaded by users. To the extent that minimum guaranteed
impressions are not met during the contract period, the Company defers
recognition of the corresponding revenue until guaranteed impression
levels are achieved. Revenue from advertising barter transactions is
recognized during the period in which the advertisements are displayed by
the Company. Barter transactions are recorded at the estimated fair value
of the advertisements provided, unless the fair value of the advertising
services received is more evident. During the year ended December 31,
1996, revenue from barter transactions was approximately $115,000.
Revenue from a research arrangement was recognized pursuant to the
agreement as the related work was performed. During the year ended
December 31, 1996, total revenue recognized and costs incurred under this
arrangement were $87,171 and $81,442, respectively.
Advertising Costs
Advertising costs are charged to operations as incurred. Advertising costs
were approximately $410,000 and $15,000 in the years ended December 31,
1996 and 1995, respectively.
Accounting for Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123, which is
effective for the Company's 1996 financial statements, defines a fair
value method of accounting for stock-based awards to employees. The
Company has elected to account for stock-based awards to its employees
using the intrinsic value approach prescribed by Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees"
and related interpretations, and has adopted SFAS No. 123 through
disclosure only (Note 5).
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 liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. Basis of Financial Statements
The accompanying financial statements have been prepared on a basis which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. The Company incurred a
net loss of approximately $2,726,000 for the year ended December 31, 1996
and at December 31, 1996 has an accumulated deficit of approximately
$3,908,000.
The future viability of the Company is dependent on its ability to obtain
additional financing and to generate cash from operations.
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Useful lives December 31,
in years 1996 1995
<S> <C> <C> <C>
Computer equipment and software 3 $174,661 $ 63,329
Office equipment and fixtures 3 76,514 35,022
Computer equipment under capital lease 1-3 477,965 390,812
-------- --------
729,140 489,163
Less - Accumulated depreciation and
amortization 243,724 45,824
-------- --------
$485,416 $443,339
======== ========
</TABLE>
Depreciation and amortization expense on fixed assets was $197,900 and
$45,824 in 1996 and 1995, respectively, of which $132,055 and $37,689,
respectively, related to amortization of assets held under capital lease.
Accumulated amortization on assets under capital lease was $169,744 and
$37,689 at December 31, 1996 and 1995, respectively.
4. Redeemable Convertible Preferred Stock
Issuances
During 1995, the Company issued 1,000 shares of Series A redeemable
convertible preferred stock and 1,524 shares of common stock with certain
anti-dilution provisions. A value of $75,000 was ascribed to the common
stock and anti-dilution provisions based on their estimated fair value at
the time of issuance. These anti-dilution provisions were terminated by
mutual agreement of the Company and the investors in October 1995.
3
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
During 1995, the Company issued 250 shares of Series B redeemable
convertible preferred stock. During 1996, the Company issued 750, 1,000,
and 1,000 shares of Series B, Series C and Series D redeemable convertible
preferred stock, respectively. In April and September, 1997, the Company
issued a total of 667 additional shares of Series D redeemable convertible
preferred stock to the sole Series D investor for cash proceeds of
approximately $1,000,000.
Conversion
Each preferred share is convertible into common stock at the option of the
preferred stockholder or automatically upon the closing of an initial
public offering of the Company's common stock in which proceeds from the
public equal or exceed $10,000,000. The number of common shares to which a
holder of the preferred stock shall be entitled upon conversion shall be
based upon the conversion rates defined by the related stockholder
agreements (approximately 6.098 for 1, 7.988 for 1, 2.773 for 1 and 4.020
for 1 for holders of Series A, B, C or D preferred stock, respectively, at
December 31, 1996). At December 31, 1996, the outstanding preferred stock
is convertible into a total of 20,879 common shares. The conversion rates
are to be adjusted for certain dilutive and anti-dilutive events. The
Company has reserved 6,098, 7,988, 2,773 and 6,702 shares of common stock
for the conversion of Series A, B, C and D preferred stock, respectively.
Liquidation, Dissolution or Winding Up of the Company
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A, B, C and D preferred stock are entitled to
receive, on a pro-rata basis, $500, $1,600, $1,000 and $1,500 per share,
respectively, plus all accrued and unpaid dividends.
Voting, Registration and Other Rights
The holders of the preferred stock are entitled to vote, together with the
holders of common stock on all matters submitted to stockholders for a
vote. Each preferred stockholder is entitled to the number of votes equal
to the number of shares of common stock into which each Series A, B, C and
D share is convertible at the time of such vote.
Dividends
The holders of the Series A, B, C and D preferred stock are entitled to
receive cumulative annual dividends in the amount of $50, $160, $100 and
$150 per share, respectively, whether or not declared by the Board of
Directors- These dividends are payable upon liquidation, dissolution or
winding-up of the Company, or upon redemption of the respective preferred
stock.
Redemption
On each of the fifth, sixth and seventh anniversaries of the applicable
series closing date, the Company is required to redeem 33-1/3 percent of
the Series A, B, C and D preferred stock at a redemption price equal to
$500, $1,600, $1,000 and $1,500 per share, respectively, plus accrued and
unpaid dividends through the redemption date. During 1996 and 1995, the
Company recorded charges to accumulated deficit of $263,641 and $64,713,
respectively, to reflect the accretion of the preferred stock to
redemption value.
4
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
Required redemption amounts for each of the five years following December
31, 1996 for the preferred stock, excluding any cumulative and unpaid
dividends, are as follows:
Redemption
Year Amount
1997 $ --
1998 --
1999 --
2000 700,000
2001 1,533,333
Thereafter 2,366,667
-----------
$ 4,600,000
===========
5. Common Stock and Other Stockholders' Equity
Common Stock
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to any preferential dividend rights of the preferred
stockholders.
Stock Option Plans
In June 1994, the Company adopted the HealthGate Data Corp. Stock Option
Plan for Non-Employee Directors (the "Non-Employee Directors Plan") which
provided for the granting of non-qualified stock options to non-employee
members of the Company's Board of Directors. The Non-Employee Directors
Plan allowed for the grant of options to purchase up to 8.75% of the
Company's outstanding stock on a fully diluted basis. The exercise price
of options granted under the Non-Employee Directors Plan could not be less
than the fair value of the stock on the date of grant, and the options are
exercisable for seven years from the date of grant. This plan was
terminated by the Board of Directors on March 10, 1995.
In June 1994, the Company adopted the HealthGate Data Corp. 1994 Stock
Option Plan (the "1994 Plan") which provides for the granting of both
incentive stock options and nonqualified options to employees, directors
and consultants. The 1994 Plan, as amended, allows for a maximum of
300,000 options to purchase shares of common stock to be issued prior to
December 2004. The exercise price of any incentive stock option granted
under the 1994 Plan shall not be less than the fair market value of the
stock on the date of grant or less than 110% of the fair value in the case
of optionees holding more than 10% of the total combined voting power of
all classes of stock of the Company. Options granted under the 1994 Plan
are exercisable for a period of not longer than ten years from the date of
grant.
5
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Company applies APB 25 and related interpretations in accounting for
the 1994 Plan. Since inception (February 8, 1994) through December 31,
1996, no compensation expense has been recognized for options granted
under this plan. During 1995 and 1994, the Company granted common stock
and certain other stock options for services rendered and to be rendered
with exercise prices below the deemed fair value of the Company's common
stock. The Company recorded compensation expense over the service periods
equal to the difference between the deemed fair value of the common stock
and the exercise price, if any. Had compensation cost attributable to 1994
Plan and other options been determined based on the fair value of the
options at the grant date, consistent with the provisions of FAS 123, the
Company's net losses would not have differed materially from amounts
reported. Because additional option grants are expected to be made in the
future, the pro forma effect of applying the fair value method may be
material to reported results of operations in future years.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions for grants in 1996 and 1995:
1996 1995
Expected option term (years) 4 4
Risk-free interest rate 5.7% 6.2%
Expected volatility 0.0% 0.0%
Dividend yield 0.0% 0.0%
A summary of the status of the Plan as of December 31, 1996 and 1995 and
changes during the years ending on those dates are presented below:
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995
------------------------ ------------------------
Weighted- Weighted-
average average
Shares exercise price Shares exercise price
<S> <C> <C> <C> <C>
Outstanding at beginning of year 3,012 $ 45.56 3,372 $ 17.97
Granted 2,650 229.28 1,620 55.02
Exercised (1) 140.00 -- --
Forfeited (994) 214.99 (1,980) 6.32
------- --------- ------- --------
Outstanding at end of year 4,667 $ 113.80 3,012 $ 45.56
======= ========= ======= ========
Options available for grant at end of year 2,464 4,120
======= =======
Weighted-average fair value of options
granted during the year $ 45.53 $ 11.77
======= =======
</TABLE>
6
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
Weighted-average
Range of Number remaining Weighted-average Number Weighted-average
exercise price outstanding contractual life exercise price exercisable exercise price
<S> <C> <C> <C> <C> <C>
$.70-.75 1,012 4.03 years $ .71 892 $ .71
37.50 1,400 3.12 37.50 880 37.50
140.00 475 3.82 140.00 327 140.00
231.00 1,780 3.24 231.00 566 231.00
----- -----
4.667 2.665
===== =====
</TABLE>
6. Income Taxes
The components of the Company's net deferred tax asset are as follows:
December 31,
1996 1995
Deferred tax assets:
Startup costs capitalized for tax purposes $ 73,000 $ 95,000
Software capitalized for tax purposes 61,000 32,000
Net operating loss carryforwards 1,325,000 228,000
R&D Credit 16,000 --
Other (3,000) (4,000)
----------- -----------
Gross deferred tax assets 1,472,000 351,000
Deferred tax asset valuation allowance (1,472,000) (351,000)
----------- -----------
$ -- $ --
=========== ===========
The Company has provided a full valuation allowance for deferred tax
assets, since realization of these future benefits is not sufficiently
assured at December 31, 1996 and 1995. If the Company achieves
profitability, these deferred tax assets would be available to offset
future income tax liabilities and expense.
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $3,217,000 for federal and state reporting which expire at
various dates through 2011. Under the Internal Revenue Code, certain
substantial changes in the Company's ownership may limit the amount of net
operating loss carryforwards that can be utilized to offset future taxable
income or tax liability.
7
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
7. 401(K) Plan
During the year ended December 31, 1996, the Company established a defined
contribution savings plan under Section 401(k) of the Internal Revenue
Code. This plan covers substantially all employees who meet minimum age
and service requirements and allows participants to defer a portion of
their annual compensation on a pre-tax basis. Company contributions to the
plan may be made at the discretion of the Board of Directors. There were
no contributions made to the plan by the Company during the year ended
December 31, 1996.
8. Related Party Transactions
A stockholder of the Company is a partial owner of the building in which
the Company leases office space. The Company incurred rental costs of
approximately $58,000 and $18,000 under this lease agreement during the
years ended December 31, 1996 and 1995, respectively.
In connection with the Series B redeemable convertible preferred stock
agreement, the Company is required to use the services of the sole Series
B investor for certain consulting work. During 1996 and 1995, the Company
incurred consulting costs with this investor totaling approximately
$203,000 and $57,000, respectively. Also during the year ended December
31, 1995, this investor received 68 shares of the Company's common stock
as compensation for the service of an employee of the investor on the
Company's Board of Directors. A value of $9,519 was ascribed to these
common shares, which was recorded as compensation expense in the year
ended December 31, 1995. The Company also leases certain computer
equipment from this investor under a noncancelable capital lease
arrangement. Payments under this lease during the years ended December 31,
1996 and 1995 totaled $90,864 and $18,173, respectively.
8
<PAGE>
HealthGate Data Corp.
(a development stage enterprise)
Notes to Financial Statements
- --------------------------------------------------------------------------------
9. Commitments
The Company leases all facilities under operating lease agreements and
certain equipment under noncancelable capital lease agreements. Total rent
expense under noncancelable operating leases was approximately $58,800 and
$17,000 for the years ended December 31, 1996 and 1995, respectively. The
approximate future minimum lease commitments under all noncancelable
leases at December 31, 1996 are as follows:
Operating Capital
leases leases
1997 $ 101,961 $ 205,539
1998 111,349 82,505
---------- ----------
Total future payments $ 213,310 288,044
==========
Less - amount representing interest 19,649
----------
Present value of minimum lease payments $ 268,395
==========
The Company has entered into agreements to license content for its service
from various unrelated third parties. Future minimum license payments
under these agreements as of December 31, 1996 totaled approximately
$166,000.
9
<PAGE>
4/5/99
Schedule 6.8
to
Series E Preferred Stock Purchase Agreement
Absence of Certain Developments
For convenience, disclosures in this Schedule 6.8 have been listed in a
lettered subcategory with a reference and brief description of the lettered
subcategories of Section 6.8 of the Stock Purchase Agreement. Listings have not
been repeated in more than one lettered category. Accordingly, listing of an
item in a lettered subcategory is not intended to limit the disclosure to only
that lettered subcategory of Section 6.8.
a. Bonds, debt securities or equity securities issuances:
i. The Company issued a Convertible Bridge Promissory Note, dated
September 29, 1998, to Blackwell Science Ltd. in the original
principal amount of $2,000,000.
ii. Pursuant to a Loan and Security Agreement, dated March 26, 1998, by
and between the Company and Petra Capital LLC., the Company issued a
Secured Promissory Note, dated March 26, 1998, to Petra Capital,
LLC. in the original principal amount of $2,000,000.
iii. Since January 1, 1998, a total of 1,295 shares of common stock has
been issued and sold pursuant to previously granted stock option
agreements.
b. Mortgages or pledges any of its properties or assets
i. Loan and Security Agreement, dated March 26, 1998, by and between
HealthGate and Petra Capital LLC.
ii. Trademark and Patent Security Agreement, dated March 26, 1998, of
HealthGate in favor of Petra Capital, LLC.
c. Capital expenditures or commitments in excess of $100,000
i. The Company leases computer equipment from Data General at an annual
rate of $119,519.40.
ii. The Company leases computer equipment from The Republic Group, LLC.
Current hardware leases provide for annual payments of $89,898.
HealthGate plans to enter into another lease for additional hardware
during March, 1999. Payments under this proposed lease have not yet
<PAGE>
been determined, but value of the hardware to be leased is
approximately $122,620.83.
iii. The Company purchased $115,000 of office furniture from Synopsis,
Inc. in February 1999 in connection with the Company's move to its
Burlington, Massachusetts headquarters.
d. The Company incorporated AHN.com, Inc. a Delaware corporation, in
February, 1999. AHN.com, Inc. changed its name to "HealthGate Acquisition
Corp." in March 1999. The Corporation has no assets or operations and is
inactive.
See also Schedule 6.11 for significant agreements involving the Company.
<PAGE>
4/5/99
Schedule 6.9
to
Series E Preferred Stock Purchase Agreement
Encumbered Assets
The Company has granted security interest in its assets and intellectual
property to Petra Capital, LLC. pursuant to the following agreements:
- Loan and Security Agreement, dated March 26, 1998, by and between
HealthGate and Petra Capital, LLC.
- Trademark and Patent Security Agreement, dated March 26, 1998, of
HealthGate in favor of Petra Capital, LLC.
<PAGE>
4/5/99
Schedule 6.11
to
Series E Preferred Stock Purchase Agreement
Contracts and Commitments
For convenience, disclosures in this Schedule 6.11 have been listed in a
lettered subcategory with a reference and brief description of the lettered
subcategories of Section 6.11 of the Stock Purchase Agreement. Listings have not
been repeated in more than one lettered category. Accordingly, listing of an
item in a lettered subcategory is not intended to limit the disclosure to only
that lettered subcategory of Section 6.11.
a. i. HealthGate has established its 1994 Stock Option Plan pursuant to
which up to 650,000 options for the purchase of Company common stock
may be granted. As of February 3, 1999, options for a total of
428,580 shares of Common Stock are outstanding under the 1994 Plan.
Additionally, 1,295 shares of Common Stock have been purchased
pursuant to exercises of options. A total of 220,125 shares remain
available for issuance under the 1994 Plan.
ii. HealthGate adopted a 401(k) Plan in April, 1996.
b. HealthGate has entered into an Employment Agreement, dated October 1,
1995, with William S. Reece, its CEO and President.
c. Loan/Lien Agreements:
- Loan and Security Agreement, dated March 26, 1998, by and between
HealthGate and Petra Capital, LLC.
- Trademark and Patent Security Agreement, dated March 26, 1998, of
HealthGate in favor of Petra Capital, LLC.
- The Company issued a Convertible Bridge Promissory Note, dated
September 29, 1998, to Blackwell Science Ltd. in the original
principal amount of $2,000,000.
d. Leases
Office lease:
25 Corporate Drive, Suite 310
<PAGE>
Burlington, MA 01803
Term: March 1, 1999 - June 30, 2000
Base Rental Payment for entire term: $629,871.30
See also Schedule 6.8 for other leases
e. Contract of group of related contracts with the same party or group of
affiliated parties the performance of which involves a consideration in
excess of $100,000
i. Content license agreements
Clinical Reference Systems
$180,000 annually, from 10/1/98 - 9/30/01
ii. Internet Data Center Services Agreement with Exodus Communications,
Inc.
$10,220 per month beginning approximately March 22, 1999
$1,300 per megabit above base of one (1) megabit per month
iii. Legal services from Rich, May, Bilodeau & Flaherty, P.C. for 1999
are expected to exceed $100,000
f. HealthGate's online warranty and disclaimer reads as follows:
Copyright and Limitations on Use
Copyright (C) 1999 HealthGate(R) Data Corp. All rights reserved.
HealthGate(R) and ReADER(R) are trademarks of HealthGate Data Corp.
The information available through the Service is the property of
HealthGate Data Corp. or its licensers and is protected by copyright and
other intellectual property laws. Information received through the Service
may be displayed, reformatted and printed for your personal,
non-commercial use only. You agree not to reproduce, retransmit,
distribute, disseminate, sell, publish, broadcast or circulate the
information received through the Service to anyone, including but not
limited to others in the same company or organization. Any copy made of
information obtained through the Service must include the copyright
notice.
DISCLAIMER OF WARRANTIES AND LIABILITY
The information contained in the Service is for information purposes only
and you assume full responsibility and all risk for the appropriate use of
the medical information contained in the Service. Nothing contained in the
Service is intended to be for medical diagnosis or treatment or in lieu of
consulting with a physician or competent healthcare professional for
medical diagnosis and/or treatment.
<PAGE>
HealthGate does not directly or indirectly practice medicine or dispense
medical services and therefore assumes no liability whatsoever of any kind
for the information and data contained in the Service or for any diagnosis
or treatment made in reliance thereon.
DUE TO THE NUMBER OF SOURCES FROM WHICH INFORMATION ON THE SERVICE IS
OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC DISTRIBUTION, THERE MAY
BE DELAYS, OMISSIONS OR INACCURACIES IN SUCH INFORMATION AND THE SERVICE.
THE SERVICE COULD INCLUDE TECHNICAL OR OTHER INACCURACIES OR TYPOGRAPHICAL
ERRORS. PERIODICALLY, CHANGES MAY BE MADE IN THE INFORMATION PROVIDED IN
THE SERVICE. HEALTHGATE DATA CORP. AND ITS AFFILIATES, AGENTS AND
LICENSERS CANNOT AND DO NOT WARRANT THE ACCURACY, COMPLETENESS,
CURRENTNESS, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE NEWS AND INFORMATION AVAILABLE THROUGH THE SERVICE, OR THE
SERVICE ITSELF, OR ANY OTHER INFORMATION WHICH IS REFERENCED BY OR LINKED
TO THE SERVICE. NEITHER HEALTHGATE DATA CORP. NOR ANY OF ITS AFFILIATES,
AGENTS OR LICENSERS SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR
INJURY CAUSED IN WHOLE OR PART BY ITS NEGLIGENCE OR CONTINGENCIES BEYOND
ITS CONTROL IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING
THE SERVICE AND ANY INFORMATION THROUGH THE SERVICE, OR ANY OTHER
INFORMATION WHICH IS REFERENCED BY OR LINKED TO THE SERVICE. IN NO EVENT
WILL HEALTHGATE DATA CORP., ITS AFFILIATES, AGENTS OR LICENSERS BE LIABLE
TO YOU OR ANYONE ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN
RELIANCE ON SUCH INFORMATION OR FOR ANY CONSEQUENTIAL, SPECIAL OR SIMILAR
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. YOU AGREE
THAT THE LIABILITY OF HEALTHGATE DATA CORP., ITS AFFILIATES, AGENTS AND
LICENSORS, IF ANY, ARISING OUT OF ANY KIND OF LEGAL CLAIM (WHETHER IN
CONTRACT, TORT OR OTHERWISE) IN ANY WAY CONNECTED WITH THE SERVICE OR THE
INFORMATION IN THE SERVICE, OR ANY OTHER INFORMATION WHICH IS REFERENCED
BY OR LINKED TO THE SERVICE, SHALL NOT EXCEED THE AMOUNT YOU PAID TO
HEALTHGATE DATA CORP. FOR USE OF THE SERVICE.
g. HealthGate has granted registration rights pursuant to the following
agreements:
- Registration Agreement with holders of the Company's Series A
Preferred Stock, dated as of March 16, 1995 (as amended, the "First
Purchase Agreement);
- Registration Agreement with Nichols Research Corp. (holder of the
Company's Series B Preferred Stock), dated as of October 18, 1995;
- Registration Agreement with holders of the Company's Series C
Preferred Stock, dated as of August 21, 1996;
<PAGE>
- Registration Agreement with Blackwell Science Ltd. (holder of the
Company's Series D Preferred Stock, dated as of December 20, 1996
(as amended, the "First Purchase Agreement);
- Registration Agreement with Petra Capital, dated March 26, 1998
- The foregoing Registration Agreements have been amended by
Amendments dated October 18, 1995, August 21, 1996, December 20,
1996 and March 26, 1998.
h. Agreements limiting business activity or imposing any obligation of
exclusivity upon the Company.
- Data General Corporation, a HealthGate Value Added Reseller, has
exclusive rights to their current hospital clients (and those of
Meditech) through July 1, 1999. If Data General sells 25 CHOICE
enterprise-based agreements as a HealthGate Value-Added Reseller,
this exclusivity extends for another six months.
- Pursuant to the terms of the Stock Purchase Agreement dated as of
December 20, 1996 by and between HealthGate and Blackwell, in the
event HealthGate attempts to expand into Europe or Asia, HealthGate
has agreed to negotiate in good faith with Blackwell to determine in
what manner Blackwell may serve as HealthGate's primary strategic
alliance partner for HealthGate in connection with such expansion.
i. Agreement or arrangement with any Related Party
- Blackwell Science Ltd., which currently uses HealthGate's
activePress services for hosting full-text journals over the Web, is
also a shareholder in the Company.
- In May 1998, HealthGate purchased certain of the assets (principally
computer hardware, software and office furnishings) of Systems
Architecture, Inc. for $70,000. Systems Architecture, Inc. was a
company owned by Hamid Tabatabaie, HealthGate's Vice President of
Sales and Marketing.
j. Agreement imposing any indemnity obligation upon the Company
Generally, HealthGate's Content License Agreements contain mutual
indemnification clauses.
k. Any other agreement which is material to its operations and business
prospects or involves a consideration in excess of $100,000 annually.
- Lycos, Inc.: advertising agreement in the amount of $104,520;
- Following funding from Purchaser, HealthGate anticipates entering
into an
<PAGE>
agreement with Massachusetts Medical Society, publisher of The New
England Journal of Medicine, concerning an on-line consumer version
of the New England Journal of Medicine. Annual consideration payable
by HealthGate to Massachusetts Medical Society under the proposed
agreement is expected to be approximately $500,000.
See also Schedule 6.8 for recent matters involving the Company.
<PAGE>
Schedule 6.13
to
Series E Preferred Stock Purchase Agreement
Litigation
None.
<PAGE>
Exhibit 10.27
DEVELOPMENT AND DISTRIBUTION AGREEMENT
BETWEEN
GE MEDICAL SYSTEMS
AND
HEALTHGATE DATA CORP.
JUNE 11, 1999
<PAGE>
DEVELOPMENT AND DISTRIBUTION AGREEMENT
This Agreement, effective as of June 11, 1999, is between GE Medical
Systems, a division of General Electric Company, a corporation organized and
existing under the laws of the state of New York ("GEMS"), and HealthGate Data
Corp., a corporation organized and existing under the laws of the state of
Delaware ("HealthGate").
RECITALS
A. HealthGate owns or has rights to certain "HealthGate Products" (as
defined below) which are used in health, medicine, training and education.
B. GEMS owns or has rights to certain content, satellite broadcast
programming and branding and related goods and services which are used in
health, medicine, training and education, and which are used to distribute
information about, and to promote, its other goods and services.
C. The parties intend to develop certain enhanced or supplemented
embodiments of HealthGate Products (called "GEMS Products" herein, as defined
below) by integrating certain Marks (as defined below), content, programming and
e-commerce capabilities of GEMS with the HealthGate Products. GEMS is granted a
limited worldwide right hereunder to distribute HealthGate Products, including
an exclusive right to distribute HealthGate Products to the Exclusive Customers
(as defined below), and an exclusive worldwide right to distribute GEMS
Products. The parties are to share Revenue (as defined herein) in connection
therewith.
D. Simultaneous with this Agreement, the parties are entering into a
Warrant Purchase Agreement (the "Warrant Agreement") of even date herewith,
under which General
2
<PAGE>
Electric Company or one or more of its affiliates acquires a warrant to purchase
certain stock of HealthGate as set forth therein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants set forth below, the parties agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms herein shall have the following meanings for purposes of
this Agreement:
1.1 "Agreement" has the meaning set forth in the preamble.
1.2 "HealthGate Products" means all present and all future releases,
versions and embodiments of the suite of HealthGate products and services
currently known as "CHOICE," that are developed for or marketed or sold to the
Healthcare Marketplace, including any future products or services having a
different name but substituting for or superseding, or performing the same or
equivalent function as, or competing with, CHOICE, but not including those
current products or services listed on Exhibit B attached hereto with respect to
which HealthGate is prohibited by existing obligations to content providers from
allowing distribution by GEMS.
1.3 "Healthcare Marketplace" means institutions, organizations and
corporations in the business of delivering patient care, including but not
limited to hospitals, multi-hospital systems, clinics, out-patient centers,
healthcare group purchasing organizations and integrated delivery networks.
1.4 "GEMS Products" means products resulting from HealthGate Products
(i) being enhanced or supplemented with content contributed by GEMS, regardless
of format, or (ii) to which Marks of GEMS are applied, or (iii) for which GEMS
contributes any development costs.
3
<PAGE>
1.5 "Products" means HealthGate Products sold or deemed sold by GEMS and
GEMS Products, singly and jointly.
1.6 "Exclusive Customers" means the companies and institutions listed in
Exhibit A hereto.
1.7 "Revenue" means all monetary consideration and the fair market value
of all non-monetary consideration actually received, not including any sales or
value-added taxes, and less any returns or refunds. In the case of Revenue in a
currency other than United States dollars, such Revenue shall be converted to
United States dollars using the exchange rate in effect on the last day of the
calendar quarter during which such Revenue is received.
1.8 "Qualified Lead" means a lead with an Exclusive Customer for which
HealthGate delivers written notice to GEMS (a) identifying such Exclusive
Customer, (b) identifying a contact at such Exclusive customer, (c) summarizing
the web capabilities of and HealthGate proposals made to such Exclusive Customer
as of the date of such notice, and (d) describing any discussions between
HealthGate and such Exclusive Customer as of the date of such notice.
1.9 "Confidential Information" means any information received by a party
that is marked "Confidential" or "Proprietary" or, in the case of information
that is disclosed orally, is reduced to writing and such writing is delivered to
the receiving party confirming the oral disclosure and identifying the oral
disclosure as "Confidential" within 30 days after the oral disclosure.
Confidential Information shall not include any information that the receiving
party can demonstrate, by a preponderance of the evidence, is already known to
it at the time of the disclosure, is in the public domain other than as
consequence of breach by it of its obligation hereunder not to disclose the
information, is received from another without an obligation of
4
<PAGE>
confidentiality, or is thereafter independently developed by it without the use
of any such information.
1.10 "Marks" has the meaning set forth in Section 6.5 below.
1.11 "Control" has the meaning set forth in Section 13.3 below.
1.12 "Integration Support" has the meaning set forth in Article 2 below.
1.13 "Competitive Activities" means GEMS selling of any enterprise-wide
supplemental website healthcare content to the Healthcare Marketplace other than
as provided hereunder. As of the signing of this Agreement, "Competitive
Activities" shall mean those offered by drkoop.com and AHN. "Competitive
Activities" shall not include departmental and educational solutions, shall not
include GEMS' existing distribution arrangements with the Health Channel, and
shall not include TiP.
1.14 "List Price" means, with respect to the sale of Products during a
calendar quarter, the lesser of (a) the list price for HealthGate Products last
published by HealthGate prior to such calendar quarter and (b) any discounted
prices at which HealthGate directly or indirectly distributes comparable volumes
of HealthGate Products to end users during such calendar quarter. "List Price"
does not include any sales or value-added taxes, surcharges, discounts, refunds
or credits.
ARTICLE II
DEVELOPMENT
2.1 DEVELOPMENT OF GEMS PRODUCTS. The parties will collaborate in the
development of GEMS Products by integrating into HealthGate Products those
portions of GEMS' content, programming and branding and related goods and
services as may be designated by GEMS from time to time. The GEMS Products will
be directed toward specific areas of expertise of GEMS,
5
<PAGE>
including, but not limited to, radiology, cardiology and women's health, and
related educational materials, and GEMS e-commerce applications. More
specifically, the parties anticipate that the GEMS Products will include
continuing education and continuing medical education, e-commerce, medical
content, health and wellness content and consulting services.
2.2. INTEGRATION SUPPORT. During the term of this agreement, HealthGate
will provide Integration Support (as defined below) to GEMS as follows:
(a) Upon receipt of a request for Integration Support from GEMS,
each of which shall be written with sufficient detail to enable
HealthGate's personnel to estimate the programming and other requirements
thereof, HealthGate shall promptly deliver to GEMS a written project
outline which will outline the scope of work and the number of man hours
required to fulfill such request (each, a "Project Outline"). Any
modifications to the GEMS request for Integration Support shall require a
further request from GEMS and a further Project Outline from HealthGate.
(b) At its expense, HealthGate will provide up to 300 man-hours of
Integration Support to GEMS during each calendar quarter. Subject to
Section 2.2(c) below, all Integration Support provided to GEMS in excess
of 300 man-hours during each calendar quarter shall be provided to GEMS on
an as available basis and at the expense of GEMS, based on the actual time
and materials costs incurred by HealthGate in providing such additional
Integration Support and on terms and conditions no less favorable than
those granted to others.
(c) Any time or material expenses incurred by HealthGate in excess
of the time and materials set forth in a Project Outline (as modified in
accordance with Section 2.2(a) above) shall be borne by HealthGate, and
any such excess man-hours shall
6
<PAGE>
not apply for any purpose against the 300 man-hours agreed to be provided
under Section 2.2(b) above.
(d) "Integration Support" includes, but is not limited to, the
following services: review of requests submitted by GEMS as contemplated
under Section 2.2(a) above; preparation and delivery of Project Outlines;
and design, development, testing and implementation of all necessary
services and support for the integration of GEMS Marks, links to GEMS
Websites and the integration of GEMS' content and look and feel of GEMS
into HealthGate Products for the purpose of creating GEMS Products.
2.3 CREATION OF DERIVATIVE WORKS. HealthGate will provide all necessary
technical support to GEMS in the creation and development of derivative works of
and new content or features for GEMS Products, subject to the ownership
provisions of Article III below and such other terms and conditions as agreed
upon by the parties from time to time. Such terms and conditions will be
reasonable, and no less favorable to GEMS than those offered by HealthGate to
others under similar circumstances. The parties may mutually agree for
HealthGate to provide such support at the expense of GEMS, the shared expense of
GEMS and HealthGate, or the expense of HealthGate, which agreement shall have
the effect described in Article III and Section 7.2(b).
ARTICLE III
OWNERSHIP
3.1 OWNERSHIP OF GEMS PRODUCTS. GEMS will own, and HealthGate hereby
assigns and agrees to assign to GEMS, all elements of GEMS Products that (i)
constitute, or are derivative works of, GEMS content, regardless of format
(including without limitation works of authorship, source and object code, and
databases) or (ii) for which GEMS contributes
7
<PAGE>
development costs. Such assignment shall include all copyrights, trade secret
rights and other intellectual property rights thereto, with the unrestricted
right to reproduce, prepare derivative works, use, distribute, perform and
display such elements. HealthGate will have no rights to any such elements
unless expressly provided otherwise in writing by GEMS.
3.2 OWNERSHIP OF HEALTHGATE PRODUCTS. HealthGate shall own all
HealthGate Products and any elements of GEMS Products that do not constitute,
and are not derivative works of, GEMS content and for which GEMS does not
contribute development costs, including all copyrights, trade secret rights and
other intellectual property rights thereto, subject to the distribution rights
of GEMS under Section 4.1 below and other rights of GEMS hereunder.
3.3 GEMS OWNERSHIP OF WORK FOR WHICH GEMS FUNDS DEVELOPMENT. All work,
including associated technology, developed by HealthGate and funded by GEMS
shall be owned by GEMS and all rights therein together with all intellectual
property rights shall be owned by GEMS, unless HealthGate delivers to GEMS clear
and convincing proof including corroborated records showing prior ownership of
such rights by HealthGate, and GEMS agrees with such ownership, in advance of
such development. HealthGate hereby grants GEMS a royalty-free, irrevocable,
non-exclusive license to allow GEMS to copy, modify, distribute, perform
publicly such portions of the delivered work, and to use any portions of any
associated technology that are not owned by GEMS in connection with GEMS'
commercialization of the delivered work.
3.4 HEALTHGATE'S RIGHTS IN WORK FOR WHICH GEMS FUNDS DEVELOPMENT. GEMS
hereby grants to HealthGate a royalty-free, irrevocable, non-exclusive license
to allow HealthGate to copy, modify, distribute, perform publicly the technology
associated with the work for which GEMS funded development, but only outside the
field of medical imaging and patient
8
<PAGE>
monitoring and only without the involvement of any competitors of GEMS including
but not limited to those listed in Exhibit C hereto.
3.5 ASSIGNMENTS. Except as provided in this Article III and subject to
the licenses and other rights under this Agreement, each party retains ownership
of its respective underlying intellectual property rights. Each party agrees to
take such action as may be reasonably required to effectuate the ownership
provisions of this Article III, including without limitation the execution and
delivery of instruments of assignment, recordation or registration, and the
giving of truthful testimony.
3.6 ENFORCEMENT. Each party shall promptly notify the other of any
infringement or other violation by any third party of any patent, copyright,
trade secret, trademark or other intellectual property right related to the
Products. The party owning such right may enforce such right against such third
party, and the other party shall reasonably cooperate with such enforcement at
the enforcing party's expense. Any damages or other monetary recovery in the
enforcement action shall be retained by the enforcing party.
ARTICLE IV
DISTRIBUTION RIGHTS
4.1 GRANT OF RIGHTS GOVERNING GEMS PRODUCTS. HealthGate hereby grants
to GEMS and its affiliates an exclusive worldwide right and license to
distribute, and arrange for subdistribution through GEMS subdistributors that
do not engage in any activities that would be deemed Competitive Activities
if engaged in by GEMS, GEMS Products on such terms and conditions as GEMS may
determine, consistent with the provisions of this Agreement.
4.2 GRANT OF RIGHTS GOVERNING HEALTHGATE PRODUCTS.
9
<PAGE>
(a) HealthGate hereby grants to GEMS a worldwide right and license,
exclusive except as provided in this Section 4.2(a), to distribute, and
arrange for subdistribution through GEMS subdistributors that do not engage
in any activities that would be deemed Competitive Activities if engaged in
by GEMS, HealthGate Products on such terms and conditions as GEMS may
determine, consistent with the provisions of this Agreement to the Exclusive
Customers. If GEMS engages in any Competitive Activities, then HealthGate may
convert such right and license to nonexclusive upon 30 days notice to GEMS.
HealthGate may continue to market or sell HealthGate Products to any
Exclusive Customer, for a period of 90 days after execution of this
Agreement, but any resulting sale of any HealthGate Products shall be deemed
a sale by GEMS for purposes of the sharing of Revenues and other provisions
of this Agreement. After the first 90 day period of this Agreement,
HealthGate may deliver to GEMS written notice of a Qualified Lead with any
Exclusive Customer. If within 90 days after receiving such notice from
HealthGate, GEMS fails to consummate a sale to, or receive a commitment from,
such Exclusive Customer, or achieve other significant demonstrated progress
toward a sale to such Exclusive Customer, then HealthGate at its option upon
notice to GEMS may thereafter distribute or arrange for the distribution of
HealthGate Products to such Exclusive Customer.
(b) HealthGate hereby grants to GEMS a nonexclusive worldwide right
and license to distribute HealthGate Products, other than to the Exclusive
Customers, on such terms and conditions as GEMS may determine, consistent
with the provisions of this Agreement in those instances in which a customer
desires to purchase HealthGate Products and the distribution to such customer
does not violate any then-existing exclusive distribution obligation of
HealthGate and subject to HealthGate prior consent. In addition, GEMS shall
have the non-exclusive right to distribute HealthGate Products to Quorum.
4.3 REVOCATION OR TRANSFER OF CONFLICTING DISTRIBUTION RIGHTS. If
HealthGate has previously granted distribution rights to others for any of the
Exclusive Customers, then
10
<PAGE>
HealthGate shall revoke such rights or cause them to be transferred to GEMS in
accordance with all the provisions herein.
4.4 UNAVAILABLE CONTENT. Promptly after the date of this Agreement,
HealthGate shall exert its best efforts with each of its content providers that
prohibit the distribution of their content through GEMS Products or otherwise
prohibit distribution by GEMS to waive such prohibition and allow such
distribution. HealthGate will regularly keep GEMS informed of HealthGate's
efforts and progress in obtaining such waivers.
4.5 PROHIBITED DISTRIBUTORS. HealthGate will not distribute or allow the
distribution of any HealthGate Products or any components, portions, modules or
other constituents of HealthGate Products, or any product or service competitive
to HealthGate Products, by any company listed in Exhibit C hereto; provided,
however, the limitation provided under this Section 4.5 shall only apply to the
Healthcare Marketplace and shall not limit HealthGate's ability to enter into
transactions or arrangements not involving the Healthcare Marketplace; and
provided further, HealthGate will be released from the limitation provided under
this Section 4.5 at its option upon 30 days prior notice to GEMS if GEMS engages
in any Competitive Activities.
4.6 TERMS OF DISTRIBUTION. The general terms and conditions of the
distribution of Products by GEMS will be as set forth in a Standard End User
License Agreement substantially in the form agreed upon by the parties from time
to time.
4.7 NO BEST EFFORTS OR RESTRICTIONS. The loss of exclusivity by GEMS
with respect to the Exclusive Customers as set forth in Section 4.2 above is
HealthGate's sole remedy for any failure by GEMS to make sales of Products.
Except as expressly set forth herein, GEMS will not be restricted in its conduct
of any activities by this Agreement; the distribution activities of GEMS for the
Products shall be as determined by GEMS in its sole discretion subject to the
11
<PAGE>
terms and conditions of this Agreement; and GEMS shall not be obligated to
undertake any "best efforts" or any other particular commitment level.
4.8 MEETINGS. The parties will meet approximately each calendar quarter
to discuss market conditions and strategies for the effective sale and
distribution of the Products.
ARTICLE V
SERVICES AND SUPPORT
5.1 WEBSITE DESIGN AND HOSTING. HealthGate, at its expense, shall
design, develop, maintain, update, support and host the websites for all
Products; provided, however, with respect to products, services and applications
that are resident on non-HealthGate servers, HealthGate shall only be
responsible for maintaining the links between HealthGate's servers and such
other servers. Promptly upon request, HealthGate shall deliver to GEMS and, if
required under the applicable end user agreement, to customer's quarterly usage,
tracking and similar information related to each such customer's website, such
information to include, if applicable, page views, numbers of unique visitors,
numbers of visits to sections, advertisers' and sponsors' usage and click
throughs.
5.2 TRAINING. At the request of GEMS, and on a date and at a location
chosen by GEMS and provided to HealthGate a reasonable time in advance,
HealthGate shall provide one comprehensive training session for the GEMS sales
and marketing force to launch the sales and marketing of the Products by GEMS.
While this Agreement is in effect, on a quarterly basis, and on a date and at a
location chosen by GEMS and provided to HealthGate a reasonable time in advance,
HealthGate will conduct a comprehensive training session for individuals
selected by GEMS as GEMS internal trainers for the sales and marketing of the
Products. In addition, while this Agreement is in effect, HealthGate shall
provide such additional training and sales support to
12
<PAGE>
GEMS as it may reasonably request in the sales and marketing of the Products.
HealthGate and GEMS shall each pay the travel, lodging and other related
expenses of their respective personnel in connection with any of the
above-referenced training. HealthGate shall also bear the cost of the necessary
ancillary print materials related to such training. GEMS and HealthGate shall
share equally the cost of any facilities usage expenses of all such training,
except for training that takes place at HealthGate's offices, for which
HealthGate shall bear such expenses, provided that HealthGate approves such
expenses in advance.
5.3 SURVIVAL OF SERVICES AND SUPPORT. HealthGate's provision of the
services described in this Article V shall survive termination or expiration of
this Agreement with respect to then active Products customers (i.e. those with
which an end user agreement is then in effect) and Products customers for which
there are commitments prior to termination or expiration.
5.4 RIGHT OF GEMS TO SUPPORT. If, during or after the term of this
Agreement, HealthGate fails to provide service to one or more Products customer
consistent with the level of service mutually deemed satisfactory from time to
time by HealthGate and GEMS, with such initial level of satisfactory service to
be established by HealthGate and GEMS within 60 days after the date of this
Agreement, GEMS and HealthGate will meet and work together in good faith to
address and resolve any such service level issue. If any such service level
issue is not remedied in a timely manner such that the level of service provided
to such Products customers is not at least equal to the then mutually
agreed to level of service, HealthGate shall fully cooperate with GEMS, to
enable GEMS, at HealthGate's expense, to provide such services; provided,
however, HealthGate's liability under this Section 5.4 shall be limited to the
amount of actual revenue it shall have received from the sale of Products to the
affected customers.
13
<PAGE>
ARTICLE VI
MARKETING
6.1 GEMS' MARKETING. GEMS and HealthGate will work collaboratively to
develop the overall strategic marketing plan for the Products in accordance with
this Article VI.
6.2 COOPERATION BY HEALTHGATE. HealthGate at its expense (except to the
extent provided otherwise in this Article VI) will cooperate as reasonably
requested by GEMS in marketing the Products. Without limiting the generality of
the foregoing sentence, HealthGate (i) on a timely basis will provide to GEMS
all relevant technical, marketing and other information regarding the Products
and will provide appropriate artwork for marketing communications; and (ii) in
advance of each calendar quarter will review with GEMS the HealthGate budget and
detailed plan for the marketing of Products and HealthGate's plans for public
relations and enhancing and building company image and branding for such
calendar quarter.
6.3 COOPERATION BY GEMS. GEMS will be responsible for the production and
distribution of marketing communications regarding GEMS Products. During the
initial one-year term of this Agreement, GEMS will incorporate HealthGate's name
into marketing communications for GEMS Products to the extent consistent with
General Electric Company corporate guidelines. GEMS will include the GEMS
Products (and prices therefor) in its product catalog or equivalent supporting
materials. The GEMS Products may be included as a part of industry trade shows
and exhibitions in which GEMS participates, at GEMS discretion. The GEMS
Products may be included as a part of GEMS public advertising strategy, at GEMS
discretion. The expenses attributable to the inclusion of the GEMS Products in
such trade shows,
14
<PAGE>
exhibitions, and advertisements will be split evenly between GEMS and
HealthGate, provided that HealthGate approves such expenses in advance.
6.4 TIP PROGRAMMING AND OTHER WEBSITES. GEMS may, at its option, promote
HealthGate on GEMS TiP TV to the extent TiP content has been posted on
HealthGate hosted websites such as HealthGate.com and bewell.com. Such promotion
may be in the form of a tag line reading substantially as "To access a web-based
copy of this program, please contact HealthGate.com." GEMS, at its discretion,
will determine what GEMS content is available for HealthGate sponsored websites
and the prices charged to HealthGate for such content. GEMS may also, with the
assistance of HealthGate, promote the Products in TiP TV magazine. HealthGate
may choose to sponsor TiP programming, subject to program availability. Pricing
for such sponsorship will be set at the then current sponsorship market price
less a discount to be agreed upon by the parties taking into consideration the
development costs expended by GEMS and other market factors, such discount to be
no more than 15%. In exchange for the discounted sponsorship fee, HealthGate
will be named as such program's sponsor.
6.5 BRANDING. Each party reserves all rights to any name, marks and
logos ("Marks") it may have. GEMS will have the right, but not the obligation,
to include its Marks in the Products, and to prohibit the inclusion of the Marks
or advertising of any company if such company is in competition with GEMS in any
goods or services distributed by GEMS. The Products will also include the name
of HealthGate, consistent with applicable General Electric Company corporate
guidelines including without limitation guidelines to avoid confusion of
customers, sales forces and others and to produce and maintain market identity.
Each use by HealthGate of any Marks of GEMS, whether in advertising or marketing
materials, company announcements or offering circulars, informational materials,
public events, or otherwise, shall
15
<PAGE>
be subject to the prior written approval of GEMS. Neither party shall by this
Agreement obtain any right, title, or interest in or to any Marks of the other
party or its affiliates. Accordingly, neither party shall use any Marks
confusingly similar to or likely to cause confusion with the Marks of the other
or of any other person or entity. This Section 6.5 shall survive termination of
this Agreement. Violation of this Section 6.5 shall entitle the owner of the
Mark to seek any legal or equitable remedy it has, whether arising under this
Agreement or otherwise.
ARTICLE VII
REVENUE SHARING
7.1 HEALTHGATE PRODUCTS. Unless otherwise agreed by the parties (as, for
example, to address promotional activities or volume accounts), all Revenues
collected by either party for subscriptions to HealthGate Products sold by GEMS,
or for upgrades, services or enhancements thereto (but not including GEMS
Products, which are addressed in Section 7.2 below) sold by either party, shall
be divided such that 70% of the List Price is received by HealthGate and the
remainder is received by GEMS.
7.2 GEMS PRODUCTS. Unless otherwise agreed by the parties (as, for
example, to address promotional activities or volume accounts), all Revenues
collected by either party for subscriptions to GEMS Products sold by GEMS, or
upgrades, services or enhancements thereto sold by either party, shall be
divided such that:
(a) 70% of the List Price of any HealthGate Products components in
such GEMS Products is received by HealthGate and the remainder is received by
GEMS, except as provided in Subsection (b) below.
(b) If such GEMS Products or upgrades, services or enhancements
thereto shall have been created or developed by HealthGate at its own expense
or partial expense by agreement of
16
<PAGE>
the parties under Section 2.3 above, then the division of Revenues shall be
modified as the parties agree upon in advance of such creation or development
taking into consideration the expense so incurred by HealthGate.
7.3 ADVERTISING REVENUE. All Revenues collected by either party for
advertisements or other promotional material included in the Products during
the term of this Agreement shall be divided 90% to HealthGate and 10% to GEMS.
7.4 E-COMMERCE. All Revenues collected by either party from e-commerce
offered on the Products not involving products or services of GEMS or its
affiliates, shall be divided 90% to HealthGate and 10% to GEMS. Any Revenues
collected by either party from e-commerce offered on the Products involving
products or services of GEMS or its affiliates, for the first two and one-half
years following the date of this Agreement, shall be retained 100% by GEMS, and
any such Revenues collected after such two and one-half year period shall be
divided as the parties negotiate in good faith considering (a) the level of
effort expended by each party to enable such e-commerce, (b) prevailing market
conditions, (c) comparable third party web-based distribution fees, (d) the
price points of GEMS Products, (e) the volume of sales and (f) in no event shall
be any less favorable to GEMS than the fees charged by HealthGate to others.
7.5 SURVIVAL OF REVENUE SHARING. The Revenue sharing arrangements set
forth in this Article VII shall survive the termination or expiration of this
Agreement with respect to then active Products customers (i.e. those with which
an end user agreement is then in effect) and Products customers for which GEMS
has a signed commitment.
17
<PAGE>
ARTICLE VIII
ACCOUNTING
8.1 ACCOUNTING. Reconciliation of accounts in accordance with the
Revenue sharing arrangements set forth in Article VII above shall be made within
45 days after each calendar quarter with respect to Revenues received during
such calendar quarter, by each party delivering to the other party a check (or
by making a wire transfer or in such other reasonable manner as the receiving
party may direct) for the amount due without offset for any amount due from the
other party together with the report described in Section 8.2 below.
8.2 RECORDS. Each party shall keep complete and accurate records showing
its Revenues hereunder, for the term of this Agreement and a period of one year
thereafter. Each party shall deliver to the other party a written report
accompanying each of the payments described in Section 8.1 above setting forth
the share of Revenues due to the other party and the calculation thereof.
ARTICLE IX
WEBSITE LINKING
9.1 LINKING. HealthGate will make available the HealthGate Products for
linking to GEMS websites, and will provide all necessary formatting services and
support for such linking in a manner that is invisible to users. Such services
and support will be on such reasonable terms and conditions as the parties may
agree upon, and no less favorable to GEMS than those granted to others in
similar circumstances.
18
<PAGE>
ARTICLE X
WARRANTIES AND INDEMNITIES
10.1 REPRESENTATIONS AND WARRANTIES OF HEALTHGATE. HealthGate represents
and warrants to GEMS as follows:
(a) that HealthGate is a validly existing corporation in good
standing under the laws of the State of Delaware;
(b) that HealthGate has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder;
(c) that HealthGate has full right, power and authority to enter
into and perform its obligations under this Agreement, and that HealthGate
has the right to grant to and vest in GEMS all rights and licenses set
forth in this Agreement, free and clear of any and all claims, rights and
obligations whatsoever;
(d) that except for any portion of the Products that may be
created by GEMS, to the knowledge of HealthGate no part of the Products is
or shall be an imitation or copy of, or shall infringe upon, any other
materials, or shall violate or infringe upon any common law or statutory
rights of any person or entity, including without limitation rights
relating to defamation, contract, trademark, patent, copyright, trade
secret, privacy or publicity;
(e) that HealthGate has not sold, assigned, leased, licensed, or
in any other way disposed of or encumbered any of the rights or licenses
granted to GEMS in this Agreement other than a security interest granted
to Petra Capital LLC in connection with a subordinated loan to HealthGate;
and
19
<PAGE>
(f) that all versions of the Products delivered to GEMS under this
Agreement shall be free from any specification nonconformities,
significant programming errors or defects in workmanship or materials and
shall operate and run in a reasonable and efficient business manner
(including, with respect to HealthGate's internal systems only, being free
of any Year 2000 defects or nonconformities due to the passage of the year
1999). In the event of any breach of this Section 10.1 (f), other than
those based on any Year 2000 defects or nonconformities due to the passage
of the year 2000 not related to HealthGate's internal systems, HealthGate
shall, at its sole expense, immediately correct the nonconformity or other
defect.
10.2 REPRESENTATIONS AND WARRANTIES OF GEMS. GEMS represents and warrants
to HealthGate as follows:
(a) that GEMS is a validly existing corporation in good standing
under the laws of the State of New York;
(b) that it has full corporate power and authority to execute and
deliver this Agreement and to perform the transactions contemplated
hereunder; and
(c) that, with respect to any portion of the Products that may be
created by GEMS, to the knowledge of GEMS no such portion of the Products
is or shall be an imitation or copy of, or shall infringe upon, any other
materials, or shall violate or infringe upon any common law or statutory
rights of any person or entity, including without limitation rights
relating to defamation, contract, trademark, patent, copyright, trade
secret, privacy or publicity.
20
<PAGE>
10.3 INDEMNITY. Each party will indemnify and hold harmless the other'
from and against any liability, costs or expenses (including attorney fees)
based upon any action, claim or assertion inconsistent with the warranties and
representations of Section 10.1 or 10.2 above. The indemnified party shall
promptly notify the indemnifying party of any such action or assertion and shall
cooperate in the defense thereof. The indemnifying party shall have the right to
direct the defense of any such action, claim or assertion, subject to the
indemnified party's approval of any settlement thereof and the indemnified
party's right to take such actions as may be reasonably necessary to protect its
rights hereunder.
10.4 INSURANCE. HealthGate will maintain insurance coverage for product
liabilities and other claims arising from the Products in the policy amount of
$5 million combined single limit per occurrence and $5 million in the aggregate
(with a self-insured retention of $10,000 per occurrence and $50,000 aggregate).
During the term of the Agreement, HealthGate covenants to maintain such
insurance policy and to take such steps, as necessary, to name GEMS as an
additional insured under such insurance policy. Evidence of the existence and
amount of the insurance policy shall be provided by HealthGate to GEMS upon GEMS
written request.
10.5 NO OTHER WARRANTIES. THE WARRANTIES EXPRESSED IN THIS ARTICLE X ARE
IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESSED OR IMPLIED OR ARISING BY
PERFORMANCE, CUSTOM OR USAGE IN THE TRADE, AND THE PARTIES HEREBY DISCLAIM ALL
OTHER WARRANTIES, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
10.6 NO CONSEQUENTIAL DAMAGES. Except as expressly set forth herein, in
no event shall either party be liable under, or in connection with, this
Agreement for any indirect, special,
21
<PAGE>
incidental, punitive or consequential losses, expenses or damages whatsoever,
including, but not limited to, loss of revenue or profits or increased costs as
a result of inability to operate, inability to fulfill contracts with third
parties, or similar matters or events. The limitations, exclusions and
disclaimers in this Agreement shall apply irrespective of the nature of the
cause of the action or demand, including but not limited to breach of contract,
negligence, tort or any other legal theory and shall survive any breach or
breaches and/or failure of the essential purpose of this Agreement, or any
remedy contained in this Agreement.
ARTICLE XI
CONFIDENTIALITY
11.1 OBLIGATION. Each party agrees that any Confidential Information
furnished or disclosed to it by the other party shall be treated as confidential
by it and used by it only as expressly authorized herein, that it shall not
disclose such Confidential Information to others without the prior written
consent of the disclosing party, and that it shall take all necessary measures
to protect the confidentiality of such Confidential Information that it takes to
protect its own similar proprietary or confidential information (and that such
measures shall in no event be less than those required by law to protect the
confidentiality and proprietary nature of such information), EXCEPT insofar as:
(a) expressly provided otherwise herein or in any other written
agreement with the disclosing party or required by law;
(b) such Confidential Information is necessarily disclosed by its
use in products manufactured and sold or otherwise disposed of by the
disclosing party; or
22
<PAGE>
(c) such Confidential Information is necessarily disclosed to bona
fide subcontractors of the receiving party provided that such
subcontractors agree to maintain such Confidential Information in
confidence and to protect such Confidential Information from disclosure to
others to the extent of the foregoing requirements of this Section and to
limit their use of such Confidential Information to fulfilling their
obligations as a subcontractor or supplier.
11.2 COOPERATIVE DEVELOPMENT. Without limiting the generality of Section
11.1 above, should any joint development effort be undertaken by the parties
involving software owned by GEMS, then GEMS may in its sole discretion make
source code for such software available to HealthGate to the extent reasonably
necessary for HealthGate to perform the development or maintenance obligations
agreed upon by the parties or provided hereunder. HealthGate shall not use such
source code or software except in performing such obligations and shall not
disclose it to anyone other than its employees who both (a) require access
thereto in order to allow HealthGate to perform such obligations and (b) have
agreed in writing to refrain from using or disclosing it other than as permitted
hereunder.
11.3 OTHER CONFIDENTIALITY AGREEMENT. Except to the extent modified
hereunder, all the obligations of the Confidentiality Agreement made as of March
25, 1999 between General Electric Company and HealthGate remain in full force
and effect as provided thereunder.
23
<PAGE>
ARTICLE XII
TERM AND TERMINATION
12.1 TERM. This Agreement shall be for an initial term of one year,
automatically renewed for successive one-year periods unless either party
delivers to the other party written notice of non-renewal at least 90 days prior
to the end of the initial term or any renewal term.
12.2 EARLY TERMINATION. This Agreement may be terminated by GEMS in its
sole discretion and shall have no further force and effect if, as of June 14,
1999, the transactions contemplated by the Warrant Agreement between General
Electric Company and HealthGate dated on or about the date hereof have not been
closed and the Warrant to be issued to General Electric Company thereunder has
not been issued by HealthGate. GEMS shall have no liability for such termination
and shall retain any other rights or remedies it may have in regard to such
termination. If either party commits a material breach of this Agreement or the
Warrant Agreement, then the other party may deliver written notice of such
breach to the breaching party. If the breaching party fails to remedy such
breach within 30 days after such notice, then the other party may terminate this
Agreement by written notice of termination. A material breach shall be deemed to
include without limitation any failure to remit in a timely manner amounts due
under Article VII above, any violation by HealthGate of the exclusive
distribution rights of GEMS under Article IV above, any breach of any of the
representations or warranties of Article X, any violation by HealthGate of any
of the Confidentiality Obligations of Article XI, and any dissolution,
insolvency, bankruptcy, appointment of a receiver or trustee, making of an
assignment for the benefit of creditors, the commencement of any proceeding
(state or federal) relating to the administration of creditors rights generally,
or the failure generally to pay debts as they become due.
24
<PAGE>
12.3 REMEDIES. Upon any termination of this Agreement pursuant to this
Article XII, each party shall have all rights and remedies available to it
hereunder and at law or in equity, it being understood that the exercise of any
one remedy is not meant to be exclusive of any other remedy and that all
remedies hereunder are intended to be cumulative. Following termination, the
terminating party may suspend any and all performance hereunder except as
provided under Section 12.4 below.
12.4 SURVIVAL AND POST-TERMINATION RIGHTS. The provisions of Sections
5.3, 5.4 and Article VIII (to the extent provided in each such Section and
Article) and Articles I, X, XI and XIII and Sections 3.1 through 3.4, 4.7 and
6.5 shall survive any termination or expiration of this Agreement. No
termination or expiration shall in any way terminate or otherwise affect the
right of any user or customer of GEMS with respect to any Products.
ARTICLE XIII
MISCELLANEOUS
13.1 ENTIRE AGREEMENT. This Agreement together with the Warrant Agreement
constitute the entire agreement and understanding of the parties with regard to
the subject matter hereof. This Agreement shall not be modified or supplemented
except by a written instrument signed by both parties.
13.2 NOTICES. Any notice required or permitted under this Agreement shall
be deposited in First Class Mail addressed as follows:
25
<PAGE>
If to GEMS:
GE Medical Systems
3000 North Grandview Blvd.
Waukesha, WI 53186
Attention: General Manager, E-Commerce
Mail Code: 440
Telephone: (414) 584-4862
Facsimile: (414) 544-3470
With a copy to:
GE Medical Systems
3000 North Grandview Blvd.
Waukesha, WI 53186
Attention: General Counsel
If to HealthGate:
HealthGate Data Corp., Inc.
25 Corporate Drive, Suite 310
Burlington, MA 01803
Attention: GEMS Project Manager
Telephone: 781-685-4000
Facsimile: 781-685-4040
With a copy to:
Stephan M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108-4675
Telephone: 617-556-3827
Facsimile: 617-556-3891
13.3 NO ASSIGNMENT BY HEALTHGATE. Neither this Agreement nor any rights
or obligations may be assigned or transferred by HealthGate except with the
written consent of GEMS. GEMS may assign this Agreement freely to any affiliates
of GEMS, and may assign to non-affiliates of GEMS to the extent such assignments
are not contrary to pre-existing obligations by HealthGate to its content
providers (in which case HealthGate will exert its best efforts to obtain
waivers of such obligations). GEMS shall notify HealthGate of any assignment
26
<PAGE>
that is not to a GEMS affiliate, and the assignee shall agree in writing to
assume all obligations of GEMS. Any transaction or series of related
transactions pursuant to which any entity or person (including without
limitation any of their respective affiliates) first acquires after the
effective date of this Agreement, directly or indirectly, an aggregate amount of
fifty percent (50%) or more voting control or fifty percent (50%) or more of the
equity securities ("Control") of HealthGate (or of any entity directly or
indirectly having Control of HealthGate) or by contract or otherwise obtains the
right to appoint at least fifty percent (50%) of the Board of Directors of
HealthGate (or any entity directly or indirectly having Control of HealthGate),
shall be deemed an assignment of rights under this Agreement for purposes of
this Section 13.3. Further, any sale, assignment, pledge, hypothecation, or
exclusive license of any of the copyrights, patents, trade secret rights or
other intellectual property rights in or relating to any of the Products (other
than that security interest referenced in Section 10.1(e) above) shall be deemed
an assignment of this Agreement for purposes of this Section 13.3. Any purported
assignment or other transaction in violation of this Section 13.3 shall be null
and void and of no force or effect.
13.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without reference to
any conflict of law principles.
13.5 ARBITRATION. Any dispute under this Agreement shall be finally
resolved by arbitration by a panel of three arbitrators (or such other number as
the parties may agree to) in New York, New York, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrators may award attorney fees to the prevailing party to the extent they
may deem appropriate. The parties hereto waive all rights to trial by jury in
any
27
<PAGE>
action, suit or proceeding brought to enforce or defend any rights or remedies
arising under or in connection with this Agreement, whether grounded in tort,
contract or otherwise.
13.6 CONFIDENTIALITY. No public announcements may be made of the contents
of this Agreement except as mutually agreed in writing.
13.7 RELATIONSHIPS OF THE PARTIES. Each party is an independent
contractor under this Agreement. No party shall have any express or implied
right or authority to assume or create any obligations on behalf of or in the
name of the other party or to bind the other party to any contract, agreement or
undertaking with any third party.
13.8 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "included", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." References to a person are also to its successors and assigns, and
references to any statute are also to all rules, regulations and orders
promulgated thereunder. No rule of construction shall be applied to the
disadvantage of a party by reason of that party having been responsible for the
preparation of this Agreement or any part hereof.
28
<PAGE>
Executed on the dates set forth below.
GE Medical Systems, a division of
General Electric Company
By: /s/ Michael A. Jones
--------------------------------------
Title: /s/ GM Global Business Development
-----------------------------------
Date: June 11, 1999
------------------------------------
HealthGate Data Corp.
By: /s/ William S. Reece
------------------------------------
Title: Chief Executive Officer
------------------------------------
Date: June 11, 1999
------------------------------------
29
<PAGE>
EXHIBIT A
List of exclusive Companies and Institutions
1. Harvard Medical Complex (except Spalding Rehabilitation Hospital and
Cambridge Health Alliance)
2. Columbia Pres.-New York Hospital and associated Columbia and Cornell
teaching hospitals (except New Milford Hospital)
3. Sloan Kettering Cancer Hospital.
4. University of Massachusetts @ Worcester (except University of
Massachusetts Medical Center)
5. Hospital for Special Surgery, NYC
6. Hospital of the University of Pennsylvania, Philadelphia
7. Robert Wood Johnson Medical Center, NJ
8. Johns Hopkins Medical Center and Associated Hospitals
9. National Inst. of Health Clinical Center and Suburban Hosp, Bethesda
10. Duke Medical Complex
11. Bowman Gray Medical Center and Associated Hospitals
12. Emory University Complex
13. University of Alabama
14. Vanderbilt Complex
15. University of Pittsburgh complex
16. Cleveland Clinic
17. University of Toronto complex (except Toronto Hospital)
18. McGill University Complex
19. University of Western Ontario, London, Ont.
20. University of Chicago complex
<PAGE>
21. University of Illinois complex
22. Northwestern University complex
23. Medical College of Wisconsin
24. University of Wisconsin, Madison
25. Mayo Clinic
26. Texas Medical Center/U Texas @, MD Anderson Houston,
27. University of Texas Dallas (Southwestern Medical Center, Parkland
Hospital)
28. University of Iowa
29. University of Utah
30. University of Washington complex, Seattle
31. University of British Columbia/Vancouver General Hosp. (except Vancouver
General Hospital)
32. UCSF complex
33. Stanford
34. UCLA complex
35. Cedars Sinai Medical Center
36 Columbia / HCA
37. HealthSouth
<PAGE>
EXHIBIT B
LIST OF EXCLUDED PRODUCTS OR SERVICES
Products/Services
Versions of CHOICE products for content syndication to other web-sites
(e.g., WebMD and AHN).
Versions of CHOICE products for Corporate-Wellness programs
(non-Healthcare Marketplace).
The suite of activePress product and services (terms and conditions to be
agreed upon on a case-by-case basis).
Content
Blackwell-Synergy
Provider permission required
Complete Guide to Medical Tests
Re-negotiating contract.
Complete Guide to Pediatric Symptoms, Illness & Medications
Re-negotiating contract.
Complete Guide to Prescription and Non-Prescription Drugs
Re-negotiating contract.
Complete Guide to Sports Injuries
Re-negotiating contract.
Complete Guide to Symptoms, Illness & Surgery
Re-negotiating contract.
Doody Book Reviews
Re-negotiating contract; may not offer to CHOICE
HCIA Cost Report Database
Re-negotiating contract.
HCIA DRG Summary Database
Re-negotiating contract.
HCIA Health Care Professionals Database
Re-negotiating contract.
<PAGE>
HCIA Managed Care Database
Re-negotiating contract.
HCIA Medical Rehabilitation Facilities Database
Re-negotiating contract.
HCIA National Inpatient Profile Database
Re-negotiating contract.
HCIA National Link Study
Re-negotiating contract.
HCIA National Outpatient Profile Database
Re-negotiating contract.
HCIA Nursing Home Database
Re-negotiating contract.
HCIA Retirement Facilities Database
Re-negotiating contract.
Los Angeles Times Syndicate News Services
Cannot offer to CHOICE except as provided through Healthy Living
Medical Software Reviews
Re-negotiating contract.
New England Journal of Medicine
Provider permission required
Physicians World Communications Group Continuing Medical Education programs
Distribution rights for CHOICE not available
PsycFIRST
Re-distribution rights not available
PsycINFO
Distribution limited to block of citations only
Reuters Medical News
Distribution rights for CHOICE not available
Well-Connected Consumer Health Reports
Re-negotiating contract; re-distribution to other Web sites not available as
part of CHOICE
<PAGE>
EXHIBIT C
PROHIBITED DISTRIBUTORS
1. Siemens
2. Toshiba
3. Philips
4. ATL
5. Picker
6. Acuson
7. ADAC
8. Hitachi
9. Hewlett Packard
10. AGFA
11. Spacelabs
<PAGE>
EXHIBIT D
LIST PRICING
Patient and Consumer Package USD $28,000
- -----------------------------------------------------------------
Patient Series Content:
Adult Health Advisor
Behavioral Health Advisor
Pediatric Health Advisor
Woman's Health Advisor
Seniors Health Advisor
Well-Connected Patient Education Reports
The Consumer Series Content:
Health News
The Wellness Center
Complete Guide to Prescription and Non-Prescription Drugs
Complete Guide to Symptoms, Illness, and Surgery
Diagnostic Procedures Handbook
Medical Dictionary
Healthy Eating
Healthy Parenting
Healthy Sexuality
Healthy Woman
Healthy Man
Healthy Mind
Healthy Athlete
Included Features for Patient and Consumer Package:
o Customized "Web-zines" for front page of the articles
o Three articles per web-zine per month
o Standard "Send to a friend"
o Quarterly usage reports
o Authentication for Patients
o 1500 authentication cards with hospital ID number (additional authentication
cards can be made available for USD $200.00 per 1,000).
o Customized "Intelligent promotional" Service
o Includes hosting of up to 10 banner ads
o Customized "Commercial advertising and sponsorship" spots
Professional Package USD $20,000
-----------------------------------------------------------------
Included Content
MEDLINE
AIDSLINE
AIDSDRUGS
AIDSTRIAL
CANCERLIT
<PAGE>
BIOETHICSLINE
HEALTHSTAR
Drug Information Handbook
PsycINFO; 5000 citations
EMBASE; 2,000 citations
CME's (Continuing Medical Education) unlimited for [130] physicians
CINAHL
Medical News
Detwilers Directory
Included Features for Professional Package:
o Standard "Send to a friend"
o Quarterly reports on the usage
o Authentication for Professionals
o 750 authentication cards with hospital ID number
o Customized "Intelligent promotional" Service
o Includes hosting of up to 10 banner ads
o Commercial advertising and sponsorship Module
Required customization and implementation USD $ 7,000
--------------------------------------------------------------------------
Included Features:
o A Standard design template
o Customized coloring scheme
o Customized sizing of the templates
o Customized logo placement
o Customized front page for each of the selected series
o Customized linking to and from the Institution's Web site
o Limited Customized authentication scheme, including combination of
o Linked URL
o Linked Domain address
o Password and Username
o Quarterly usage report
o User support at HealthGate
o Printing Module for the Patient Series
o School Nurse Communication module
o Additional banner ads, package of 5
o Resource Locator Module with content sensitive links
o Find a doctor
o Find a facility
o Find a service
<PAGE>
Itemized Pricing
- -------------------------------
Consumer / Patient Series Total USD $28,000
Professional Series Total USD $20,000
Total License Fee USD $48,000
Implementation Fee (one-time) USD $7,000
-----------
Package Total USD $55,000
<PAGE>
Exhibit 10.28
CONFIDENTIAL INFORMATION
CONTENT DEVELOPMENT AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into as of June 15, 1999, by and between HealthGate
Data Corp., a Delaware corporation ("HealthGate"), having an address at 25
Corporate Drive, Suite 310, Burlington, Massachusetts 01803 and the
Massachusetts Medical Society, a Massachusetts corporation (the "Society"),
having an address at 1440 Main Street, Waltham, Massachusetts 02154.
WHEREAS, the Society is the owner and publisher of The New England Journal of
Medicine ("NEJM");
WHEREAS, HealthGate, among other business activities, distributes health and
biomedical content through the Internet;
WHEREAS, HealthGate desires to engage the Society to assist in the development
of a version of NEJM written for the consumer reader;
NOW THEREFORE, in consideration of the foregoing, the mutual promises set forth
in this Agreement and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged by all parties, the parties hereby agree as
follows:
1. CONTENT. The Society shall develop and deliver all Content to HealthGate,
in a mutually agreed upon electronic format, for posting on the World Wide
Web Sites owned or operated by HealthGate (the "Sites"). As set forth in
Section 11 below, the Society retains all ownership and copyright of the
Content. HealthGate shall not make any changes to the Content without the
prior written consent of the Society. The Sites shall include copyright
notices and other notices of right title and interest to the Content. Both
parties agree, within 15 working days after executing this Agreement, to
develop a detailed specification describing the Content, which shall be
attached to this Agreement as Schedule A. Generally, the Content shall be
described as follows:
(a) The Content is a companion consumer version of NEJM which summarizes
the findings, reports, information, etc. presented in each original
article published in NEJM;
(b) The Content shall include an article for every original article
appearing in the weekly printed version of NEJM;
(c) The Content will be updated weekly, corresponding to the normal print
publication schedule of NEJM;
(d) Each update to the Content shall be delivered to HealthGate no later
than 10 workings days prior to the publication date for the
corresponding print issue;
<PAGE>
CONFIDENTIAL INFORMATION
(e) The Society shall make reasonable efforts to deliver to HealthGate the
first issue of the Content 120 days after execution of this Agreement;
(f) Each article shall average approximately 1,000 to 1,500 words in
length and be written on a reading level appropriate for the
non-healthcare professional reader. The parties shall mutually agree
upon the applicable reading level;
(g) Each article shall also include the following information
corresponding to the original article: (i) detailed bibliographic
information; (ii) author contact information; (iii) bulleted points
covering the major issue of the article; (iv) a companion title,
written for the consumer, interpreting the corresponding original
article title; (v) a link to the full-text of the original article on
the NEJM site, located at www.nejm.org;
(h) Subject to the Society obtaining necessary ownership rights, each
weekly update of the Content shall contain the editorials and letters
to the editor as appearing in the corresponding print issue;
(i) Subject to the Society obtaining necessary ownership rights,
HealthGate shall have the right to reproduce and include in the
Content the images, graphics, photographs, etc. corresponding to
articles originally published in NEJM. All such images shall be
delivered to HealthGate as part of the weekly update schedule.
HealthGate shall have the right to use said images, with the prior
approval of the Society, in the promotion of the Content;
(j) Subject to mutual agreement of the parties, HealthGate will enhance
the Content with applicable hypertext links to other sites, including
the NEJM site. HealthGate will establish links, with the assistance of
the Society, from portions of the Content to the corresponding
original articles found on the NEJM site. HealthGate shall manage such
links to the NEJM site. Any revenue associated with said links shall
be shared according to Section 6 (e).
(k) A table of contents for the corresponding print issue will be included
with each weekly update to the Content.
(l) Weekly updates to the Content shall be released at 5:00 p.m. Eastern
Time on the Wednesday before the date of publication. HealthGate shall
not make the updates to the Content available to the public or any
third party prior to this time.
2
<PAGE>
CONFIDENTIAL INFORMATION
(m) HealthGate shall design a template for the display of the Content
which shall be subject to review and approval by the Society. The
display of the Content shall not vary from the template approved by
the Society, except as may be mutually agreed upon by the parties from
time to time.
(n) The title (the "Title") used to identify the Content shall be subject
to mutual agreement of the parties and the Title and all proprietary
rights and goodwill related thereto, shall be the exclusive property
of the Society.
(o) HealthGate shall not make any changes to the Content without the
written approval of the Society.
2. SOFTWARE AND HARDWARE. HealthGate shall be responsible for all Software and
Hardware necessary to design, develop, and mount the Content on its servers
and host the Content on its Sites.
3. ACTIVITY REPORTS. During the time that HealthGate hosts and distributes the
Content, HealthGate shall provide to the Society activity reports detailing
access and usage of the Content. HealthGate shall provide the Society with
activity reports concerning access to the Site within 30 days of the end of
any month.
4. ADVERTISING. HealthGate shall have the right to place advertising and
sponsorship on the Content. Policies regarding advertising and sponsorship
shall be subject to mutual agreement between the parties.
5. MARKETING AND PROMOTION.
(a) The Society agrees to provide free "space available" advertising in
NEJM, no less than two times per year, to promote the Content.
HealthGate shall assume all costs associated with the production of
any advertisement used to promote the Content on this space available
basis. Specifications for these advertisements shall be provided by
the Society.
(b) The Society agrees to mention the Content and its availability through
the Sites, including a specific Web site address that shall be
provided by HealthGate, in each print issue of NEJM. The Society shall
have the rights to use HealthGate's trade names, trademarks and
service marks in said promotion.
(c) The Society may, at its discretion, promote the Content in its
marketing material, provided that the HealthGate trade name and a
HealthGate Web site to be designated by HealthGate is used in
conjunction with said promotion.
3
<PAGE>
CONFIDENTIAL INFORMATION
(d) HealthGate shall promote the availability of and access to the Content
using a variety of methods, which shall include, but not be limited
to, e-mail, advertising, and linking. Such promotional efforts shall
be subject to Section 16 (a)
6. FEES.
(a) PRODUCTION, DEVELOPMENT, AND LICENSING. HealthGate shall remit to the
Society $500,000 annually to cover all costs associated with the
production, development, and licensing of the Content. In the first
year of this Agreement, HealthGate shall remit to the Society the
annual fees in the following manner: $100,000 upon signing on this
Agreement, $200,000 upon release of the first issue of the Content,
$100,000 180 days after the delivery of the first issue, and $100,000
270 days after the delivery of the first issue. In subsequent years,
HealthGate shall make four equal payments of $125,000 payable 90 days
apart, with the first payment due on anniversary of the release of the
first issue.
(b) ADVERTISING. HealthGate shall remit to the Society a percentage of any
revenue generated by HealthGate for the sale of advertising and/or
sponsorship revenue placed on the Content, as defined in Schedule B.
(c) PRINT PRODUCTS. During the term of this Agreement and for a period of
5 years following expiration or termination of this Agreement for any
reason, any revenue from print products derived from the Content
produced during the term of this Agreement shall be shared equally
between the two parties, after expenses.
(d) SALES TO OTHER WEB SITES. HealthGate shall remit to the Society a
percentage of any revenue generated by HealthGate for the licensing of
the Content or portions thereof to other Web sites or other parties
(in accordance with Section 7 (a)), as defined in Schedule B.
(e) SALES ATTRIBUTED TO LINKS TO NEJM. HealthGate shall remit to the
Society a percentage of any revenue attributed to a link from the
Content to the corresponding original article at the NEJM site (in
accordance with Section 1 (j)), as defined in Schedule B.
(f) ACTIVITY REPORTS. All payments and fees described in Section 6 (b),
(d), and (e) shall be based upon the activity reports referred to
Section 3. Any payments shall be made to the Society within 30 days
after submission of Activity Reports.
4
<PAGE>
CONFIDENTIAL INFORMATION
(g) OTHER FEES. There are no other fees contemplated by the parties in
association with this Agreement.
7. EXCLUSIVITY.
(a) HealthGate shall have exclusive rights to distribute the Content
through its own Web sites or through sites owned or operated by
HealthGate during the term of this Agreement. HealthGate may
distribute the Content to other Web sites, not owned or operated by
HealthGate, with the prior written approval of the Society, whose
approval shall not be unreasonably withheld.
(b) Notwithstanding the foregoing, the Society shall, six months after
the delivery of the first issue of the Content, have the right to
post the Content on one or more of the Society's web sites. This
exception shall be granted provided that each article displayed at
the NEJM Web site (i) includes a message that the Content was
developed jointly by the Society and HealthGate; (ii) is provided in
the same manner in which it is made available on the HealthGate site,
including, but not limited to, user registration, release date,
advertising sold by HealthGate (provided that such advertising
complies with the Society's advertising policies for the web site)
and served from the HealthGate server, and any value added services
provided by HealthGate, such as links to the MEDLINE database or to
other sites or services; (iii) includes a link to the Content hosted
by HealthGate; and (iv) is posted on the same schedule as the Content
is posted by HealthGate. This exception to Section 7 (a) shall not
waive either party's rights as outlined elsewhere in this Agreement.
8. INITIAL TERM. The Initial Term of this Agreement shall commence upon
delivery of the Content to HealthGate and, unless terminated earlier as set
forth herein, shall continue for a period of two (2) years after such date
(the "Initial Term").
9. RENEWAL. After the Initial Term, HealthGate may renew this Agreement
(subject to the termination provisions of Section 10) for up to two (2)
additional 18 month periods, provided that HealthGate's option to extend
the term shall be conditioned upon there being no material uncured defaults
or breaches by HealthGate at the time of HealthGate's exercise of such
option.
10. TERMINATION.
(a) Either party may terminate this Agreement without cause upon the last
date of the Initial Term or any subsequent renewal term by giving
written notice of termination
5
<PAGE>
CONFIDENTIAL INFORMATION
to the other party no later than ninety (90) days prior to the end of
the Initial Term or of any subsequent one year term. Upon termination
by either party, HealthGate may continue to use the Content produced
during the term of this Agreement to fulfill any outstanding
commitments, obligations, or contracts for a period no longer than
12 months after termination or expiration of this Agreement, subject
to terms and conditions which shall be mutually agreed upon by the
parties at the time.
(b) In the event that any use of the Content by HealthGate is, in the
opinion of the Society, injurious to the reputation or goodwill of
NEJM, the Society may terminate this Agreement upon 30 days written
notice to HealthGate, unless HealthGate shall remedy such use within
the 30 day period or be undertaking actions to remedy such use to the
satisfaction of the Society.
11. INTELLECTUAL PROPERTY RIGHTS.
(a) HEALTHGATE PROPERTY. HealthGate shall own and retain all right, title
and interest in (i) the Software (as defined in Section 2), and (ii)
the copyrights in the Software; and (iii) computer code written by
HealthGate for the format, appearance and presentation of the Content
(collectively, the "HealthGate Properties"), subject only to (x) the
Society's right, title and interest in the Content (as defined in
Section 1) contained therein and any derivative work based upon the
content, (y) the Title and the Society's other trade names,
trademarks and service marks and (z) any other information of the
Society provided to HealthGate hereunder (collectively, "Society's
Property").
(b) SOCIETY'S PROPERTY. The Society shall own and retain all right, title
and interest in the Society's Property. Any use of any trademark owned
by the Society shall inure to the exclusive benefit of the Society.
Upon expiration or termination of this Agreement, HealthGate shall
discontinue use of the Society's Property except as provided for in
Section 10 (a).
(c) HEALTHGATE CONFIDENTIAL INFORMATION. The Society understands and
acknowledges that the HealthGate Properties are subject to protection
as copyrighted works of authorship of HealthGate or HealthGate's
suppliers under the United States Copyright Act, and represent
valuable confidential or proprietary information of HealthGate.
Further, the Society understands and acknowledges that any
confidential information pertaining, INTER ALIA, to HealthGate's
customers, finances, internal operations and methods of compiling,
manipulating, presenting and disseminating Software or information,
which is disclosed to the Society (collectively, "HealthGate
Confidential Information"), represent valuable confidential
information of HealthGate entitled to protection as trade secrets. The
Society shall keep
6
<PAGE>
CONFIDENTIAL INFORMATION
confidential, and shall protect from unauthorized disclosure by its
employees and agents, the HealthGate Confidential Information and all
copies or physical embodiments thereof in any media in its possession,
and shall limit access to such HealthGate Confidential Information to
those of its personnel who require such access in connection with the
Society's use thereof as permitted by this Agreement. The Society
shall secure and protect the HealthGate Confidential Information and
any and all copies and other physical embodiments thereof in any media
in its possession in a manner consistent with the steps taken by the
Society to protect its own trade secrets. The Society shall take
appropriate action by instruction or agreement with its employees who
are permitted access to the HealthGate Confidential Information or any
copy or other physical embodiment thereof in any media in its
possession, to satisfy its obligations hereunder. Promptly upon
discovery that any person has acquired possession, use or knowledge of
any part of the HealthGate Confidential Information other than as
authorized by this Agreement, the Society shall notify HealthGate of
such fact and the surrounding circumstances. The obligations of this
Section 11(c) shall survive any termination of this Agreement. The
obligations of this Section 11(c) shall not apply to any information
which (a) is generally known to the public, or becomes so known other
than by reason of a breach by the Society of its obligations
hereunder, (b) was known to the Society prior to its disclosure by
HealthGate, or (c) is learned by the Society from a third party who is
not in breach of an obligation of confidentiality in making such
disclosure.
(d) SOCIETY'S CONFIDENTIAL INFORMATION. HealthGate understands and
acknowledges that any Society's Property contained in the Site, are
subject to protection as copyrighted works of authorship of the
Society, and represent valuable or proprietary confidential
information of the Society. Further, HealthGate understands and
acknowledges that the Society information pertaining, INTER ALIA, to
the Society's subscribers, customers, finances, internal operations,
sales practices and procedures which is disclosed to HealthGate
(collectively, "Society's Confidential Information"), represent
valuable confidential information of the Society entitled to
protection as trade secrets. HealthGate shall keep confidential, and
shall protect from unauthorized disclosure by its employees and
agents, the Society's Confidential Information and all copies or
physical embodiments thereof in its possession, and shall limit access
to such Society's Confidential Information to those of its personnel
and personnel of its consultants or agents who require such access in
connection with HealthGate's use thereof as permitted by this
Agreement. HealthGate shall secure and protect the Society's
Confidential Information and any and all copies and other physical
embodiments thereof in its possession in a
7
<PAGE>
CONFIDENTIAL INFORMATION
manner consistent with the maintenance of the Society's rights and
interest therein. HealthGate shall take appropriate action by
instruction or agreement with its employees, agents and consultants
who are permitted access to the Society's Confidential Information or
any copy or other physical embodiment thereof, to satisfy HealthGate's
obligations hereunder. Promptly upon discovery that any person has
acquired possession, use or knowledge of any part of the Society's
Confidential Information other than as authorized by this Agreement,
HealthGate shall notify the Society of such fact and the surrounding
circumstances. The obligations of this Section 11(d) shall survive any
termination of this Agreement. The obligations of this Section 11(d)
shall not apply to any information which (a) is generally known to the
public, or becomes so known other than by reason of a breach by
HealthGate of its obligations hereunder, (b) was known to HealthGate
prior to its disclosure by the Society, or (c) is learned by
HealthGate from a third party who is not in breach of an obligation of
confidentiality in making such disclosure.
(e) PUBLIC AUTHORITY EXCEPTIONS. The parties' respective obligations under
this Section 11 shall not apply where disclosure is required, directed
or ordered by statute, regulation or a public authority, in legal or
administrative proceedings, in connection with the sale of securities
in the event of the filing of a Form S-1 Registration Statement or a
similar statement for the sale of securities by HealthGate with the
Securities Exchange Commission ("SEC") or any state authority or
otherwise. Notwithstanding the foregoing, and so that the other party
may timely present its objections to such disclosure, each party shall
provide the other party with timely notice of a request, requirement
or demand to disclose such information or matter which is either made
by a public authority, directed to a public authority or required by
the rules and regulations of statute, regulation or a public
authority.
12. REPRESENTATIONS AND WARRANTIES.
(a) AUTHORITY. Each party hereby represents and warrants that it has the
full right, power and authority to enter into and perform this
Agreement, and this Agreement has been duly authorized, executed and
delivered and constitutes the valid and binding obligation of such
party enforceable in accordance with its terms.
(b) HEALTHGATE. HealthGate hereby represents and warrants that: (i) it
has, and will have throughout the term of this Agreement, all rights
necessary to perform its obligations as set forth in this Agreement;
(ii) the HealthGate Property licensed hereunder does not and will not
infringe any trade name, trademark or copyright.
8
<PAGE>
CONFIDENTIAL INFORMATION
(c) THE SOCIETY. The Society hereby represents and warrants that: (i) it
has, and will have throughout the term of this Agreement, all right,
title and interest in and to the Content and Society Properties,
except for items that are in the public domain or that are obtained
under valid licenses, (ii)) it has and will have the right to grant
the license granted herein, (iii) the Society Content and Property do
not and will not infringe any trade name, trademark or copyright, and
(iv) there are no material suits, claims or proceedings currently
pending or threatened against the Society based upon the Content and
that the Society will promptly advise HealthGate of the pendency or
threat of any such suits, claims or proceedings relating to the
Content or the Site arising during the term of this Agreement.
13. INDEMNIFICATION.
(a) THE SOCIETY'S INDEMNIFICATION. The Society shall indemnify, defend and
hold harmless HealthGate and its officers, employees, agents,
affiliates and subsidiaries against and from all losses, expenses,
damages and costs including, without limitation, reasonable attorneys'
fees, that may at any time be incurred by any of them by reason of (i)
any allegation, claim or suit threatened, made or brought against any
of them related to any matter covered by the representations and
warranties or set forth in Sections 12 (a) and 12 (c) above, (ii) any
allegation, claim or suit threatened, made or brought against any of
them that is based upon or arises from any actual or alleged error,
inaccuracy or other defect in the Society's Content or Properties and
(iii) any breach by the Society of any provision of this Agreement.
(b) HEALTHGATE'S INDEMNIFICATION. HealthGate shall indemnify, defend and
hold harmless each Society and its officers, employees, agents,
affiliates and subsidiaries against and from all losses, expenses,
damages and costs including, without limitation, reasonable attorney's
fees, that may at any time be incurred by any of them by reason of any
allegation, claim or suit threatened, made or brought against any of
them related to (i) any matter covered by the representations and
warranties set forth in Sections 12 (a) and 12 (b) above and (ii) any
breach by HealthGate of any provision of this Agreement.
(c) NOTICE; DEFENSE OF CLAIMS. Each party shall give prompt written notice
to the other party of any claim for indemnification hereunder,
specifying to the extent known the amount and nature of the claim, and
any matter which in the opinion of such party is likely to give rise
to an indemnification claim. The indemnifying party shall have the
right to control the defense through
9
<PAGE>
CONFIDENTIAL INFORMATION
counsel of its choosing. The indemnified party shall have the right to
the extent of its interests to participate on its own behalf and at
its own expense in such matter or its settlement through counsel of
its choosing.
14. EXCLUSION OF IMPLIED WARRANTIES AND LIMITATION OF LIABILITY. EXCEPT AS SET
FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY OR REPRESENTATION TO THE
OTHER, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO
EVENT, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR LOST PROFITS OR ANY OTHER INDIRECT, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
AGREEMENT.
15. ASSIGNMENT. Neither party may assign, sublicense or otherwise transfer in
whole or in part, any of the party's rights or obligations under this
Agreement without the written consent of the other party.
16. MISCELLANEOUS.
(a) PUBLICITY. HealthGate shall not distribute or publicly display or
communicate the name or trademarks of the Society without the prior
written approval of the Society, whose approval shall not be
unreasonably withheld. The Society agrees to respond to any written
request submitted by HealthGate regarding the use of the name or
trademarks of the Society within ten (10) working days of the
submission of a request; however any failure to respond to HealthGate
shall not be deemed approval. Notwithstanding the foregoing, the
Society hereby consents to the use of its name and trademarks, and the
reference to this Agreement, and if appropriate, the filing of this
Agreement, in connection with any filings made by HealthGate with the
Securities and Exchange Commission and any other applicable state
securities regulators concerning an initial or any other public
offering of its securities.
(b) RELATIONSHIP OF PARTIES. The relationship of the parties hereto shall
be that of independent contractors. Nothing herein shall be construed
to create any partnership, joint venture, or similar relationship or
to subject the parties to any implied duties or obligations respecting
the conduct of their affairs which are not expressly stated herein.
Neither party shall have any right or authority to assume or create
any obligation or responsibility, either express or implied, on behalf
of or in the name of the other party, or to bind the other party in
any matter or thing whatsoever.
10
<PAGE>
CONFIDENTIAL INFORMATION
(c) NOTICES. Notices to either party under or relating to this Agreement
shall be in writing to the address indicated on the first page of this
Agreement, Attention: President, and shall be deemed effective when
received, or on the second day following the date after depositing the
notice with a reputable, overnight delivery service (such as FedEx or
U.P.S.).
(d) SEVERABILITY. The terms and conditions of this Agreement are
severable. If any term or condition of this Agreement is deemed to be
illegal or unenforceable under any rule of law, all other terms shall
remain in force. Further, the term or condition which is held to be
illegal or unenforceable shall remain in effect as far as possible in
accordance with the intention of the parties.
(e) ENTIRE AGREEMENT; MODIFICATIONS. The parties hereto agree that this
Agreement represents the complete and exclusive statement of the
Agreement between the parties, and supersedes all prior proposals and
understandings, oral or written, relating to the subject matter of
this Agreement. This Agreement may be amended only in writing executed
by the parties hereto.
(f) EFFECT OF WAIVER. Failure by either party to enforce any provision of
this Agreement shall not be deemed a waiver of that provision or of
any other provision of this Agreement.
(g) FORCE MAJEURE. Neither party shall be responsible for any delay nor
failure in performance resulting from acts beyond the control of such
party. Such acts shall include but not be limited to an act of God; an
act of war; a riot; an epidemic, fire, flood or other disaster; an act
of government; and a strike or lockout; provided that, in order to be
excused from delay or failure to perform, such party must act
diligently to remedy the cause of such delay or failure.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(i) VENUE. Except with respect to any dispute subject to arbitration in
accordance with the provisions of Section 15 (j) below, each party
hereto hereby irrevocably agrees that any legal action or proceeding
arising out of this Agreement shall be brought only in the Superior
Court of The Commonwealth of Massachusetts in and for Middlesex County
or the United States District Court for the Eastern Division of the
District of Massachusetts (or, if such court does not have subject
matter jurisdiction over such dispute, in any other state or federal
court located in the Commonwealth of
11
<PAGE>
CONFIDENTIAL INFORMATION
Massachusetts), preserving, however, all rights of removal to a
federal court under 28 U.S.C. Section 1441. Each party hereto
irrevocably waives any objection to the venue of the aforesaid courts
in connection with any legal action or proceeding against it arising
out of this Agreement. Each party hereto also agrees that any trial
arising out of or in connection with a claim against it in connection
with this Agreement shall be before the court and each party's right
to a trial by jury is hereby waived. Each party hereto irrevocably
consents to the service of process outside the territorial
jurisdiction of said courts in any such action or proceeding by
mailing copies thereof by registered United States mail, postage
prepaid, to its address as specified above.
(j) ARBITRATION. Any question, dispute, disagreement, or difference of any
kind whatsoever which may arise between the Society and HealthGate
under, out of, or in connection with this Agreement, or the carrying
out of the work hereunder (whether during the progress of the work or
after its completion, and whether before or after the termination
abandonment or breach of this Agreement) shall be tried to be settled
amicably upon mutual consultation with good faith, and in failing so
shall be submitted to arbitration in Boston, Massachusetts to a panel
of one arbitrator under the rules of the American Arbitration
Association.
(k) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall take effect as an original, and all
of which, together, shall evidence one and the same Agreement.
(l) SECTION HEADINGS; EXHIBITS. The section, subsection and Schedule
headings used herein are for reference and convenience only, and shall
not enter into the interpretation hereof. The Schedules referred to
herein and attached hereto, or to be attached hereto, are incorporated
herein to the same extent as if set forth in full herein.
(m) NEUTRAL CONSTRUCTION. The parties to this Agreement agree that this
Agreement was negotiated fairly between them at arm's length and that
the final terms of this Agreement are the product of the parties'
negotiations. Each party warrants and represents that it has sought
and received legal counsel of its own choosing with regard to the
contents of this Agreement and the rights and obligations affected
hereby. The parties agree that this Agreement shall be deemed to have
been jointly and equally drafted by them, and that the provisions of
this Agreement therefore should not be construed against a party or
parties on the grounds that the party or parties drafted or was more
responsible for drafting the provision(s).
12
<PAGE>
CONFIDENTIAL INFORMATION
(n) CERTAIN TERMS.
"Internet" means the world-wide network of computers commonly
understood to provide some or all of the following features, among
others: electronic mail, file transfers through File Transfer Protocol
("FTP"), Telnet access to local and remote computers, Usenet
Newsgroups, Gopher access to information on local and remote
computers, Wide Area Information Servers ("WAIS"), and World Wide Web
access.
"World Wide Web" or "Web" means all of the web pages that are
accessible to a typical computer user with appropriate access to the
Internet and a web browser.
(q) EMPLOYEES. Neither HealthGate nor the Society shall hire or seek to
engage the services of, nor offer to pay commissions, compensation or
any other form of incentives to the employees or consultants of the
other for any purpose whatsoever without the express written consent
of the other party. This provision shall expire eighteen (18) months
after the termination of this Agreement.
(r) COOPERATION. Each party shall cooperate with the other party as is
reasonably necessary to further the purposes of this Agreement and the
other party's performance hereunder.
13
<PAGE>
CONFIDENTIAL INFORMATION
Executed as of the date set forth above, as a document under seal, by the duly
authorized representatives of the parties hereto.
HealthGate Data Corp.
By: /s/ Rick Lawson
---------------
Rick Lawson
VP, Content
Massachusetts Medical Society
By: /s/ Harry L. Greene, II
-----------------------
Name: Harry L. Greene, II
Title: Executive Vice President
14
<PAGE>
CONFIDENTIAL INFORMATION
------------------------
SCHEDULE A: CONTENT SPECIFICATION
---------------------------------
<PAGE>
CONFIDENTIAL INFORMATION
------------------------
SCHEDULE B: REVENUE SHARING
---------------------------
Revenue described in Section 6 (b), Section 6 (d), and Section 6 (e) shall be
shared according to the following schedule:
<TABLE>
<CAPTION>
REVENUE HEALTHGATE SHARE NEJM SHARE
------- ---------------- ----------
<S> <C> <C>
$0-$500,000 50% 50%
$500,001 - $1,000,000 52 47
$1,000,001 - $1,500,000 53 47
$1,500,001 - $2,000,000 54 46
$2,000,001 - $3,000,000 55 45
$3,000,001 - $4,000,000 56 44
$4,000,001 - $5,000,000 57 43
$5,000,000 - $7,500,000 58 42
$7,500,000 and higher 60 40
</TABLE>
<PAGE>
Exhibit 10.30
HEALTHGATE DATA CORP.
WARRANT PURCHASE AGREEMENT
June 11, 1999
<PAGE>
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (this "Agreement"), is made as of June 11,
1999 by and between HealthGate Data Corp., Inc., a Delaware corporation (the
"COMPANY") and General Electric Company, a New York Corporation or one or more
of its affiliates (the "Purchaser").
RECITALS
WHEREAS, the Purchaser and the Company are contemporaneously entering into
a Distribution Agreement of even date herewith (the "DISTRIBUTION AGREEMENT");
and
WHEREAS, as a material condition to the Purchaser's willingness to enter
into the Distribution Agreement, the Company has agreed to issue to the
Purchaser a warrant to purchase shares of capital stock of the Company, subject
to the terms and conditions of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1 ISSUANCE OF WARRANT. Subject to the terms and conditions hereof, on
the date of the execution of this Agreement or such later date as the conditions
to closing herein are satisfied (the "Closing"), the Company shall issue to the
Purchaser, and the Purchaser shall accept from the Company, the Warrant in the
form attached as EXHIBIT A hereto.
2. DELIVERIES TO BE MADE AT THE CLOSING.
2.1. AGREEMENTS TO BE EXECUTED. The following documents shall be
executed prior to or simultaneously with the Closing:
(i) DISTRIBUTION AGREEMENT. The Company and the Purchaser will
have entered into a Distribution Agreement, in substantially the form set
forth in EXHIBIT B attached hereto (the "DISTRIBUTION AGREEMENT"), and the
Distribution Agreement will be in full force and effect as of the Closing.
(ii) REGISTRATION AGREEMENT. The Company and the Purchaser will
have entered into a Registration Agreement in substantially the form set
forth in Exhibit C attached hereto (the "REGISTRATION AGREEMENT") and the
Registration Agreement will be in full force and effect as of the Closing
and the Company shall have obtained any requisite consents, agreements or
waivers from the stockholders of the Company on or prior to the Closing.
(iii) STOCKHOLDERS AGREEMENT. The Company and the other parties
to the Amended and Restated Stockholders Agreement dated April 7, 1999
shall have executed and delivered an amendment to the Stockholders
Agreement adding Purchaser to such agreement, including tag-along rights
for Purchaser equivalent to those granted to GE Capital therein with
<PAGE>
respect to the Common Stock and extending such rights for a term ending
upon the consummation of an IPO or the expiration of the 5 year term hereof
(the "STOCKHOLDERS AGREEMENT").
(iv) LOCK-UP AGREEMENT. The Purchaser shall have executed and
delivered to the Company a Lock-up Agreement in substantially the form
attached hereto as Exhibit D.
2.2 CLOSING DOCUMENTS. The Company will deliver, or cause to be
delivered, to the Purchaser all of the following documents:
(i) the opinion of Rich, May, Bilodeau & Flaherty, P.C., counsel
for the Company, which shall be in the form set forth in EXHIBIT E
attached hereto and which will be addressed to the Purchaser and dated
the date of the Closing;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement, the
Stockholders Agreement and each of the other agreements contemplated
hereby, the issuance and sale of the Warrant, the reservation for
issuance of 300,000 shares of Common Stock for issuance upon exercise
of the Warrant, and all other transactions contemplated by this
Agreement;
(iii) certified copies of the Certificate of Incorporation and
the Company's bylaws, each as in effect as of the Closing; and
(iv) such other documents relating to the transactions
contemplated by this Agreement as the Purchaser or its counsel may
reasonably request.
3. COVENANTS. The rights of the Purchaser under Article 3 (other than
Sections 3.1(vii), 3.4, 3.5, 3.6 and 3.8) shall terminate at the earlier of such
time as the Company consummates an IPO or the Warrant is exercised in full or
terminated.
3.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company will,
upon the written request of the Purchaser, deliver to the Purchaser (so long as
the Purchaser holds any portion of the Warrant and this covenant is in effect,
except the Company shall have no such obligation while its Registration
Statement on Form S-1 (No. 333-76899) is on file with the SEC and has not been
abandoned or withdrawn) and to each transferee of the Purchaser who has acquired
and holds the Warrant
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, (a)
unaudited consolidated statements of income and cash flows and changes
in consolidated financial position of the Company and its Subsidiaries
for such monthly period and for the period from the beginning of the
fiscal year to the end of such monthly period and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the annual
budget
2
<PAGE>
and to the corresponding period in the preceding fiscal year, all
prepared in accordance with generally accepted accounting principles,
consistently applied, and (b) a management summary of the month's
events including new business development, material legal matters,
bookings, backlogs, staffing levels, and sales projections;
(ii) accompanying the statements referred to in subparagraph (i),
an Officer's Certificate stating that there is no Event of
Noncompliance in existence and that there has occurred no event of
default under any other material agreement to which the Company or any
of its Subsidiaries is a party or, if any Event of Noncompliance or
any such event of default exists, specifying the nature and period of
existence thereof, and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto;
(iii) as soon as practicable and in any event within 90 days
after the end of each fiscal year, audited consolidated statements of
income and cash flows and changes in financial position of the Company
and its Subsidiaries for such fiscal year, and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
fiscal year, setting forth in each case comparisons to the preceding
fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by, with
respect to the consolidated portions of such statements, an audit
opinion by a Big Five public accounting firm selected by the Company;
(iv) promptly upon receipt thereof, a copy of the annual
management letter of the Company's independent accountants to the
Company's board of directors and any additional reports, management
letters or other detailed information concerning significant aspects
of the Company's operations and financial affairs given to the Company
by its independent accountants (and not otherwise contained in other
materials provided hereunder);
(v) at least 30 days prior to the end of each fiscal year, an
annual operating budget prepared on a monthly basis for the Company
and its Subsidiaries for the succeeding fiscal year (displaying
anticipated statements of income, changes in financial position and
balance sheets) and an annual budget for capital expenditures of the
Company and its Subsidiaries, which budgets shall be approved by the
Company's board of directors, and promptly upon preparation thereof
any other significant budgets which the Company prepares, and any
revisions of such annual or other budgets;
(vi) promptly (but in any event within five business days) after
the discovery or receipt of notice of any Event of Noncompliance, any
event of default under any material agreement to which it or any of
its Subsidiaries is a party, or any other material adverse event or
circumstance affecting the Company or any Subsidiary (including the
filing of any material litigation against the Company or
3
<PAGE>
any Subsidiary which, if determined adversely, would have a material
adverse effect on the business, assets, financial condition, results
of operations or prospects of the Company and its Subsidiaries taken
as a whole), an Officer's Certificate specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto;
(vii) promptly upon transmission thereof, copies of the Company's
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Annual
Reports to Stockholders filed with the Securities and Exchange
Commission; and
(viii) with reasonable promptness, such other information and
financial data concerning the Company as any Person entitled to
receive materials under this Section 3.1 may reasonably request.
Except as otherwise required by law or judicial order or decree or by any
governmental regulatory agency or authority, the Purchaser and each Person
receiving information regarding the Company pursuant to Sections 3.1 or 3.2 will
use commercially reasonable efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Person may disclose any financial information regarding the Company and its
Subsidiaries in connection with the transfer of the Warrant or Underlying Common
Stock if such Person's transferee agrees in writing to be bound by the
provisions hereof. As a condition to disclosure of such information to any
Person other than the Purchaser, the Company may request receipt of written
confirmation by such Person that such Person will abide by the foregoing
confidentiality provisions.
3.2 INSPECTION OF PROPERTY. The Company will permit any
representatives designated by any Person (so long as the Purchaser holds any
portion of the Warrant and this covenant is in effect, except the Company shall
have no such obligation while its Registration Statement on Form S-1 (No.
333-76899) is on file with the SEC and has not been abandoned or withdrawn) upon
reasonable notice and during normal business hours, to (i) visit and inspect any
of the properties of the Company, (ii) examine the corporate and financial
records of the Company and make copies thereof or extracts therefrom and (iii)
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with the directors, officers, key employees and independent accountants of the
Company, in each case subject to the confidentiality provisions of the last
subsection of Section 3.1 and provided that such visits, inspections,
examinations and discussions will be at the Purchaser's expense and will not
unreasonably interfere with the Company's normal business operations and that
the Company will not be required to disclose hereunder any technical proprietary
information relating to its business.
3.3 AFFIRMATIVE COVENANTS. The Company will, and will cause each
Subsidiary to:
(i) at all times cause to be done all things reasonably necessary to
maintain, preserve and renew its corporate existence and all material
licenses, authorizations and permits necessary to the conduct of its
businesses;
4
<PAGE>
(ii) maintain and keep its properties in good repair, working order
and condition, ordinary wear and tear excepted, and from time to time make
all necessary or desirable repairs, renewals and replacements, so that its
businesses may be properly and advantageously conducted at all times,
except where the failure to so comply would not have a material adverse
effect on the business, assets, financial condition, results of operations
or prospects of the Company and its Subsidiaries taken as a whole;
(iii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same become delinquent and
before penalties accrue thereon) and all claims for labor, materials or
supplies which if unpaid might by law become a lien upon any of its
property, to the extent to which the failure to so pay or discharge might
reasonably be expected to have a material adverse effect upon the business,
assets, financial condition, results of operations or prospects of the
Company and its Subsidiaries taken as a whole, unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(iv) comply with all other obligations which it incurs pursuant to any
contract or agreement, whether oral or written, express or implied, as such
obligations become due to the extent to which the failure to so comply
might reasonably be expected to have a material adverse effect upon the
business, assets, financial condition, results of operations or prospects
of the Company and its Subsidiaries taken as a whole, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(v) comply with all applicable laws, rules, regulations and orders of
all domestic and foreign governmental authorities, including, without
limitation, the Foreign Corrupt Practices Act, the violation of which might
reasonably be expected to have a material adverse effect upon the business,
assets, financial condition, results of operations or prospects of the
Company and its Subsidiaries taken as a whole;
(vi) apply for and use its best efforts to continue in force with
responsible insurance companies adequate insurance covering risks of such
types and in such amounts as are customary for corporations of similar size
engaged in similar lines of business and, without limiting the foregoing,
maintain "key man" life insurance covering William S. Reece (so long as
such individual is an employee of the Company) and naming the Company as
beneficiary in the amount of $1,000,000 for each such policy, the proceeds
of which will be available for general corporate purposes of the Company;
and
(vii) maintain proper books of record and account which fairly present
its financial condition and results of operations and make provisions on
its financial statements
5
<PAGE>
for all such proper reserves as in each case are required in accordance
with generally accepted accounting principles, consistently applied.
3.4 COMPLIANCE WITH AGREEMENTS. The Company will use its best efforts
to perform and observe (i) all of its obligations to the Warrant Holders and all
of its obligations to each holder of the Underlying Common Stock including those
under the Stockholders Agreement and (ii) all of its obligations to each holder
of Registrable Securities set forth in the Registration Agreement.
3.5 CURRENT PUBLIC INFORMATION. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company will file all reports required to be filed by it under
the Securities Act and the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder, and will take such
further action as any holder or holders of Restricted Securities may reasonably
request, all to the extent required to enable such holders to sell Restricted
Securities pursuant to Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission.
3.6 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrant,
300,000 shares of Common Stock. All shares of Common Stock which are so issuable
will, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company will take all such actions
as may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of stock may
be listed (except for official notice of issuance which will be promptly
transmitted by the Company upon issuance).
3.7 PROPRIETARY RIGHTS. The Company will, and will cause each
Subsidiary to, use its best efforts to possess and maintain all material
Proprietary Rights which the Company deems necessary to the conduct of their
respective businesses and own all right, title and interest in and to, or have a
valid license or right for, all material Proprietary Rights used by the Company
or any Subsidiary in the conduct of their respective businesses.
3.8 PUBLIC DISCLOSURES. The Company will not, nor will it permit any
Subsidiary to, disclose the Purchaser's name or identity as an investor in the
Company in any press release or other public announcement or in any document or
material filed with any governmental entity, without the prior written consent
of the Purchaser, unless such disclosure is required by applicable law or
governmental regulations or by order of a court of competent jurisdiction in
which case prior to making such disclosure the Company will use reasonable
efforts to give written notice to the Purchaser describing in reasonable detail
the proposed content of such disclosure and will permit the Purchaser to review
and comment upon the form and substance of such disclosure. Notwithstanding the
foregoing, the Company may describe its strategic affiliation with the
6
<PAGE>
Purchaser and GE Medical Systems in the Company's filings with the SEC provided
that it obtains the Purchaser's or GE Medical Systems prior review (which shall
be provided promptly) and written consent, which consent shall not be
unreasonably withheld.
3.9 CONTENT RESTRICTIONS. Neither the Company nor any of its
Subsidiaries will host, display, provide or aggregate non-healthcare information
on its proprietary and customer websites that might be considered pornographic,
lewd or obscene in nature. The Purchaser acknowledges that future issues of
"Healthy Sexuality" which are consistent with the format, content and tone of
issues prior to the date of this Agreement shall not constitute a breach of this
Section 3.9.
3.10 ERISA. Neither the Company nor any Subsidiary shall incur any
material liability with respect to retiree medical or death benefits or unfunded
benefits payable after termination of employment. All employee benefit plans and
arrangements maintained or contributed to by the Company, any Subsidiary or any
ERISA Affiliate shall be maintained in compliance in all material respects with
all applicable law, including any reporting requirements. With respect to any
plan maintained by or contributed to by the Company or any Subsidiary, neither
the Company nor any Subsidiary will fail to make any contribution due from it
under the terms of such plan or as required by law. An "ERISA Affiliate" for
purposes of this Section is any trade or business, whether or not incorporated,
which, together with the Company, is under common control, as described in
Section 414(b) or (c) of the Code.
3.11 BEST EFFORTS. The Company will take or cause to be taken all
actions and make or cause to be made all filings necessary or appropriate in
connection with the consummation of the transactions contemplated by this
agreement and the performance of the Company's obligations hereunder.
4. TRANSFER OF RESTRICTED SECURITIES.
(i) Restricted Securities are transferable pursuant to (a) public
offerings registered under the Securities Act, (b) Rule 144 of the
Securities and Exchange Commission (or any similar rule then in force) if
such rule is available, (c) to any Affiliate of the Purchaser and (d)
subject to the conditions specified in subparagraph (ii) below, any other
legally available means of transfer;
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in Section 4(i)(a), (b) or (c) above), the
holder thereto will deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an
opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters (an "Approved Counsel") to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the
Company an opinion of an Approved Counsel that no subsequent transfer of
such Restricted Securities will require registration under the Securities
Act, the Company
7
<PAGE>
will promptly upon such contemplated transfer deliver new certificates for
such Restricted Securities which do not bear the Securities Act legend set
forth in Section 7.3. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the
holder thereof will not transfer the same until the prospective transferee
has confirmed to the Company in writing its agreement to be bound by the
conditions contained in this Section and Section 7.3.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material
inducement to the Purchaser to enter into this Agreement and purchase the
Warrant, the Company hereby represents and warrants to Purchaser as of the date
of this Agreement (unless made as of a specific date) that:
5.1 ORGANIZATION AND CORPORATE POWER. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and is
duly qualified to do business in every jurisdiction in which its ownership of
property or its conduct of business requires it to qualify. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
business as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Company's
and each Subsidiary's charter documents and bylaws, which have been furnished to
the Purchaser's counsel, reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete.
5.2 CAPITAL STOCK AND RELATED MATTERS. As of the Closing and
immediately thereafter, the authorized capital stock of the Company will consist
of (i) 1,000 shares of Series A Convertible Preferred Stock, $.01 par value (the
"Series A Preferred"), 1,000 of which are issued and outstanding, (ii) 1,000
shares of Series B Convertible Preferred Stock, $.01 par value (the "Series B
Preferred"), 1,000 of which are issued and outstanding, (iii) 1,000 shares of
the Series C Convertible Preferred Stock, $.01 par value (the "Series C
Preferred"), 1,000 of which are issued and outstanding, (iv) 1,667 shares of the
Series D Convertible Preferred Stock, $.0l par value (the "Series D Preferred"),
1,667 of which are issued and outstanding, (v) 829,962 shares of Series E
Preferred, 720,757 of which are issued and outstanding and (vi) 20,000,000
shares of Common Stock, of which 1,146,895 shares are issued and outstanding,
304,950 shares have been reserved for issuance upon conversion of the Series A
Preferred and 399,400 shares have been reserved for issuance upon conversion of
the Series B Preferred and 138,650 shares have been reserved for issuance upon
conversion of the Series C Preferred and 335,100 shares have been reserved for
issuance upon conversion of the Series D Preferred and 720,757 shares have been
reserved for issuance upon conversion of the Series E Preferred and 300,000
shares have been reserved for the issuance by all necessary corporate action
upon exercise of the Warrant. The 300,000 shares of Common Stock reserved for
issuance upon exercise of the Warrant will represent, as of the Closing, in
excess of 7.19% of the Company's Common Stock and options on a Fully-Diluted
Basis, as set forth in EXHIBIT F hereto. As of the Closing, neither the Company
nor any Subsidiary will have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock, nor will it have outstanding
any rights or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its
8
<PAGE>
capital stock, except for the Series A Preferred, the Series B Preferred, the
Series C Preferred, the Series D Preferred, and the Series E Preferred and
except for this Warrant and any options, rights or warrants to purchase shares,
of capital stock of the Company issued to members of the board of directors,
employees, consultants and advisors of the Company, and GE Capital Equity
Investments, Inc. as more fully set forth on SCHEDULE 5.2 attached hereto. As of
the Closing, neither the Company nor any Subsidiary will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock, except pursuant to the Certificate of
Incorporation. As of the Closing, all of the outstanding shares of the Company's
capital stock will be validly issued, fully paid and nonassessable.
5.3 SUBSIDIARIES. Except as set forth on SCHEDULE 5.3 attached
hereto, the Company does not own or hold any rights to acquire any shares of
stock or any other security or interest in any other Person.
5.4 AUTHORIZATION: NO BREACH. The execution, delivery and performance
of this Agreement, the Registration Agreement and the Stockholders Agreement and
all other agreements contemplated hereby and thereby, the transactions
contemplated hereby and thereby have been duly authorized by the Company and are
within the corporate power and authority of the Company. As of the date of their
execution and delivery by the Company, this Agreement, the Registration
Agreement, the Stockholders Agreement and all other agreements contemplated
hereby will be duly executed and delivered by the Company and each will
constitute a valid and binding obligation of the Company, enforceable in
accordance with its terms; except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally. The execution and
delivery by the Company of this Agreement, the Registration Agreement, the
Stockholders Agreement and all other agreements contemplated hereby and thereby,
the offering, sale and issuance of the Warrant hereunder, the issuance of the
Common Stock upon exercise of the Warrant do not and will not (i) conflict with
or result in a breach of the terms, conditions or provisions of, (ii) constitute
a default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to accelerate any
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the Certificate of
Incorporation or bylaws of the Company or any Subsidiary, or any law, statute,
rule or regulation to which the Company or any Subsidiary is subject, or any
agreement, instrument, order, judgment or decree to which the Company or any
Subsidiary is subject.
5.5 FINANCIAL STATEMENTS; BOOKS AND RECORDS. The audited consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1998 and
1997 and the related audited consolidated statements of income and cash flows
for each of the years ended December 31, 1998, 1997 and 1996 have been
previously delivered to Purchaser. Such financial statements (including the
notes thereto, if any) were prepared in accordance with GAAP, are accurate and
complete in all material respects, are in accordance with the books and records
of the Company. All the books, records and accounts of the Company and its
Subsidiaries are in all material respects true and complete, are maintained in
accordance with good business practice and
9
<PAGE>
all laws applicable to its business, and accurately present and reflect in all
material respects all of the transactions therein described. The Company has
previously delivered to the Purchaser true, correct and complete texts of all of
the minutes relating to meetings of the stockholders, board of directors and
committees of the board of directors of the Company and each Subsidiary since
their respective dates of incorporation.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any material obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, whether or not known to the
Company, whether due or to become due) arising out of transactions entered into
at or prior to the Closing, or any action or inaction at or prior to the
Closing, or any state of facts existing at or prior to the Closing, other than:
(i) liabilities set forth on the Latest Balance Sheet (including the notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) or in connection with the transactions described
in this Agreement and (iii) other liabilities and obligations expressly
disclosed in the other Schedules to this Agreement.
5.7 NO MATERIAL ADVERSE CHANGE. Since January 1, 1999, there has been
no material adverse change in the Company's business, assets, financial
condition, results of operations, prospects, employee relations, customer
relations or otherwise.
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on Schedule
5.8 hereto, the representations and warranties set forth in Section 6.8 of the
Stock Purchase Agreement dated as of April 5, 1999 between the Company, GE
Capital Equity Investments, Inc. and Blackwell Science, Ltd. (the "April Stock
Purchase Agreement") remain true complete and correct in all material respects.
5.9 ASSETS. The Company and each Subsidiary have good and marketable
title to, or a valid and subsisting leasehold interest in, the properties and
assets used by them, located on their premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all liens, security interests,
charges and encumbrances, except as disclosed on the Latest Balance Sheet
(including the notes thereto). The Company's and each Subsidiary's buildings,
equipment and other tangible assets are in good operating condition in all
material respects and are fit for use in the ordinary course of business.
5.10 TAX MATTERS. The Company and each Subsidiary have filed or caused
to be filed all tax returns which they are required to file; all such returns
are true and correct in all material respects; the Company and each Subsidiary
have paid all taxes owed by them or which they are obligated to withhold from
amounts owing to any employee, creditor or third party; neither the Company nor
any Subsidiary has waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to a tax assessment or deficiency;
the assessment of any additional taxes for periods for which returns have been
filed is not expected; and there are no material unresolved questions or claims
concerning the Company's or any Subsidiary's tax liability. The Company and its
Subsidiaries have paid or caused to be paid, or have established reserves that
the Company reasonably believes to be adequate, for all federal income tax
liabilities and state
10
<PAGE>
income tax liabilities applicable to the Company or any of its Subsidiaries for
all fiscal years which have not been examined and reported on by the taxing
authorities. For the purpose of this Agreement, "tax" or "taxes" means any
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding, value added, estimated, alternative or add on
minimum tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority.
5.11 CONTRACTS AND COMMITMENTS. Except as set forth on Schedule 5.11
hereto, the representations and warranties set forth in Section 6.11 of the
April Stock Purchase Agreement remain true complete and correct in all material
respects.
5.12 PROPRIETARY RIGHTS. The Company and its Subsidiaries possess all
material Proprietary Rights necessary to the present and contemplated conduct of
their respective businesses and (i) the Company and its Subsidiaries own all
right, title, and interest in and to all of such Proprietary Rights, (ii) there
have been no claims made against the Company or any Subsidiary for the assertion
of the invalidity, abuse, misuse, or unenforceability of any of such rights, and
there are, to the best of the Company's knowledge, no grounds for the same,
(iii) neither the Company nor any Subsidiary has received a notice of conflict
with the asserted rights of others within the last five years, and (iv) the
conduct of the Company's and each Subsidiary's business has not, to the best of
the Company's knowledge, infringed any such rights of others. Each employee or
consultant of the Company or any Subsidiary is a party to a confidentiality
agreement relating to the business of the Company and its Subsidiaries. Each
technical employee or consultant of the Company or any Subsidiary, excluding
consultants hired for intellectual property expertise in a particular topic
distinct from the Company's business, is a party to an invention assignment
agreement relating to the business of the Company and its Subsidiaries.
5.13 LITIGATION, ETC. Except as set forth in SCHEDULE 5.13, there are
no actions, suits, proceedings, orders, investigations or claims pending or, to
the best of the Company's knowledge, threatened against or affecting the Company
or any Subsidiary at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality; neither the
Company nor any Subsidiary is subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of the Company's
knowledge, any governmental investigations or inquiries (including inquiries as
to the qualification to hold or receive any license or permit); and, to the best
of the Company's knowledge, there is no basis for any of the foregoing. Neither
the Company nor any of its Subsidiaries is in default in any material respect
with respect to any judgment, order, writ, injunction, decree or award.
5.14 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company or any Subsidiary; provided, however, that this representation
excludes any claim arising out of or due to any action of the Purchaser. The
Company will pay, and hold the Purchaser harmless against, any liability, loss
or expense
11
<PAGE>
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
5.15 GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the valid execution, delivery and performance by
the Company of this Agreement or the other agreements contemplated hereby, or
the consummation by the Company of any other transactions contemplated hereby or
thereby.
5.16 INSURANCE. The representations and warranties set forth in
Section 6.16 of the April Stock Purchase Agreement remain true complete and
correct in all material respects.
5.17 EMPLOYEES AND ERISA.
(i) The Company is not aware that any executive or key employee of
the Company or any Subsidiary or any group of employees of the Company or
any Subsidiary has any plans to terminate employment with the Company or
any Subsidiary, the Company and each Subsidiary have complied in all
material respects with all laws relating to the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes,
and the Company is not aware that it or any Subsidiary has any material
labor relations problems.
(ii) Neither the Company, its Subsidiaries nor any of their respective
employees is a party to any consulting or employment agreements containing
any non-compete or confidentiality provisions relating to the present or
proposed business activities of the Company and its Subsidiaries;
(iii) Neither the Company nor any Subsidiary presently maintains or
contributes to, or ever has maintained or contributed to, any "employee
benefit plan," as such term is defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), with respect
to which the Company is required to file Internal Revenue Service Form
5500, and neither the Company nor any Subsidiary presently contributes to
or ever has contributed to any "multiemployer plan," as such term is
defined in Section 3 of ERISA.
5.18 COMPLIANCE WITH LAWS. Neither the Company nor any Subsidiary is
in violation of any domestic or foreign law or any regulation or requirement,
including without limitation, the Foreign Corrupt Practices Act, which violation
might reasonably be expected to have a material adverse effect upon the
business, assets, financial condition, result of operations or prospects of the
Company and its Subsidiaries, and neither the Company nor any Subsidiary has
received notice of any such violation.
5.19 DISCLOSURE. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items prepared
or supplied to the Purchaser by
12
<PAGE>
or on behalf of the Company with respect to the transactions contemplated hereby
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not misleading.
There is no fact which the Company has not disclosed to the Purchaser in writing
and of which any of its officers, directors or executive employees is aware and
which could reasonably be anticipated to have a material adverse effect upon the
existing or expected financial condition, operating results, assets, customer
relations, employee relations or business prospects of the Company and its
Subsidiaries.
5.20 POSSESSION OF FRANCHISES, LICENSES, ETC. The Company and its
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from governmental or political subdivisions or regulatory
authorities that are necessary in any material respect to the Company or any of
its Subsidiaries for the ownership, maintenance and operation of their
respective properties and assets, and neither the Company nor any of its
Subsidiaries is in violation of any thereof in any material respect.
5.21 HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT. Neither the
Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding company," or
an "affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
5.22 ENVIRONMENTAL AND OTHER REGULATIONS. The Company and its
Subsidiaries are in compliance with all applicable federal, state, local and
foreign laws and regulations relating to protection of the environment and human
health, and are in compliance in all material respects with all other applicable
federal, state, local and foreign laws and regulations, including, without
limitation, those relating to equal employment opportunity and employment
safety. There are no claims, notices, civil, criminal or administrative actions,
suits, hearings, investigations, inquiries or proceedings pending or, to the
best knowledge of the Company, threatened against the Company or any Subsidiary
that are based on or related to any environmental matters, including any
disposal of hazardous substances at any place, or the failure to have any
required environmental permits, and there are no past or present conditions that
are likely to give rise to any liability or other obligations of the Company or
any Subsidiary under any environmental laws.
5.23 YEAR 2000. The representations and warranties set forth in
Section 6.24 of the April Stock Purchase Agreement remain true complete and
correct in all material respects.
6. DEFINITIONS. For the purposes of this Agreement, the following terms
have the meanings set forth below:
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
13
<PAGE>
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Company's common stock, $.01 par value per
share, having the rights set forth in Article 4 of the Certificate of
Incorporation.
"CONSOLIDATED NET WORTH" means the consolidated stockholders' equity
of the Company determined in accordance with generally accepted accounting
principles consistently applied.
"CONVERTIBLE SECURITIES" means evidences of indebtedness, capital
shares or other securities which are convertible into or exchangeable for, with
or without payment of additional consideration, shares of Common Stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event.
"EVENT OF NONCOMPLIANCE" means any instance of the Company's failure,
under the provisions of the Certificate of Incorporation, to perform its
obligations to the holders of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred.
"FACILITIES" means any facilities or equipment used by the Company or
its Subsidiaries in any location, including HVAC systems, mechanical systems,
elevators, security systems, fire suppression systems, telecommunications
systems, fax machines, copy machines, and equipment, whether or not owned by the
Company or its Subsidiaries.
"FULLY DILUTED BASIS" means the number of shares of Common Stock
outstanding, plus (x) the number of shares of Common Stock into which all
outstanding Convertible Securities of the Company would be convertible and (y)
the number of shares of Common Stock which would be issuable upon the exercise
of all warrants, rights or options to purchase shares of Common Stock then
outstanding.
"GAAP" means the generally accepted accounting principles in the
United States.
"INTERNAL MIS SYSTEMS" means any computer software and systems
(including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of business by or on behalf
of the Company or its Subsidiaries, including the Company's and its
Subsidiaries' payroll, accounting, billing/receivables, inventory, asset
tracking, customer service, human resources, and e-mail systems.
"INVESTMENT" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any note, stock, securities or
other ownership interest in any other Person and (ii) any capital contribution
by such Person to any other Person.
"OFFERING PRICE" means the price at which a share of the Company's
Common Stock will be offered at the Public Offering.
14
<PAGE>
"OFFICER'S CERTIFICATE" means a certificate signed by the Company's
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"PERSON" means an individual, a partnership, a corporation, limited
liability company, limited liability partnership, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
"PRODUCTS" means any products offered or furnished by the Company or
any of its Subsidiaries, or any predecessor in interest of the Company or any of
its Subsidiaries, currently or at any time in the past, including without
limitation each item of hardware, software, or firmware; any system, equipment,
or products consisting of or containing one or more thereof; and any and all
enhancements, upgrades, customizations, modifications, and maintenance thereto.
"PROPRIETARY RIGHTS" means any patents, registered and common law
trademarks, service marks, trade names, copyrights, licenses and other similar
rights (including, without limitation, know-how, trade secrets and other
confidential information) and applications for each of the foregoing, if any.
"PUBLIC OFFERING" means a firm commitment underwritten public offering
of the Company's Common Stock pursuant to a registration statement filed with
the Securities and Exchange Commission in which the Company's common stock is
issued at a price that implies a Company post-closing equity value of at least
$150,000,000.
"RELATED PARTY" means any officer, director or beneficial holder of 5%
or more of the outstanding shares of capital stock of the Company, any spouse,
former spouse, child, parent, parent of a spouse, sibling or a grandchild of any
such officer, director or beneficial holder of the Company, and any Affiliate of
any of the foregoing persons.
"RESTRICTED SECURITIES" means (i) the Warrant issued hereunder, (ii)
the Common Stock issued upon exercise of the Warrant and (iii) any securities
issued with respect to the securities referred to in clauses (i) or (ii) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities will cease to be
Restricted Securities when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) been transferred pursuant to Rule 144 or become eligible for
sale pursuant to Rule 144(k) (or any similar rule then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend set forth in Section 7.3 have been
delivered by the Company in accordance with Section 5(ii). Whenever any
particular securities cease to be Restricted Securities, the holder
15
<PAGE>
thereof will be entitled to receive from the Company, without expense, new
securities of like tenor not bearing a Securities Act legend of the character
set forth in Section 7.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.
"SERVICES" means any services offered or furnished by the Company or
any of its Subsidiaries, or any predecessor in interest of the Company or any of
its Subsidiaries, currently or at any time in the past.
"SUBSIDIARY" means any corporation of which the securities having a
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries;
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable upon exercise of the Warrant and (ii) any Common Stock issued or
issuable with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. Any Person who
holds the Warrant will be deemed to be the holder of the Underlying Common Stock
obtainable upon exercise of the Warrant, regardless of any restriction on the
exercise of the Warrant. As to any particular shares of Underlying Common Stock,
such shares will cease to be Underlying Common Stock when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) been distributed to the
public pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (c) ceased to be Restricted Securities other than for the
reasons set forth in clauses (a) and (b).
"YEAR 2000 COMPLIANT" means that (1) the products, services, or other
item(s) at issue accurately process, provide and/or receive all date/time data
(including calculating, comparing, sequencing, processing and outputting)
within, from, into, and between centuries (including the twentieth and
twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (2) neither the performance nor the functionality nor the
Company's or any of its Subsidiaries' provision of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on, after,
or spanning January 1, 2000.
7. MISCELLANEOUS.
16
<PAGE>
7.1 EXPENSES; INDEMNIFICATION.
(i) The Company agrees to pay the Purchaser $15,000 simultaneously
with the execution and delivery of the Warrant in compensation for certain
of the Purchaser's expenses incurred in connection herewith. In addition,
the Company agrees to pay the Purchaser for all costs and expenses of the
Purchaser relating to the enforcement of the rights granted under this
Agreement and the agreements contemplated hereby, if the Company is found
to have breached its obligations under any such agreement.
(ii) The Company further agrees to indemnify and save harmless the
Purchaser and its respective officers, directors, partners, employees,
trustees and agents, each person who controls the Purchaser within the
meaning of the Securities Act or the Exchange Act, from and against any and
all costs, expenses, damages or other liabilities resulting from any breach
of any representation, warranty, covenant or agreement set forth in this
Agreement, and the agreements contemplated hereby by the Company or any
legal, administrative or other proceedings brought by any third party
arising out of the transactions contemplated hereby and thereby; provided
that, if and to the extent that such indemnification is unenforceable for
any reason, the Company shall make the maximum contribution to the payment
and satisfaction of such indemnified liability which shall be permissible
under applicable laws.
(iii) The indemnified party under this Section 7.1 will, promptly
after the receipt of notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from the
Company on account of an indemnity agreement contained in this Section 7.1,
notify the Company in writing of the commencement thereof. The omission of
any indemnified party so to notify the Company of any such action shall not
relieve the Company from any liability which it may have to such
indemnified party except to the extent the Company shall have been
prejudiced by the omission of such indemnified party so to notify the
Company, pursuant to this Section 7.1. In case any such action shall be
brought against any indemnified party and it shall notify the Company of
the commencement thereof, the Company shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the Company to such indemnified party of its election so to
assume the defense thereof, the Company will not be liable to such
indemnified party under this Section 7.1 for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof nor for any settlement thereof entered into without the
consent of the Company; provided that (i) if the Company shall elect not to
assume the defense of such claim or action or (ii) if the indemnified party
reasonably determines (x) that there may be a conflict between the
positions of the Company and of the indemnified party in defending such
claim or action or (y) that there may be legal defenses available to such
indemnified party different from or in addition to those available to the
Company, then separate counsel for the indemnified party shall be entitled
to participate in and conduct the defense, in the case of (i) and (ii)(x),
or such
17
<PAGE>
different defenses, in the case of (ii)(y), and the Company shall be liable
for any reasonable legal or other expenses incurred by the indemnified
party in connection with the defense.
7.2 REMEDIES. The Purchaser will have all rights and remedies set
forth in this Agreement, the Registration Agreement and the Stockholders
Agreement and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
7.3 PURCHASER'S INVESTMENT & OTHER REPRESENTATIONS The Purchaser
hereby represents and warrants as follows:
(i) INVESTMENT. The Purchaser is acquiring the Restricted Securities
purchased hereunder or acquired pursuant hereto for its own account for
investment and not with a view to, or for sale in connection with, any
public distribution thereof, nor with any present intention of distributing
or selling the same to the public; and the Purchaser is aware of the
restrictions and limitations affecting its right and ability to sell or
transfer such securities; provided that nothing contained herein will
prevent the Purchaser and subsequent holders of Restricted Securities from
transferring such securities in compliance with the provisions of Section 4
hereof.
(ii) AUTHORITY. The Purchaser has full power and authority to enter
into and to perform this Agreement in accordance with its terms. The
Purchaser has not been organized, reorganized or recapitalized specifically
for the purpose of investing in the Company.
(iii) ACCREDITED INVESTOR. The Purchaser is an Accredited Investor
within the definition set forth in Securities Act Rule 501(a).
(iv) RESTRICTIVE LEGEND. The Warrant Certificate will be imprinted
with a legend in substantially the following form:
"THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF
COMMON STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("THE ACT") AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS
EITHER (I) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH
DISPOSITION OR (II) THE SALE OF SUCH SECURITIES IS MADE PURSUANT
TO SECURITIES AND EXCHANGE COMMISSION RULE 144."
18
<PAGE>
(v) ORGANIZATION AND CORPORATE POWER. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. The Purchaser has all requisite corporate power and authority to
carry out the transactions contemplated by this Agreement.
(vi) AUTHORIZATION; NO BREACH. The execution, delivery and performance
of this Agreement and all other agreements and the transactions
contemplated hereby have been duly authorized by the Purchaser. This
Agreement and all other agreements contemplated hereby each constitutes a
valid and binding obligation of the Purchaser, enforceable in accordance
with its terms; except as enforcement thereof may be limited by any
applicable bankruptcy, reorganization, insolvency, moratorium, or similar
laws affecting rights of creditors generally. The execution and delivery by
the Purchaser of this Agreement and all other agreements contemplated
hereby and thereby and the fulfillment of and compliance with the
respective terms hereof and thereof by the Purchaser, do not and will not
(i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) result in a violation of, or (iii) require any
authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the charter
or bylaws of the Purchaser, or any law, statute, rule or regulation to
which the Purchaser is subject, or any agreement, instrument, order,
judgment or decree to which the Purchaser is subject.
(vii) BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
binding upon the Purchaser or Company or any Subsidiary; provided, however,
that this representation excludes any claim arising out of or due to any
action of the Company. The Purchaser will pay, and hold the Company
harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising
in connection with any such claim.
(viii) GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental
authority is required in connection with the execution, delivery and
performance by the Purchaser of this Agreement or the other agreements
contemplated hereby, or the consummation by the Purchaser of any other
transactions contemplated hereby or thereby.
7.4 RISK AND DUE DILIGENCE. Purchaser understands that the operation
of the Company's business is subject to numerous risks and that the Warrant and
Underlying Common Stock is a speculative investment that involves a high degree
of risk of loss of the entire investment therein. Purchaser is cognizant of and
understands such risks, including those set forth on Schedule 7.4 attached
hereto. Purchaser has been allowed, upon request, to examine any document or
agreement listed in the Schedules hereto, and has had the opportunity to obtain
any information concerning the Company, including the opportunity to ask
questions of and receive answers from authorized representatives of the Company
concerning this investment.
19
<PAGE>
7.5 CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Purchaser. No other course of dealing between the Company and the holder of the
Warrant or Underlying Common Stock or any delay in exercising any rights
hereunder or under the Certificate of Incorporation will operate as a waiver of
any rights of any such holders.
7.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
issuance and delivery of the Warrant, regardless of any investigation made by or
on behalf of any party, but shall expire upon the earlier of (i) a fully
completed Public Offering by the Company or (ii) two years after the date of
Closing.
7.7 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. This Agreement may be assigned by the Purchaser to any transferee of any
portion of the Warrant or any Underlying Common Stock. This Agreement may not be
assigned by the Company.
7.8 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
7.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
7.10 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
7.11 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK,
20
<PAGE>
FOR ANY ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY
GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE
ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT
SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO
ITS RESPECTIVE ADDRESS SET FORTH IN THIS AGREEMENT SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO
THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND
HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.12 PUBLICITY. Each of the parties hereto agrees that it will make no
statement regarding the transactions contemplated hereby which is inconsistent
with any press release agreed to by the parties hereto. Notwithstanding the
foregoing, each of the parties hereto may, in documents required to be filed by
it with any regulatory body, make such statements with respect to the
transactions contemplated hereby as each may be advised is legally necessary
upon advice of its counsel.
7.13 NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or
mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications will
be sent
To the Company:
HealthGate Data Corp.
25 Corporate Drive, Suite 310
Burlington, MA 01803
Attention: William S. Reece, Chief Executive Officer
Telephone (781) 685-4000
Fax (781) 685-4040
21
<PAGE>
With a copy to:
Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Telephone (617) 482-1360
Fax (617) 556-3889
To Purchaser:
GE Medical Systems
3000 North Grandview Blvd.
Waukesha, Wisconsin 53186
Attention: General Counsel
With a copy to:
Steven Shoemate, Esq.
Gibson Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166-0193
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
HEALTHGATE DATA CORP. GENERAL ELECTRIC COMPANY
By: /S/ WILLIAM S. REECE By: /S/ MICHAEL A. JONES
-------------------------- -------------------------------
William S. Reece Michael A. Jones
Chairman and President GM, Global Business Development
23
<PAGE>
Exhibit A
Form of Warrant
[Previously filed in Exhibit 10.30 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit B
Distribution Agreement
[Previously filed in Exhibit 10.27 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit C
Registration Agreement
[Previously filed in Exhibit 4.10 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit D
Form of Lock-up Agreement
<PAGE>
June ___, 1999
SG Cowen Securities Corporation
Financial Square, 27th Floor
New York, NY 10005
As representative of the
several Underwriters
Re: HealthGate Data Corp.
o Shares of Common Stock
Dear Sirs:
In order to induce SG Cowen Securities Corporation ("SG Cowen"),
Banc of America Securities LLC and Volpe Brown Whelan & Company, LLC
(collectively, the "Underwriters") to enter into a certain underwriting
agreement with HealthGate Data Corp., a Delaware corporation (the "Company")
with respect to the public offering of shares of the Company's Common Stock, par
value $0.01 per share ("Common Stock"), the undersigned hereby agrees that for a
period of 180 days following the date of the final prospectus filed by the
Company with the Securities and Exchange Commission in connection with such
public offering, the undersigned will not, without the prior written consent of
SG Cowen, on behalf of the several Underwriters, (1) directly or indirectly,
offer, sell, assign, transfer, encumber, pledge, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise dispose of, other
than by operation of law, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (including,
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations promulgated under
the Securities Act of 1933, as the same may be amended or supplemented from time
to time (such shares, the "Beneficially Owned Shares")) or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The undersigned
shall, however, be entitled to (i) transfer the Company's Common Stock or
securities convertible into or exchangeable or exercisable for any Company's
Common Stock to an affiliate of the undersigned, provided however, that any such
transferee agrees to be bound by the terms of this letter and to enter into a
similar agreement with SG Cowen on its own behalf, and (ii) sell any Company
Common Stock purchased in the open market by the undersigned at or following
consummation of the initial public offering.
Anything contained herein to the contrary notwithstanding, any
person to whom shares of Common Stock or Beneficially Owned Shares are
transferred from the undersigned shall be bound by the terms of this Agreement.
The undersigned is executing and delivering this letter on the
express understanding that each director, each executive officer, each
individual and entity listed in the "Principal Stockholders" table in the
Company's Registration Statement on Form S-1 (Registration No. 333-76899) and
certain other holders of the Company's Common Stock representing in the
aggregate more than 93% of the Company's outstanding Common Stock (assuming
conversion of all outstanding preferred stock to common stock and including the
undersigned's stock) has executed and delivered to SG Cowen a letter
substantially similar to this letter. If such understanding is incorrect, this
letter shall immediately become null and void. If any holder of the Company's
Common Stock who has executed such a lock-up letter is released with respect to
some or all of such stockholder's shares of the Company's Common Stock to effect
a transfer in which the transferee will not be bound to the lock-up arrangements
of the transferor, SG Cowen, upon written request
<PAGE>
from the undersigned, will release in the aggregate the same number of the
undersigned's and its affiliates' shares from such lock-up provisions.
In addition, the undersigned hereby waives, from the date hereof
until the expiration of the 180 day period following the date of the Company's
final Prospectus, any and all rights, if any, to request or demand registration
pursuant to the Securities Act of any shares of Common Stock that are registered
in the name of the undersigned or that are Beneficially Owned Shares.
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the transfer agent of the Common Stock with respect to any shares of
Common Stock or Beneficially Owned Shares.
Whether or not the public offering actually occurs depends on a
number of factors, including market conditions. Any public offering will only be
made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
This agreement shall terminate and be of no further force and effect
if the closing of the offering has not occurred by March 31, 2000.
This letter shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflict of
laws.
General Electric Company
By: __________________________
Name: ________________________
Title: _______________________
____________________________
____________________________
____________________________
(Address)
<PAGE>
June ___, 1999
SG Cowen Securities Corporation
Financial Square, 27th Floor
New York, NY 10005
As representative of the
several Underwriters
Re: HealthGate Data Corp.
o Shares of Common Stock
Dear Sirs:
This is to confirm that prior to our execution and delivery of a lock-up
agreement addressed to you dated June __, 1999, HealthGate Data Corp., a
Delaware corporation (the "Company"), has informed us that in connection with a
lock-up agreement between Barry M. Manuel and SG Cowen Securities Corporation,
as a representative of the several underwriters ("SG Cowen"), Dr. Manuel will be
permitted to transfer up to 20,000 shares of the Company's Common Stock as bona
fide gifts to individuals or entities, and, such transferee(s) shall not be
bound by the terms of this letter, without violating the term of his lock-up
agreement with SG Cowen.
This letter is to confirm that the exemption of Dr. Manuel's 20,000 shares
of Company Common Stock as described above shall be deemed not to constitute a
release of Dr. Manuel's shares as described in the final sentence of the third
paragraph of our lock-up agreement with you. Accordingly, Dr. Manuel's transfer
of up to 20,000 shares of Company Common Stock, as described above, will not
require the release of an equal number of shares from the lock-up provision in
our lock-up agreement with you.
General Electric Company
By: __________________________
Name: ________________________
Title: _______________________
<PAGE>
Exhibit E
<PAGE>
June 17, 1999
General Electric Company
3000 North Grandview Blvd.
Waukesha, Wisconsin 53186
GE Medical Systems
3000 North Grandview Blvd.
Waukesha, Wisconsin 53186
Re: HealthGate Data Corp.
Ladies and Gentlemen:
We have acted as counsel to HealthGate Data Corp., a Delaware corporation
(the "Company"), in connection with (i) the Development and Distribution
Agreement, dated as of June 11, 1999 (the "Distribution Agreement"), by and
between the Company and GE Medical Systems ("GEMS"), a division of General
Electric Company, a New York corporation ("GE"), and (ii) a Warrant Purchase
Agreement, dated as of June 11, 1999 (the "Warrant Purchase Agreement"), by and
between the Company and GE providing for, inter alia, the issuance of a Warrant
(the "Warrant") to GE for up to 300,000 shares of the Company's common stock
(the "Warrant Shares"). This opinion is being furnished to you pursuant to
Section 2.2(i) of the Warrant Purchase Agreement. Terms used herein without
definition shall have the meanings ascribed to them in the Warrant Purchase
Agreement.
We have examined the originals or certified, conformed or reproduction
copies of all such records, agreements, instruments and documents as we have
deemed relevant or necessary as the basis for the opinions hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to our opinion, we have relied
upon statements or certificates of public officials, officers or representatives
of the Company and others.
<PAGE>
General Electric Company
GE Medical Systems
June 17, 1999
Page 2
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as presently
conducted, to enter into and perform the Distribution Agreement, the
Warrant Purchase Agreement, the Warrant and the Registration
Agreement, and to carry out the transactions contemplated thereby.
The Company is duly qualified to do business and is in good standing
in the Commonwealth of Massachusetts, the only United States
jurisdiction in which, to our knowledge, the Company currently owns
property or conducts its business.
2. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, par value $.01 (the "Common Stock"), of
which 1,151,895 shares are issued and outstanding, and 834,629
shares of Preferred Stock, par value $.01 (the "Preferred Stock"),
1,000 shares of which are designated "Series A Convertible Preferred
Stock," all of which are issued and outstanding, 1,000 shares of
which are designated "Series B Convertible Stock," all of which are
issued and outstanding, 1,000 shares of which are designated "Series
C Convertible Preferred Stock," all of which are issued and
outstanding, 1,667 of which are designated "Series D Convertible
Preferred Stock," all of which are issued and outstanding, and
829,962 of which are designated "Series E Redeemable Convertible
Preferred Stock," 720,757 of which are issued and outstanding. There
are no authorized classes of capital stock of the Company other than
those set forth in this paragraph. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable. Except as
contemplated by the Warrant Purchase Agreement or the Company's
Amended and Restated Certificate of Incorporation, as amended, and
except as set forth on Schedule 5.2 to the Warrant Purchase
Agreement, to our knowledge, (i) no ------------ subscription,
warrant, option, convertible security or other right (contingent or
otherwise) to purchase or acquire any shares of capital stock of the
Company is authorized or outstanding, (ii) there is not any
commitment of the Company to issue any subscription, warrant,
option, convertible security or other such right or to issue or
distribute to holders of any shares of the Company's capital stock
any evidences of indebtedness or assets of the Company, and (iii)
the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof.
<PAGE>
General Electric Company
GE Medical Systems
June 17, 1999
Page 3
3. The issuance and delivery of the Warrant by the Company in
accordance with the Warrant Purchase Agreement has been duly
authorized by all necessary corporate action on the part of the
Company, and the Warrant Shares of common stock issuable thereunder
when so issued, sold and delivered against payment therefor in
accordance with the provisions of the Warrant will be duly and
validly issued, fully paid and non-assessable.
4. The execution, delivery and performance by the Company of the
Distribution Agreement, the Warrant Purchase Agreement, the
Registration Agreement, the Agreement Concerning Stockholders
Agreement have been duly authorized by all necessary corporate
action, and each such agreement has been duly executed and delivered
by the Company. Each such agreement constitutes the valid and
binding obligation of the Company, and is enforceable against the
Company.
5. The execution, delivery and performance of the Distribution
Agreement, the Warrant Purchase Agreement and the Registration
Agreement, and the offer, issuance and sale of the common stock
under the Warrant, will not conflict with, or result in any breach
of any of the terms, conditions, or provisions of, or constitute a
default under, the Amended and Restated Certificate of Incorporation
or Bylaws of the Company, each as amended to date, or any material
indenture, lease, agreement or other instrument known to us to which
the Company is a party or by which it or any of its properties are
bound or any decree, judgment or order specifically naming the
Company and known to us.
6. Except as obtained and in effect at the Closing, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with any governmental authority
is required on the part of the Company in connection with the
execution and delivery of the Distribution Agreement, the Warrant
Purchase Agreement, the Warrant or the offer, issuance, sale and
delivery of the Warrant Shares, or the other transactions to be
consummated at the Closing pursuant to the Warrant Purchase
Agreement.
7. The offer and issuance of the Warrant and the Warrant Shares
pursuant to the Warrant Purchase Agreement are exempt, and the
issuance of Common Stock upon exercise of the Warrant will be
exempt, from registration under the Securities Act of 1933, as
amended.
<PAGE>
General Electric Company
GE Medical Systems
June 17, 1999
Page 4
We express no opinion as to compliance with applicable anti-fraud
provisions of federal securities laws. We express no opinion as to compliance
with applicable state securities laws.
The opinions expressed herein are subject to the effect of generally
applicable rules of law that: (a) limit or affect the enforcement of provisions
of any contract that purport to require a waiver of the obligations of good
faith and fair dealing; (b) provide that forum selection clauses are not
necessarily binding on the courts in the forum selected; (c) limit the
enforceability of waivers of the right to trial by jury or rights to notice or
other rights or benefits conferred by operation of law; (d) limit the
availability of a remedy where another remedy has been elected or limit waivers
of remedies or defenses; (e) limit the enforceability of provisions releasing,
exculpating or exempting a party from, or requiring indemnification of a party
for, liability for its own action or inaction or on public policy grounds; (f)
where less than all of a contract may be unenforceable, limit the enforceability
of the balance of such contract to circumstances in which the unenforceable
portion is not an essential part of the agreed upon exchange under such
contract; and (g) govern and afford judicial discretion regarding the
entitlement to attorneys' fees and other costs.
The opinions on enforceability expressed herein are subject further to the
effect of applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws affecting the rights of creditors and
secured parties generally, and by general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), as well
as possible limitations upon the exercise of remedial or procedural provisions
contained in the Distribution Agreement, the Warrant Purchase Agreement, the
Agreement Concerning Stockholders Agreement or the Registration Agreement,
provided, that such limitations do not, in our opinion, subject to the other
qualifications contained in this opinion letter, make the remedies and
procedures that will be afforded to GEMS or GE inadequate for the practical
realization of the principal benefits purported to be provided to GEMS or GE by
the Distribution Agreement, the Warrant Purchase Agreement, the Agreement
Concerning Stockholders Agreement and the Registration Agreement (subject to the
effect of any judicial or other delays in the availability of such remedies).
Notwithstanding the foregoing, however, we express no opinion as to the
enforceability of Section 6 of the Registration Agreement.
Whenever our opinion with respect to the existence or absence of facts is
indicated to be based on our knowledge or awareness, we are referring to the
actual knowledge or awareness of Rich, May, Bilodeau & Flaherty, P.C. attorneys
who have given substantive attention to such matters during the course of such
representation, which knowledge or awareness has been obtained by such attorneys
in their capacity as such and is intended to signify that in the course of such
representation, no information has come to their attention which has given them
actual knowledge or awareness of the existence or absence of such facts, and
that we have undertaken
<PAGE>
General Electric Company
GE Medical Systems
June 17, 1999
Page 5
no independent investigation either within our firm, with our clients, or with
any other person to determine the existence or absence of such facts.
We are members of the bar of the Commonwealth of Massachusetts and do not
hold ourselves out as competent to opine as to matters of law governed by other
states. Accordingly, our opinions are limited to the laws of the Commonwealth of
Massachusetts, the General Corporation Law of the State of Delaware, and the
laws of the federal government of the United States. To the extent that any of
the laws of New York or other laws govern any of the matters as to which we
express an opinion herein, we have assumed, with your permission, that the law
of such jurisdiction is, in all material respects, the same as that of the law
of the Commonwealth of Massachusetts.
This opinion is rendered only to the addressees and is solely for their
benefit in connection with the transactions contemplated by the Warrant Purchase
Agreement, and may not be relied upon by any other person for any purpose
without the prior written consent of the undersigned.
Very truly yours,
RICH, MAY, BILODEAU & FLAHERTY, P.C.
<PAGE>
Exhibit F to Warrant Stock Purchase Agreement
HealthGate Data Corp.
GE Medical Systems Warrant
Calculations of Shares and Percentage
Common Stock 1,151,895 (Includes 6,345 exercised options)
Series A 304,868
Series B 399,400
Series C 138,642
Series D 335,097
Series E 720,757
Subtotal 3,050,659
Options 519,868 (464,268-Plan; 55,600 Non Plan)
Petra Warrant 114,950
Dain Rauscher Warrant 5,460
Option and Warrant
Subtotal 640,278
Available Options 179,387 (650,000-464,268-6,345)
Subtotal 3,870,324
Post-Closing
Percentage
GEMS Warrant 300,000 7.19%
Total Post-Closing
Shares Fully Diluted 4,170,324
<PAGE>
Schedule 5.2
to
Warrant Purchase Agreement
Capitalization of HealthGate
Attached hereto is HealthGate Data Corp.'s 3-page Capitalization Table (as
of May 14, 1999) which includes a listing of outstanding options, rights and
warrants to purchase shares of capital stock of the Company.
<PAGE>
HealthGate Data Corp.
Capitalization Table (as of May 14, 1999)
<TABLE>
<CAPTION>
SERIES A STOCK SERIES B STOCK
COMMON
STOCK
Series A Series B
Converted Converted
Stockholder Series A As shares Series B As Shares
Number Name Stock Converted(1) Rounded Stock Converted(2) Rounded
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 15 4,573.17 4,573
2 Abdollahi, Farah 0.00
Account Management Corporation
3 Profit Sharing Plan 50 15,243.90 15,243
4 Badash, Michelle 0.00
5 Baranoski, Amy 0.00
6 Blackwell Science, Ltd. 0.00
7 Blackwell Wissenschafts-Verlag GmbH 0.00
8 Blair, Tina M., M.D. 2,550 250 76,219.51 76,219
9 Blake, Gregory 0.00
10 Blazewicz, Robert J. 70 0.00
11 Boliver, Cynthia 0.00
12 Brassard, Kevin 0.00
13 Brown, Laurie 0.00
14 Brown, Stephen L. and Arlene C. 0.00
15 Buradagunta, Syam 0.00
16 Cabanas, Lazare 0.00
17 Capotoste, Christopher 0.00
18 Carchidi, Joseph 0.00
19 Ciancarelli, John 0.00
20 Clark, Jeffrey S. 6,650 0.00
21 Cohen, Lori-Anne 0.00
22 Crane, Dwight B. 0.00
23 Cunningham, Lynne 0.00
24 Dain Rausher Wessels
25 de Castro, Edson 8,550 0.00
26 Dearing, Jeff 0.00
27 deRoetth, Christopher 20 6,097.56 6,097
28 deRoetth, Louise 5 1,524.39 1,524
29 deRoetth, Peter 50 15,243.90 15,243
30 DeVivo, Robert 0.00
31 DeWolf, Nicholas 0.00
32 Dias, John J.
33 Egan, Christopher 0.00
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
34 Declaration of Trust dated March 29, 1995 0.00
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
35 Trust dated June 29, 1994 0.00
Egan, Richard, Trustee of the 1986
Richard J. Egan Trust under Declaration
36 of Trust dated May 27, 1986 0.00
37 Evans, Steuart 0.00
38 Fambrough, Ray 0.00
39 Foss, Donald A. 0.00
40 Franceschetti, Denise 0.00
41 Friend, David 54,200 150 45,731.71 45,731
42 G.E. Capital Equity Investments, Inc.
43 Glenn, Robert 0.00
44 Harman, Paul 0.00
45 Henigan, Hardy 0.00
46 Hopp, Michael 0.00
47 Horgen, Chris H. 0.00
48 Israel, Mark 5,000 0.00
49 Jobes, Elizabeth 0.00
50 Kegels, Scott 0.00
51 Ketter, Brad 0.00
52 Koton, Phyllis 16,000 0.00
54 Kudsi, Bashar 0.00
====================================================================================================================================
<CAPTION>
SERIES C STOCK SERIES D STOCK
Series C Series D
Converted Converted
Stockholder Series C As Shares Series D As Shares
Number Name Stock Converted(3) Rounded Stock Converted(4) Rounded
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth -
2 Abdollahi, Farah -
Account Management Corporation
3 Profit Sharing Plan -
4 Badash, Michelle -
5 Baranoski, Amy -
6 Blackwell Science, Ltd. - 1,333 267,957.652 267,957
7 Blackwell Wissenschafts-Verlag GmbH - 334 67,140.177 67,140
8 Blair, Tina M., M.D. -
9 Blake, Gregory -
10 Blazewicz, Robert J. -
11 Boliver, Cynthia -
12 Brassard, Kevin -
13 Brown, Laurie -
14 Brown, Stephen L. and Arlene C. 20 2,773.0021 2,773
15 Buradagunta, Syam -
16 Cabanas, Lazare -
17 Capotoste, Christopher -
18 Carchidi, Joseph -
19 Ciancarelli, John -
20 Clark, Jeffrey S. -
21 Cohen, Lori-Anne -
22 Crane, Dwight B. -
23 Cunningham, Lynne -
24 Dain Rausher Wessels -
25 de Castro, Edson -
26 Dearing, Jeff -
27 deRoetth, Christopher -
28 deRoetth, Louise -
29 deRoetth, Peter 35 4,852.7536 4,852
30 DeVivo, Robert -
31 DeWolf, Nicholas 50 6,932.5051 6,932
32 Dias, John J.
33 Egan, Christopher 25 3,466.2526 3,466
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
34 Declaration of Trust dated March 29, 1995 25 3,466.2526 3,466
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
35 Trust dated June 29, 1994 25 3,466.2526 3,466
Egan, Richard, Trustee of the 1986
Richard J. Egan Trust under Declaration
36 of Trust dated May 27, 1986 25 3,466.2526 3,466
37 Evans, Steuart 20 2,773.0021 2,773
38 Fambrough, Ray 20 2,773.0021 2,773
39 Foss, Donald A. 50 6,932.5051 6,932
40 Franceschetti, Denise -
41 Friend, David -
42 G.E. Capital Equity Investments, Inc.
43 Glenn, Robert 20 2,773.0021 2,773
44 Harman, Paul -
45 Henigan, Hardy -
46 Hopp, Michael -
47 Horgen, Chris H. -
48 Israel, Mark -
49 Jobes, Elizabeth -
50 Kegels, Scott -
51 Ketter, Brad -
52 Koton, Phyllis -
54 Kudsi, Bashar -
==========================================================================================================================
<CAPTION>
SERIES E STOCK
Total
Shares
Outstanding Percentage Common Common
Stockholder Series E As as of Total Stock Stock
Number Name Stock Converted(6) Converted Outstanding Warrants Options
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 4,573 0.15%
2 Abdollahi, Farah - 0.00% 1,000
Account Management Corporation
3 Profit Sharing Plan 15,243 0.50%
4 Badash, Michelle - 0.00% 2,000
5 Baranoski, Amy - 0.00% 500
6 Blackwell Science, Ltd. 174,729 174,729 442,686 14.51% 10,000
7 Blackwell Wissenschafts-Verlag GmbH 67,140 2.20%
8 Blair, Tina M., M.D. 78,769 2.58% 10,000
9 Blake, Gregory - 0.00% 1,500
10 Blazewicz, Robert J. 70 0.00% 4,080
11 Boliver, Cynthia - 0.00% 500
12 Brassard, Kevin - 0.00% 1,500
13 Brown, Laurie - 0.00% 500
14 Brown, Stephen L. and Arlene C. 2,773 0.09%
15 Buradagunta, Syam - 0.00% 1,000
16 Cabanas, Lazare - 0.00% 2,000
17 Capotoste, Christopher - 0.00% 1,500
18 Carchidi, Joseph - 0.00% 5,000
19 Ciancarelli, John - 0.00% 2,500
20 Clark, Jeffrey S. 6,650 0.22%
21 Cohen, Lori-Anne - 0.00% 500
22 Crane, Dwight B. - 0.00% 6,000
23 Cunningham, Lynne - 0.00% 1,000
24 Dain Rausher Wessels - 0.00% 5,460
25 de Castro, Edson 8,550 0.28% 26,000
26 Dearing, Jeff - 0.00% 1,000
27 deRoetth, Christopher 6,097 0.20%
28 deRoetth, Louise 1,524 0.05%
29 deRoetth, Peter 20,095 0.66%
30 DeVivo, Robert - 0.00% 1,000
31 DeWolf, Nicholas 6,932 0.23%
32 Dias, John J. - 0.00% 5,000
33 Egan, Christopher 3,466 0.11%
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
34 Declaration of Trust dated March 29, 1995 3,466 0.11%
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
35 Trust dated June 29, 1994 3,466 0.11%
Egan, Richard, Trustee of the 1986
Richard J. Egan Trust under Declaration
36 of Trust dated May 27, 1986 3,466 0.11%
37 Evans, Steuart 2,773 0.09%
38 Fambrough, Ray 2,773 0.09%
39 Foss, Donald A. 6,932 0.23%
40 Franceschetti, Denise - 0.00% 2,500
41 Friend, David 99,931 3.28% 10,000
42 G.E. Capital Equity Investments, Inc. 546,028 546,028 546,028 17.90%
43 Glenn, Robert 2,773 0.09%
44 Harman, Paul - 0.00% 20,000
45 Henigan, Hardy - 0.00% 2,000
46 Hopp, Michael - 0.00% 2,500
47 Horgen, Chris H. - 0.00% 10,000
48 Israel, Mark 5,000 0.16% 56,250
49 Jobes, Elizabeth - 0.00% 500
50 Kegels, Scott - 0.00% 500
51 Ketter, Brad - 0.00% 2,500
52 Koton, Phyllis 16,000 0.52%
54 Kudsi, Bashar - 0.00% 1,000
==========================================================================================================================
<CAPTION>
Stock Stock
Options Options
Outstanding Exercised
Stockholder under the under the F/D
Number Name 1994 Plan 1994 Plan Total(7) F/D %(7)
==================================================================================================
<S> <C> <C> <C> <C> <C>
1 Abbe, Elisabeth 4,573 0.12%
2 Abdollahi, Farah 1,000 1,000 0.03%
Account Management Corporation
3 Profit Sharing Plan 15,243 0.41%
4 Badash, Michelle 2,000 2,000 0.05%
5 Baranoski, Amy 500 500 0.01%
6 Blackwell Science, Ltd. 10,000 452,686 12.26%
7 Blackwell Wissenschafts-Verlag GmbH 67,140 1.82%
8 Blair, Tina M., M.D. 10,000 88,769 2.41%
9 Blake, Gregory 1,500 1,500 0.04%
10 Blazewicz, Robert J. 4,080 70 4,150 0.11%
11 Boliver, Cynthia 500 500 0.01%
12 Brassard, Kevin 1,500 1,500 0.04%
13 Brown, Laurie 500 500 0.01%
14 Brown, Stephen L. and Arlene C. 2,773 0.08%
15 Buradagunta, Syam 1,000 1,000 0.03%
16 Cabanas, Lazare 2,000 2,000 0.05%
17 Capotoste, Christopher 1,500 1,500 0.04%
18 Carchidi, Joseph 5,000 5,000 0.14%
19 Ciancarelli, John 2,500 2,500 0.07%
20 Clark, Jeffrey S. 6,650 0.18%
21 Cohen, Lori-Anne 500 500 0.01%
22 Crane, Dwight B. 6,000 0.16%
23 Cunningham, Lynne 1,000 1,000 0.03%
24 Dain Rausher Wessels 5,460 0.15%
25 de Castro, Edson 20,000 34,550 0.94%
26 Dearing, Jeff 1,000 1,000 0.03%
27 deRoetth, Christopher 6,097 0.17%
28 deRoetth, Louise 1,524 0.04%
29 deRoetth, Peter 20,095 0.54%
30 DeVivo, Robert 1,000 1,000 0.03%
31 DeWolf, Nicholas 6,932 0.19%
32 Dias, John J. 5,000 5,000 0.14%
33 Egan, Christopher 3,466 0.09%
Egan, Michael J., Trustee of the 1995
Michael J. Egan Revocable Trust under
34 Declaration of Trust dated March 29, 1995 3,466 0.09%
Egan, Richard E. and Maureen E., Trustees
of the Richard E. & Maureen Egan
Grandchildrens Trust under Declaration of
35 Trust dated June 29, 1994 3,466 0.09%
Egan, Richard, Trustee of the 1986
Richard J. Egan Trust under Declaration
36 of Trust dated May 27, 1986 3,466 0.09%
37 Evans, Steuart 2,773 0.08%
38 Fambrough, Ray 2,773 0.08%
39 Foss, Donald A. 6,932 0.19%
40 Franceschetti, Denise 2,500 2,500 0.07%
41 Friend, David 10,000 109,931 2.98%
42 G.E. Capital Equity Investments, Inc. 546,028 14.79%
43 Glenn, Robert 2,773 0.08%
44 Harman, Paul 20,000 20,000 0.54%
45 Henigan, Hardy 2,000 2,000 0.05%
46 Hopp, Michael 2,500 2,500 0.07%
47 Horgen, Chris H. 10,000 10,000 0.27%
48 Israel, Mark 56,250 5,000 61,250 1.66%
49 Jobes, Elizabeth 500 500 0.01%
50 Kegels, Scott 500 500 0.01%
51 Ketter, Brad 2,500 2,500 0.07%
52 Koton, Phyllis 16,000 0.43%
54 Kudsi, Bashar 1,000 1,000 0.03%
==================================================================================================
</TABLE>
<PAGE>
HealthGate Data Corp.
Capitalization Table (as of May 14, 1999)
<TABLE>
<CAPTION>
SERIES A STOCK SERIES B STOCK
COMMON
STOCK
Series A Series B
Converted Converted
Stockholder Series A As Shares Series B As Shares
Number Name Stock Converted(1) Rounded Stock Converted(2) Rounded
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55 LaFond, John P. 1,275 0.00
56 Lawson, Ricky D. 200,000 0.00
57 Madnik, Stuart E. 0.00
58 Maguire, Jean 0.00
59 Malone, Thomas W. 0.00
60 Manuel, Barry M. 225,000 0.00
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
61 Elizabeth A. Manuel and her children 25,000 0.00
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
62 Jill E. Manuel and her children 25,000 0.00
Manuel, Barry M., Trustee u/a 7/5/91 l/b/o
63 William Manuel and his children 25,000 0.00
64 Marino, Roger M. 60 18,292.68 18,292
65 Martin, Ron 0.00
66 McCullough, Josephine 0.00
67 McMahon, Gail 0.00
68 Miller, Mary B.
69 Miller, Ray W. 0.00
70 Miller, William 0.00
71 Morville, Victoria 0.00
72 Nelson, William G. 54,200 150 45,731.71 45,731
73 Nichols Research Corporation 3,400 0.00 1,000 399,400.8987 399,400
74 Norris, Nathan 0.00
75 Oberoi, Rohan 0.00
76 Pace, Maria 0.00
77 Paller, Marsha 100 30,487.80 30,487
78 Petra Capital LLC(5) 0.00
79 Pignature, Dean 0.00
80 Price, Duane 0.00
81 Reece, Plenny J.R. and Mary Joan 5,000 0.00
82 Reece, William S. 495,000 0.00
83 Reiman, Arnold S. 0.00
84 Ritter, Michael J. 0.00
85 Ritter, Shirley J. 0.00
86 Rosenfield, Donald 0.00
87 Rosenfield, Nancy 0.00
88 Rutstein, James 0.00
89 Sarsany, Kevin 0.00
90 Sartell, Sandra 0.00
91 Schuler, Christopher T. 5 1,524.39 1,524
92 Schuler, James K. 35 10,670.73 10,670
93 Schuler, Mark J. 5 1,524.39 1,524
94 Schuler, Patricia 5 1,524.39 1,524
95 Smith, Michael 0.00
96 Stinson, Robert 0.00
97 Tabatabaie, Hamid 0.00
98 Thurber, Robert 0.00
99 Turbow, Gerald D. 0.00
100 Vreeland, Amy 0.00
101 Westervelt, Jane 0.00
102 Wheeler, Langdon B. 50 15,243.90 15,243
103 Williams, Robert and Linda 50 15,243.90 15,243
104 Yamani, Fatameh 0.00
====================================================================================================================================
Totals 1,151,895 1,000 304,878.05 304,868 1,000 399,400.8987 399,400
<CAPTION>
SERIES C STOCK SERIES D STOCK
Series C Series D
Converted Converted
Stockholder Series C As Shares Series D As Shares
Number Name Stock Converted(3) Rounded Stock Converted(4) Rounded
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
55 LaFond, John P. -
56 Lawson, Ricky D. -
57 Madnik, Stuart E. -
58 Maguire, Jean -
59 Malone, Thomas W. -
60 Manuel, Barry M. -
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
61 Elizabeth A. Manuel and her children -
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
62 Jill E. Manuel and her children -
Manuel, Barry M., Trustee u/a 7/5/91 l/b/o
63 William Manuel and his children -
64 Marino, Roger M. 50 6,932.5051 6,932
65 Martin, Ron -
66 McCullough, Josephine -
67 McMahon, Gail -
68 Miller, Mary B.
69 Miller, Ray W. 15 2,079.7515 2,079
70 Miller, William 20 2,773.0021 2,773
71 Morville, Victoria -
72 Nelson, William G. -
73 Nichols Research Corporation 425 58,926.2936 58,926
74 Norris, Nathan -
75 Oberoi, Rohan -
76 Pace, Maria -
77 Paller, Marsha -
78 Petra Capital LLC(5) -
79 Pignature, Dean -
80 Price, Duane -
81 Reece, Plenny J.R. and Mary Joan -
82 Reece, William S. -
83 Reiman, Arnold S. -
84 Ritter, Michael J. 10 1,386.5010 1,386
85 Ritter, Shirley J. 10 1,386.5010 1,386
86 Rosenfield, Donald -
87 Rosenfield, Nancy -
88 Rutstein, James -
89 Sarsany, Kevin -
90 Sartell, Sandra -
91 Schuler, Christopher T. -
92 Schuler, James K. 35 4,852.7536 4,852
93 Schuler, Mark J. -
94 Schuler, Patricia -
95 Smith, Michael -
96 Stinson, Robert -
97 Tabatabaie, Hamid -
98 Thurber, Robert 20 2,773.0021 2,773
99 Turbow, Gerald D. 15 2,079.7515 2,079
100 Vreeland, Amy -
101 Westervelt, Jane 50 6,932.5051 6,932
102 Wheeler, Langdon B. -
103 Williams, Robert and Linda 35 4,852.7536 4,852
104 Yamani, Fatameh -
==========================================================================================================================
Totals 1,000 138,650.1026 138,642 1,667 335,097.8290 335,097
<CAPTION>
SERIES E STOCK
Total
Shares
Outstanding Percentage Common
Stockholder Series E As as of Total Stock
Number Name Stock Converted(6) Converted Outstanding Warrants
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
55 LaFond, John P. 1,275 0.04%
56 Lawson, Ricky D. 200,000 6.56%
57 Madnik, Stuart E. - 0.00%
58 Maguire, Jean - 0.00%
59 Malone, Thomas W. - 0.00%
60 Manuel, Barry M. 225,000 7.38%
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
61 Elizabeth A. Manuel and her children 25,000 0.82%
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
62 Jill E. Manuel and her children 25,000 0.82%
Manuel, Barry M., Trustee u/a 7/5/91 l/b/o
63 William Manuel and his children 25,000 0.82%
64 Marino, Roger M. 25,224 0.83%
65 Martin, Ron - 0.00%
66 McCullough, Josephine - 0.00%
67 McMahon, Gail - 0.00%
68 Miller, Mary B. - 0.00%
69 Miller, Ray W. 2,079 0.07%
70 Miller, William 2,773 0.09%
71 Morville, Victoria - 0.00%
72 Nelson, William G. 99,931 3.28%
73 Nichols Research Corporation 461,726 15.14%
74 Norris, Nathan - 0.00%
75 Oberoi, Rohan - 0.00%
76 Pace, Maria - 0.00%
77 Paller, Marsha 30,487 1.00%
78 Petra Capital LLC(5) - 0.00% 114,950
79 Pignature, Dean - 0.00%
80 Price, Duane - 0.00%
81 Reece, Plenny J.R. and Mary Joan 5,000 0.16%
82 Reece, William S. 495,000 16.23%
83 Reiman, Arnold S. - 0.00%
84 Ritter, Michael J. 1,386 0.05%
85 Ritter, Shirley J. 1,386 0.05%
86 Rosenfield, Donald - 0.00%
87 Rosenfield, Nancy - 0.00%
88 Rutstein, James - 0.00%
89 Sarsany, Kevin - 0.00%
90 Sartell, Sandra - 0.00%
91 Schuler, Christopher T. 1,524 0.05%
92 Schuler, James K. 15,522 0.51%
93 Schuler, Mark J. 1,524 0.05%
94 Schuler, Patricia 1,524 0.05%
95 Smith, Michael - 0.00%
96 Stinson, Robert - 0.00%
97 Tabatabaie, Hamid - 0.00%
98 Thurber, Robert 2,773 0.09%
99 Turbow, Gerald D. 2,079 0.07%
100 Vreeland, Amy - 0.00%
101 Westervelt, Jane 6,932 0.23%
102 Wheeler, Langdon B. 15,243 0.50%
103 Williams, Robert and Linda 20,095 0.66%
104 Yamani, Fatameh - 0.00%
==================================================================================================================
Totals 720,757 720,757 3,050,659 100.00% 120,410
<CAPTION>
Stock Stock
Options Options
Common Outstanding Exercised
Stockholder Stock under the under the F/D
Number Name Options 1994 Plan 1994 Plan Total(7) F/D %(7)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
55 LaFond, John P. 1,275 1,275 0.03%
56 Lawson, Ricky D. 30,000 30,000 230,000 6.23%
57 Madnik, Stuart E. 6,000 6,000 0.16%
58 Maguire, Jean 2,500 2,500 2,500 0.07%
59 Malone, Thomas W. 6,000 6,000 0.16%
60 Manuel, Barry M. 5,600 230,600 6.25%
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
61 Elizabeth A. Manuel and her children 25,000 0.68%
Manuel, Barry M., Trustee u/a 7/5/90 l/b/o
62 Jill E. Manuel and her children 25,000 0.68%
Manuel, Barry M., Trustee u/a 7/5/91 l/b/o
63 William Manuel and his children 25,000 0.68%
64 Marino, Roger M. 25,224 0.68%
65 Martin, Ron 3,000 3,000 3,000 0.08%
66 McCullough, Josephine 2,500 2,500 2,500 0.07%
67 McMahon, Gail 500 500 500 0.01%
68 Miller, Mary B. 51,188 51,188 51,188 1.39%
69 Miller, Ray W. 2,079 0.06%
70 Miller, William 2,773 0.08%
71 Morville, Victoria 500 500 500 0.01%
72 Nelson, William G. 99,931 2.71%
73 Nichols Research Corporation 461,726 12.51%
74 Norris, Nathan 2,000 2,000 2,000 0.05%
75 Oberoi, Rohan 1,500 1,500 1,500 0.04%
76 Pace, Maria 2,500 2,500 2,500 0.07%
77 Paller, Marsha 30,487 0.83%
78 Petra Capital LLC(5) 114,950 3.11%
79 Pignature, Dean 2,500 2,500 2,500 0.07%
80 Price, Duane 1,000 1,000 1,000 0.03%
81 Reece, Plenny J.R. and Mary Joan 5,000 0.14%
82 Reece, William S. 75,000 75,000 570,000 15.44%
83 Reiman, Arnold S. 14,000 14,000 0.38%
84 Ritter, Michael J. 1,386 0.04%
85 Ritter, Shirley J. 1,386 0.04%
86 Rosenfield, Donald 6,000 6,000 0.16%
87 Rosenfield, Nancy 6,000 6,000 0.16%
88 Rutstein, James 2,500 2,500 2,500 0.07%
89 Sarsany, Kevin 55,000 55,000 55,000 1.49%
90 Sartell, Sandra 3,750 3,750 3,750 0.10%
91 Schuler, Christopher T. 1,524 0.04%
92 Schuler, James K. 15,522 0.42%
93 Schuler, Mark J. 1,524 0.04%
94 Schuler, Patricia 1,524 0.04%
95 Smith, Michael 2,500 2,500 2,500 0.07%
96 Stinson, Robert 1,000 1,000 1,000 0.03%
97 Tabatabaie, Hamid 41,000 41,000 41,000 1.11%
98 Thurber, Robert 2,773 0.08%
99 Turbow, Gerald D. 2,079 0.06%
100 Vreeland, Amy 2,500 2,500 2,500 0.07%
101 Westervelt, Jane 6,932 0.19%
102 Wheeler, Langdon B. 15,243 0.41%
103 Williams, Robert and Linda 20,095 0.54%
104 Yamani, Fatameh 1,500 1,500 1,500 0.04%
===========================================================================================================
Totals 519,868 464,268 6,345 3,690,937 100.00%
=========================================
7. Additional Shares Eligible
for Issuance Under the 1994
Stock Option Plan 179,387
=========================================
</TABLE>
(1) Converted based on result of multiplying number of shares of Series A
Stock owned by $500 liquidation value per share, and dividing that result
by $1.64 conversion price.
(2) Converted based on result of multiplying number of shares of Series B
Stock owned by $1,600 liquidation value per share, and dividing that
result by $4.006 conversion price.
(3) Converted based on result of multiplying number of shares of Series C
Stock owned by $1,000 liquidation value per share, and dividing that
result by $7.2124 conversion price.
(4) Converted based on result of multiplying number of shares of Series D
Stock owned by $1,500 liquidation value per share, and dividing that
result by $7.462 conversion price.
(5) Excluding additional 139,400 if debt outstanding on 3/2000, 3/2001, or
3/2002.
(6) Converted based on result of multiplying number of shares of Series E
Stock owned by $11.4463 liquidation value per share (which increases as
dividends accrue at 7% per annum, compounded annually) and dividing that
result by $11.4463 conversion price.
(7) Fully Diluted Total does not include additional shares eligible for
Issuance under the 1994 Stock Option Plan includes Israel option exercise
for 5,000 shares and Abbe/Louisa deRoetth stock transfer.
<PAGE>
Schedule 5.3
to
Warrant Purchase Agreement
Subsidiaries
The following corporations are wholly-owned subsidiaries of HealthGate
Data Corp.:
- HealthGate Europe Ltd, a United Kingdom limited company; and
- HealthGate Acquisition Corp. (formerly known as AHN.com, Inc.), a
Delaware corporation (this is an inactive "shell" corporation).
<PAGE>
Schedule 5.8
to
Warrant Purchase Agreement
Absence of Certain Developments
- - The Company issued 720,757 shares of Series E Preferred Stock to GE Equity
Capital and Blackwell Science, Ltd. pursuant to the April 1999 Stock
Purchase Agreement. As consideration for its 174,729 shares, Blackwell
Science, Ltd. cancelled the principal balance of its $2,000,000
Convertible Bridge Promissory Note referred to in item a.i of Schedule 6.8
to the April 1999 Stock Purchase Agreement.
- - The Company issued to Dain Rauscher Wessels a Warrant for 5,460 shares of
the Company's common stock in connection with the sale of Series E
Preferred Stock .
- - The Company issued 5,000 shares of common stock on May 14, 1999 to Mark
Israel in connection with Mr. Israel's exercise of a previously granted
stock option.
- - In 1999, the Company has purchased from Dell Computer computer equipment
with a cost in excess of $260,000. The Company anticipates making
additional purchases of computer equipment from Dell Computer.
See also Schedule 5.11 for significant agreements involving the Company.
<PAGE>
Schedule 5.11
to
Warrant Purchase Agreement
Contracts and Commitments
- - HealthGate has granted registration rights to the holders of Series E
Preferred Stock pursuant to a Registration Agreement, dated as of April 7,
1999.
- - In connection with the private placement of Series E Preferred Stock, the
Company paid Dain Rauscher Wessels commissions and expenses of
approximately $300,000.
- - In connection with a proposed public offering, the Company is obtaining
services from the following firms and entities and the costs of such
services could exceed $100,000 from each service provider:
- PricewaterhouseCoopers
- Merrill Corporation
- Rich, May, Bilodeau & Flaherty, P.C.
- Underwriters.
- - The Company is planning to obtain Directors and Officers liability
insurance, the cost of which is expected to exceed $100,000.
- - The Company is receiving consulting services from Viant which services are
expected to cost more than $100,000.
See also Schedule 5.8 for recent matters involving the Company.
<PAGE>
Schedule 5.13
to
Warrant Purchase Agreement
Litigation
NONE
<PAGE>
Schedule 7.4
to
WARRANT PURCHASE AGREEMENT
"Risk Factors"
------------
The Risk Factors are substantially similar to the Risk Factors contained in
Amendment No. 2.
<PAGE>
Confidential Information
ACTIVEPRESS JOURNAL HOSTING AND DELIVERY AGREEMENT
THIS AGREEMENT is effective as of 1st January 2000, by and between HealthGate
Data Corp., a Delaware corporation ("HealthGate"), having an address at 25
Corporate Drive, Suite 310, Burlington, Massachusetts 01803 and Blackwell
Science Limited, having an address at Osney Mead, Oxford OX2 0EL, United Kingdom
and Munksgaard International Publishers Limited of 35 Norre Sogade, Copenhagen
DK 1016 Denmark (collectively the "Publisher").
WHEREAS, the Publisher is the owner and publisher of journals and the Publisher
desires to retain HealthGate to maintain, develop and host an on-line World Wide
Web ("Web") site for Content (as defined in SCHEDULE A attached hereto) relating
to its journals;
WHEREAS, HealthGate, among other business activities, hosts and distributes
health, biomedical and scientific Content for publishers through the Internet
using its activePress service;
NOW THEREFORE, in consideration of the foregoing, the mutual promises set forth
in this Agreement and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged by all parties, the parties hereby agree as
follows:
1. SITE.
HealthGate shall design, develop, and mount the Content on servers and
host the Content on a Web site with the address of
http://www.blackwell-synergy.com (the "Site"). In establishing the
Site, HealthGate shall (i) mount the Content on its Hardware (as
defined in Section 7), (ii) make the Content and portions thereof
accessible in an online interactive mode for searching, access, review,
displaying in a Web browser or on computer terminals, downloading, and
printing on users' Web-enabled computer equipment.
2. SITE SERVICE PLAN.
The Site Service Plan set forth in SCHEDULE B attached hereto contains
service and support specifications, including agreed communication
procedures for the notification and rectification of service errors.
3. CONTENT MAINTENANCE PLAN.
The Content Maintenance Plan set forth in SCHEDULE C attached hereto
contains details, procedures and specifications for posting Content to
the Site, including agreed processing objectives and communication
policies for handling error reports.
4. SOFTWARE MAINTENANCE AND DEVELOPMENT PLAN.
HealthGate has developed, licensed or otherwise acquired software to
operate the Site (collectively the "Software"). The Software
Maintenance Plan attached hereto contains details and descriptions of
the Software's functions and features and procedures for making minor
enhancements to the Software. HealthGate agrees to have Section 3 of
Schedule D implemented and approved by the Publisher by the effective
date of the agreement. The other sections of Schedule D shall be
implemented by HealthGate by the dates set out in the relevant sections
of Schedule D. Notwithstanding the foregoing, the Publisher may elect
to request the development of additional functions or features not
described in the Software Maintenance Plan. The fee for such
development described in Section 11 (e) is based upon the amount of
labor time (measured in hours) required by HealthGate to evaluate,
create and test each request.
5. PROJECT MANAGERS.
<PAGE>
Both parties agree to name two Project Managers, who shall be
responsible for arranging all meetings, visits, and consultations
between the parties, for the transmission and receipt of technical
information between the parties, and for coordinating any agreed
implementations.
HealthGate: Paul Harman, Roberta Pokigo
Publisher: Ian Bannerman, Alan Bacon
All contact between HealthGate and the Publisher regarding the Site,
Content, Software and implementation and maintenance shall be
coordinated between the Project Managers. Either party may substitute
other individuals as Project Manager from time to time upon written
notice to the other party.
6. CONTENT AND SOFTWARE BACK-UP.
The Publisher shall provide all Content, including text and graphics,
for the Site. The Publisher, at its expense, shall deliver the Content
in electronic format to HealthGate as specified in the Content
Maintenance Plan. As set forth in Section 20 below, the Publisher
retains all ownership and copyrights of the Content. HealthGate will
not make or permit any changes to the Content without the written
consent of the Publisher. HealthGate shall make and maintain back-up
copies of all Content and Software pursuant to a schedule set forth in
the Site Service Plan. HealthGate shall store said back-up materials in
a commercially reasonable safe and secure environment and not located
at the same location as the Hardware.
7. SERVER HARDWARE AND EQUIPMENT.
HealthGate shall maintain the Site on HealthGate's Web server and/or
other servers through the Term of this Agreement. HealthGate shall
acquire and maintain all necessary equipment and hardware (collectively
the "Hardware") for the Site. The Hardware shall be capable of storing
the Content. HealthGate shall replace and upgrade, as needed, the
Hardware so that users of the Site may access the Site approximately 24
hours per day and receive information from the Site at speeds and
response times substantially equivalent to HealthGate's own Web site,
located at www.healthgate.com, from the United Kingdom.
8. SALES OF INFORMATION.
The Site will include functions to facilitate the sale of information,
such as articles, issues and subscriptions, to users of the Site via a
secure server to non-subscribers of the Content. The Publisher shall
establish all fees ("Information Fees") and other terms and conditions
for such sales. HealthGate shall collect the Information Fees
established by the Publisher. Within 60 days of the end of each
calendar month, HealthGate shall forward to the Publisher the net
Information Fees actually collected, which shall be equal to the
Information Fees less a Processing Fee for each sale which shall be
retained by HealthGate. The Processing Fee is further described in
Section 11 (f).
9. ACTIVITY REPORTS.
During the time that HealthGate hosts the Site, HealthGate shall
provide to the Publisher activity reports detailing performance, access
and usage of the Site. The Activity Reporting Plan is described
SCHEDULE E attached hereto. HealthGate agrees to have Schedule E
implemented and approved by the Publisher by the effective date of the
agreement.
<PAGE>
10. ADVERTISING.
The Site shall be designed to include space for advertising. All
specifications concerning advertising space shall be determined by
mutual agreement of the Publisher and HealthGate. HealthGate shall use
the activePress advertising module to host, update, and administer
advertising banners on the site. The parties shall share the right to
sell advertising banners on the Site, but all advertising is subject to
prior review and approval by the Publisher, which approval shall not be
unreasonably withheld. Revenues from advertisers shall be allocated
between both parties as described in Section 11 (g) below.
11. SCHEDULE OF FEES.
(a) SITE MAINTENANCE. The Publisher shall remit to HealthGate
$145,000 annually for Site maintenance services outlined in
the Site Service Plan.
(b) CONTENT CONVERSION. The Publisher shall remit to HealthGate an
annual fee of $346,500 for converting for release via the Site
the Content which shall comprise up to 210 individual journal
titles. This fee shall apply whether or not the Publisher
supplies HealthGate with Content for 210 individual journal
titles. If the Publisher supplies HealthGate with Content from
more than 210 individual titles the Publisher shall remit to
HealthGate an annual fee of $1650 for each additional
individual journal title of the Content converted for release
via the Site. If content for a particular additional title is
not loaded in the first half of the year (i.e. it is not
loaded in the period January through June) and, instead, is
introduced for the first time and loaded in the second half of
the year (i.e. it is loaded in the period July through
December) the annual fee in the year it is first loaded shall
be $1000. Further, if the Publisher chooses to supply Content
from journal titles in excess of the initial 210 and these
additional titles shall be in the form of bibliographic
headers and PDF files only, then the annual conversion fee
shall be $1450.
Content Conversion fees will be reviewed by mutual agreement
each quarter to take account of potential savings as a result
of changes in working methods. For example, the content
conversion fees could be reduced if the publisher supplies
full-text content in XML.
(c) CONTENT STORAGE. The Publisher shall remit to HealthGate an
annual fee of $123,000 for 200 gigabytes of storage of the
Content on the Hardware. After one year the Publisher and
HealthGate will meet and review the requirement for additional
storage. The annual fee that the Publisher will pay HealthGate
for additional storage shall be no greater than $600 for each
additional gigabyte of storage of the Content on the Hardware
in excess of 200 gigabytes of storage.
(d) SOFTWARE MAINTENANCE. The Publisher shall remit to HealthGate
an annual license fee of $191,000 fee for maintaining the
Software as described in the Software Maintenance Plan. This
fee includes an allowance of 48 working days (equivalent to
384 hours) of development labor time per year for HealthGate
to make minor changes to the Software as requested by the
Publisher and agreed to by HealthGate, whose agreement shall
not be unreasonably withheld.
(e) SOFTWARE DEVELOPMENT. The Publisher shall remit to HealthGate
a fee of $1,200 for each 8 hours of labor time used for the
development of additional functions or features not described
in the Software Maintenance Plan.
(f) PROCESSING FEE. The Publisher shall remit a Processing Fee, as
described in Section 8 above, equal to 25% of each Information
Fee relating to the on-line sale of an individual journal
article processed by HealthGate. The minimum Processing Fee
shall be equal to $4.00 per sales transaction processed by
HealthGate. Information Fees relating to the sale of a Journal
subscription are not subject to a processing fee.
<PAGE>
(g) ADVERTISING. Each party shall receive 30% of the gross
advertising revenue for advertising sales on the Site (as
described in Section 10) originated by the other party.
Advertising can be sold either on the basis of a per thousand
impressions rate or on the basis of a time-limited period,
subject to minimum fees of $10 per thousand impressions and
$100 per page per month.
(h) RE-SUPPLY AND RE-WORK OF CONTENT. The Publisher may re-supply
SGML Content and request HealthGate to convert it again for
release via the Site. The Publisher will use its best efforts
to re-supply less than 25 issues per month. The Publisher
shall remit to HealthGate a fee of $100 for each re-supplied
issue of a journal title per month in excess of 25 issues per
month for which the Publisher requests HealthGate to convert
again for release via the Site, subject to a maximum of $5,000
per financial quarter. The Publisher can re-supply for
conversion a particular issue to HealthGate up to a maximum of
two times. If an issue is re-supplied more than two times, the
Publisher shall remit to HealthGate a fee of $100 for each
additional re-supply of the issue. The Project Managers of
both parties can meet and agree to waive or adjust the
re-supply fee in exceptional circumstances, such as one where
the Publisher may request a systematic change to Content.
(i) ACTIVITY REPORTS. All payments and fees described in Section
11 (f) shall be based upon the relevant activity reports
described in the Activity Reporting Plan, as described in
Schedule E.
(j) ESCROW ACCOUNT. The Publisher shall pay all fees associated
with the escrow account described in Section 24 (b).
(k) PAYMENT. All payments in respect of the fee schedule shall be
in made within 30 days of receipt of an invoice. All late
payments shall bear interest at a rate equal to 1% per month
until paid in full.
12. PUBLISHER PAYMENT SCHEDULE.
Subject to HealthGate performing its obligations within the terms and conditions
of this Agreement, HealthGate shall invoice the Publisher for payment according
to the following annual schedule:
(a) (i) On 1 January of each year of the Agreement:
SOFTWARE MAINTENANCE - 50% of the annual software
maintenance fee.
CONTENT CONVERSION - 25% of the annual content conversion
fee of $346,500, plus 25% of the applicable fees for any
journal added to the Site beyond the 210 titles described in
Section 11 (b).
SITE MAINTENANCE - 25% of the annual site maintenance fee.
CONTENT STORAGE - 25% of the annual content storage fee.
(ii) On 1 April of each year of the Agreement:
SOFTWARE MAINTENANCE - 25% of the annual software
maintenance fee.
CONTENT CONVERSION - 25% of the annual content conversion fee
of $346,500, plus 25% of the applicable fees for any journal
added to the Site beyond the 210 titles described in Section
11 (b).
SITE MAINTENANCE - 25% of the annual site maintenance fee.
CONTENT STORAGE - 25% of the annual content storage fee.
<PAGE>
(iii) On July 1 of each year of the Agreement:
SOFTWARE MAINTENANCE - 25% of the annual software maintenance
fee.
SITE MAINTENANCE - 25% of the annual site maintenance fee.
CONTENT CONVERSION - 25% of the annual content conversion fee
of $346,500, plus 25% of the applicable fees for any journal
added to the Site beyond the 210 titles described in Section
11 (b).
CONTENT STORAGE - 25% of the annual content storage fee.
(iv) On 1 October of each year of the Agreement
CONTENT CONVERSION - 25% of the annual content conversion fee
of $346,500, plus 25% of the applicable fees for any journal
added to the Site beyond the 210 titles described in Section
11 (b).
SITE MAINTENANCE - 25% of the annual site maintenance fee.
CONTENT STORAGE - 25% of the annual content storage fee.
(b) SOFTWARE DEVELOPMENT - Software development fees will be
invoiced on completion of the implementation of the functions
or features to which they relate, subject to the written
approval of the publisher that they perform according to the
Publisher's original specification of requirements. Extension
of the development time as a result of modifications by the
Publisher to the original specification will not be grounds
for delaying payment.
(c) OTHER FEES - All other fees shall be invoiced on a monthly
basis.
13. MILESTONES AND DELIVERABLES.
Any failure by HealthGate in meeting the throughput processing
objective time of 3 working days, as described in Schedule C, will
constitute a breach of this agreement and be subject to the procedure
for termination as defined in Section 17 (b). Further, if HealthGate
fails to process the Content of any journal issue within the processing
objective time of 3 working days, as described in Schedule C,
HealthGate, recognizing the loss caused to the Publisher, will on
demand pay to the Publisher an amount of money equivalent to the sum of
$2,000 per issue, subject to a maximum of $50,000 per financial
quarter, for all issues processed in each financial quarter.
Such sums of money will be paid by HealthGate to the Publisher not as a
penalty, but as and for the ascertained and liquidated damages owing
and payable by HealthGate to the Publisher by reason of such failure to
meet the processing objectives.
14. DISTRIBUTION RIGHTS.
The Publisher grants to HealthGate the right to sell individual
articles and subscriptions to the Content through HealthGate's own Web
sites, subject to mutually agreeable terms negotiated between the
parties for this activity.
15. INITIAL TERM.
The Initial Term of this Agreement shall commence on the date first
noted above and, unless terminated earlier as set forth herein, shall
continue for a period of two (2) years after such date (the "Initial
Term").
16. RENEWAL.
After the Initial Term, this Agreement shall renew for additional
consecutive periods of one (1) year subject to termination in
accordance with Section 17. Both parties agree to negotiate, in
<PAGE>
good faith, any changes in payment terms for the subsequent term
beginning 120 days before the end of the Initial Term and for each
subsequent annual term.
17. TERMINATION.
(a) END OF TERM. Either party may terminate this Agreement upon
the last date of the Initial Term or any subsequent renewal
term by giving written notice of termination to the other
party no later than ninety (90) days prior to the end of the
Initial Term or of any subsequent one year term.
(b) BREACH. Either party may terminate this Agreement by giving
written notice of termination to the other party if that party
is in breach of any term, condition or provision of this
Agreement and fails to remedy such breach within thirty (30)
days of receipt of such notice.
(c) CHANGE OF CONTROL OF HEALTHGATE. The Publisher may terminate
this Agreement by giving written notice of termination to
HealthGate if there is a change in control of HealthGate. For
the purpose of this section, a person shall have "Control" of
HealthGate if he holds, directly or indirectly, shares which
together with shares held by any persons acting in concert
with him carry 50% or more of the voting rights of HealthGate
and is a direct competitor of the Publisher. For the purpose
of this section, a "direct competitor" shall be defined as a
company that derives more than 50% of its sales revenues from
the activity of publishing scientific, technical and medical
journals.
(d) BANKRUPTCY. Either party may terminate this agreement if the
other party shall commit any act of bankruptcy, shall have a
receiving order made against it, shall make or negotiate for
any composition or arrangement with or assignment for the
benefit of its creditors or if the other party, being a body
corporate, shall present a petition or have a petition
presented by a creditor for its winding up or shall enter into
any liquidation (other than for the purposes of reconstruction
or amalgamation), shall call any meeting of its creditors,
shall have a receiver of all or any of its undertakings or
assets appointed, shall be deemed by virtue of the relevant
statutory provisions under the applicable law to be unable to
pay its debts, or shall cease to carry on business.
Upon the termination of this Agreement, HealthGate or its personal
representative as the case may be, shall immediately deliver up to the
Publisher all correspondence, reports, documents, specifications,
papers, information (on whatever media) and property belonging to the
Publisher which may be in his possession or under his control together
with all confidential information or copyright works belonging to the
Publisher. HealthGate shall erase the Content from its servers and
otherwise discontinue any use of the content within ten (10) working
days of the date of the termination.
18. TERMINATION SUPPORT
In the event of termination of this Agreement by the Publisher pursuant
to Section 17, the Publisher will have the following rights and
obligations:
HealthGate will comply with the Publisher's reasonable directions, and
will provide the Publisher any and all termination assistance
reasonably requested by the Publisher to allow the Services to continue
and to facilitate the orderly transfer of responsibility for the Site
to the Publisher or a successor provider of the Site designated by the
Publisher. The Publisher agrees to pay HealthGate fees for services
associated with the transition. The rate and amount of such payment
shall be determined by both parties agreeing to meet and use their best
endeavors to develop a Post Termination Support plan.
<PAGE>
The Termination assistance to be provided to the Publisher by
HealthGate may include the following:
(a) HealthGate will liaise with the Publisher, making available
for such purpose such HealthGate liaison staff as the
Publisher may reasonably require, and acting in all good
faith, to ensure a mutually satisfactory license of the
Software to the Publisher or, at the Publisher's option, to a
replacement contractor. The period of liaison will commence as
soon as notice has been given of termination of this
Agreement, and will continue for a maximum period of 3 months
after termination;
(b) HealthGate agrees that at the time of termination of this
Agreement, it will render all assistance, provide all
documentation and undertake all actions to the extent
necessary to effect an orderly assumption of the Site by the
Publisher or, at the Publisher's option, by a replacement
contractor;
(c) If the Publisher so require, HealthGate will use its best
endeavours to procure the transfer at the Publisher's expense,
to the Publisher or to a third party nominated by the
Publisher at the Publisher's sole discretion, of any Third
Party Software licenses HealthGate may have obtained in its
own name in order to run the Site and used for that purpose
exclusively;
(d) HealthGate will develop, together with the Publisher, a plan
for the orderly transition of services ("Transition Plan")
then being performed by HealthGate from HealthGate to the
Publisher or such successor provider.
(e) HealthGate will provide reasonable training for personnel of
the Publisher in the performance of the services then being
transitioned to the Publisher or such successor provider of
Services
19. POST TERMINATION SUPPORT IN THE EVENT OF BANKRUPTCY
In the event of termination of this Agreement by the Publisher as a
result of HealthGate committing an act of bankruptcy as set forth in
17(d) and for a period of six (6) months thereafter, HealthGate will
provide the Termination Support set forth in Section 18 herein. In
addition, HealthGate will continue to perform, for a reasonable period
(as determined by the Publisher) of up to six (6) months following the
termination date, any or all of the services then being performed by
HealthGate.
In the event of HealthGate committing an act of bankruptcy as set
forth in 17(d), the Publisher agrees to pay HealthGate fees for
services associated with the transition. The rate and amount of such
payment shall be determined by both parties agreeing to meet and use
their best endeavors to develop a Post Termination Support Plan. This
plan would be subject to the relevant statutory provisions under the
applicable law.
20. INTELLECTUAL PROPERTY RIGHTS.
(a) HEALTHGATE PROPERTY. HealthGate or its licensors shall own and
retain all right, title and interest in (i) the Software and
(ii) any patents, copyrights, database rights or other
proprietary rights in the Software; and (iii) computer code
written by HealthGate for the format, appearance and
presentation of the Software and Site (collectively, the
"HealthGate Properties").
(b) PUBLISHER'S PROPERTY. The Publisher shall own and retain all
right, title and interest in the Content and any derivative
work based upon the Content; the Publisher's trade names,
trademarks and service marks; any other information of the
Publisher provided to HealthGate hereunder and the format,
appearance and presentation of the Site (collectively,
"Publisher's Property").
<PAGE>
(c) HEALTHGATE CONFIDENTIAL INFORMATION. The Publisher understands
and acknowledges that the HealthGate Properties are subject to
protection as patented or copyrighted works of authorship of
HealthGate or HealthGate's suppliers under United States law,
and represent valuable confidential or proprietary information
of HealthGate. Further, the Publisher understands and
acknowledges that any confidential information pertaining,
inter alia, to HealthGate's customers, finances, internal
operations and methods of compiling, manipulating, presenting
and disseminating Software or information, which is disclosed
to the Publisher (collectively, "HealthGate Confidential
Information"), represent valuable confidential information of
HealthGate entitled to protection as trade secrets. The
Publisher shall keep confidential, and shall protect from
unauthorized disclosure by its employees and agents, the
HealthGate Confidential Information and all copies or physical
embodiments thereof in any media in its possession, and shall
limit access to such HealthGate Confidential Information to
those of its personnel who require such access in connection
with the Publisher 's use thereof as permitted by this
Agreement. The Publisher shall secure and protect the
HealthGate Confidential Information and any and all copies and
other physical embodiments thereof in any media in its
possession in a manner consistent with the steps taken by the
Publisher to protect its own trade secrets. The Publisher
shall take appropriate action by instruction or agreement with
its employees who are permitted access to the HealthGate
Confidential Information or any copy or other physical
embodiment thereof in any media in its possession, to satisfy
its obligations hereunder. Promptly upon discovery that any
person has acquired possession, use or knowledge of any part
of the HealthGate Confidential Information other than as
authorized by this Agreement, the Publisher shall notify
HealthGate of such fact and the surrounding circumstances. The
obligations of this Section 20(c) shall survive any
termination of this Agreement. The obligations of this Section
20(c) shall not apply to any information which (a) is
generally known to the public, or becomes so known other than
by reason of a breach by the Publisher of its obligations
hereunder, (b) was known to the Publisher prior to its
disclosure by HealthGate, or (c) is learned by the Publisher
from a third party who is not in breach of an obligation of
confidentiality in making such disclosure.
(d) PUBLISHER'S CONFIDENTIAL INFORMATION. HealthGate understands
and acknowledges that any Publisher's Property contained in
the Site, are subject to protection as copyrighted works of
authorship of the Publisher, and represent valuable or
proprietary confidential information of the Publisher.
Further, HealthGate understands and acknowledges that the
Publisher information pertaining, INTER ALIA, to the
Publisher's subscribers, customers, finances, internal
operations, sales practices, procedures and methods of
compiling, manipulating, presenting and disseminating
information which is disclosed to HealthGate (collectively,
"Publisher's Confidential Information"), represent valuable
confidential information of the Publisher entitled to
protection as trade secrets. HealthGate shall keep
confidential, and shall protect from unauthorized disclosure
by its employees and agents, the Publisher's Confidential
Information and all copies or physical embodiments thereof in
its possession, and shall limit access to such Publisher's
Confidential Information to those of its personnel and
personnel of its consultants or agents who require such access
in connection with HealthGate's use thereof as permitted by
this Agreement. HealthGate shall secure and protect the
Publisher's Confidential Information and any and all copies
and other physical embodiments thereof in its possession in a
manner consistent with the maintenance of the Publisher 's
rights and interest therein. HealthGate shall take appropriate
action by instruction or agreement with its employees, agents
and consultants who are permitted access to the Publisher's
Confidential Information or any copy or other physical
embodiment thereof, to satisfy HealthGate's obligations
hereunder. Promptly upon discovery that any person has
acquired possession, use or knowledge of any part of the
Publisher's Confidential Information other than as authorized
by this Agreement, HealthGate shall notify the Publisher of
such fact and the surrounding circumstances. The
<PAGE>
obligations of this Section 20 (d) shall survive any
termination of this Agreement. The obligations of this Section
20 (d) shall not apply to any information which (a) is
generally known to the public, or becomes so known other than
by reason of a breach by HealthGate of its obligations
hereunder, (b) was known to HealthGate prior to its disclosure
by the Publisher, or (c) is learned by HealthGate from a third
party who is not in breach of an obligation of confidentiality
in making such disclosure.
(e) PUBLIC AUTHORITY EXCEPTIONS. The parties' respective
obligations under this Section 20 shall not apply where
disclosure is required, directed or ordered by statute,
regulation or a public authority, in legal or administrative
proceedings, including without limitation in connection with
the filing of statements to the Securities Exchange Commission
("SEC") regarding the sale of securities or any state
authority or otherwise. Notwithstanding the foregoing, and so
that the other party may timely present its objections to such
disclosure, each party shall provide the other party with
timely notice of a request, requirement or demand to disclose
such information or matter which is either made by a public
authority, directed to a public authority or required by the
rules and regulations of statute, regulation or a public
authority.
21. REPRESENTATIONS AND WARRANTIES.
(a) AUTHORITY. Each party hereby represents and warrants that it
has the full right, power and authority to enter into and
perform this Agreement, and this Agreement has been duly
authorized, executed and delivered and constitutes the valid
and binding obligation of such party enforceable in accordance
with its terms.
(b) HEALTHGATE. HealthGate hereby represents and warrants that:
(i) it has, and will have throughout the term of this
Agreement, all right, title and interest in and to the
Software, except for items that are in the public domain or
that are obtained under valid licenses, (ii) it has and will
have throughout the term of this Agreement the right to grant
the license granted herein, and (iii) the HealthGate Property
licensed hereunder does not and will not infringe any trade
name, trademark or copyright.
(c) THE PUBLISHER. The Publisher hereby represents and warrants
that: (i) it has, and will have throughout the term of this
Agreement, all right, title and interest in and to the Content
and Publisher Properties, except for items that are in the
public domain or that are obtained under valid licenses, (ii)
it has and will have the right to grant the license granted
herein, and (iii) the Publisher Content and Property do not
and will not infringe any trade name, trademark or copyright.
(d) MILLENNIUM COMPLIANCE. HealthGate warrants that (i) the
occurrence or use of dates on or after January 1, 2000
("Millennial Dates") will not adversely affect its performance
at any level with respect to date-dependent data, computation,
output or other functions; and (ii) the site will create,
store, receive, process and output information related to or
including Millennial Dates without error or omissions.
22. INDEMNIFICATION.
(a) THE PUBLISHER'S INDEMNIFICATION. The Publisher shall
indemnify, defend and hold harmless HealthGate and its
officers, employees, agents, affiliates and subsidiaries
against and from all losses, expenses, damages and costs
including, without limitation, reasonable attorneys' fees,
that may at any time be incurred by any of them by reason of
(i) any allegation, claim or suit threatened, made or brought
against any of them related to any matter covered by the
representations and warranties or set forth in Sections 21 (a)
and 21 (c) above, and (ii) any allegation, claim or suit
threatened, made or brought against any of them that is based
upon or arises from any actual or alleged error, inaccuracy or
other defect in the Publisher's Content or Properties.
(b) HEALTHGATE'S INDEMNIFICATION. HealthGate shall indemnify,
defend and hold harmless each Publisher and its officers,
employees, agents, affiliates and subsidiaries against and
from all losses, expenses, damages and costs including,
without limitation, reasonable attorney's fees, that may at
any time be incurred by any of them by reason of any
allegation, claim or suit threatened, made or brought against
any of them related to any matter covered by the
representations and warranties set forth in Sections 21 (a)
and 21 (b) above.
<PAGE>
(c) NOTICE; DEFENSE OF CLAIMS. Each party shall give prompt
written notice to the other party of any claim for
indemnification hereunder, specifying to the extent known the
amount and nature of the claim, and any matter which in the
opinion of such party is likely to give rise to an
indemnification claim. The indemnifying party shall have the
right to control the defense through counsel of its choosing.
The indemnified party shall have the right to the extent of
its interests to participate on its own behalf and at its own
expense in such matter or its settlement through counsel of
its choosing.
23. EXCLUSION OF IMPLIED WARRANTIES AND LIMITATION OF LIABILITY.
EXCEPT AS SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY OR
REPRESENTATION TO THE OTHER, EITHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER PARTY'S LIABILITY
UNDER THIS AGREEMENT EXCEED THE AMOUNT OF PAYMENTS MADE BY THE
PUBLISHER TO HEALTHGATE PURSUANT TO THIS AGREEMENT.
24. MISCELLANEOUS.
(a) LICENSE OF SOFTWARE. Notwithstanding any other term or
provision of this Agreement or the Content Maintenance Plan,
HealthGate retains all right, title and interest to the
Software (as defined in Section 4 hereof), computer code
written by HealthGate for the design, format, appearance and
presentation of the Site, the Software, the Software
Maintenance Plan and other HealthGate Properties (as defined
in Section 20 (a) hereof). The Agreement grants to the
Publisher a non-exclusive, non-transferable license to utilize
the Software with respect to the Site during the Term of this
Agreement as provided in and subject to the terms of this
Agreement. Without limiting the generality of the foregoing,
HealthGate may utilize and/or license the Software and other
HealthGate Properties for itself or for others without any
compensation or liability to the Publisher, provided however
that upon expiration or termination of this Agreement, the
Publisher may, without any obligation to HealthGate utilize
the design, format, appearance and presentation of the Site in
any manner which the Publisher deems appropriate.
(b) SOFTWARE ESCROW. HealthGate agrees to place into escrow, at a
location to be mutually agreed upon by the parties, all
applicable source code used to provide the services outlined
in this Agreement. The Publisher shall pay all fees associated
with the escrow account. The Publisher may not access the
escrow account except in the case of HealthGate's bankruptcy.
(c) RELATIONSHIP OF PARTIES. The relationship of the parties
hereto shall be that of independent contractors. Nothing
herein shall be construed to create any partnership, joint
venture, or similar relationship or to subject the parties to
any implied duties or obligations respecting the conduct of
their affairs which are not expressly stated herein. Neither
party shall have any right or authority to assume or create
any obligation or responsibility, either express or implied,
on behalf of or in the name of the other party, or to bind the
other party in any matter or thing whatsoever.
(d) NOTICES. Notices to either party under or relating to this
Agreement shall be in writing to the address indicated on the
first page of this Agreement, Attention: President, and shall
be deemed effective when received, or on the second day
following the date after depositing the notice with a
reputable, overnight delivery service (such as FedEx or
U.P.S.).
(e) SEVERABILITY. The terms and conditions of this Agreement are
severable. If any term or condition of this Agreement is
deemed to be illegal or unenforceable under any rule of law,
all other terms shall remain in force. Further, the term or
condition which is held to be illegal or unenforceable shall
remain in effect as far as possible in accordance with the
<PAGE>
intention of the parties.
(f) ENTIRE AGREEMENT; MODIFICATIONS. The parties hereto agree that
this Agreement represents the complete and exclusive statement
of the Agreement between the parties, and supersedes all prior
proposals and understandings, oral or written, relating to the
subject matter of this Agreement. This Agreement may be
amended only in writing executed by the parties hereto.
(g) EFFECT OF WAIVER. Failure by either party to enforce any
provision of this Agreement shall not be deemed a waiver of
that provision or of any other provision of this Agreement.
(h) FORCE MAJEURE. Neither party shall be responsible for any
delay nor failure in performance resulting from acts beyond
the control of such party. Such acts shall include but not be
limited to an act of God; an act of war; a riot; an epidemic,
fire, flood or other disaster; an act of government; and a
strike or lockout; provided that, in order to be excused from
delay or failure to perform, such party must act diligently to
remedy the cause of such delay or failure.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of England and Wales.
(j) VENUE. Any and all disputes between the parties arising under
or in connection with this Agreement which cannot be resolved
amicably by the parties shall be resolved in the courts
located in London, England, except with respect to any action
brought by the Publisher against HealthGate, in which case
jurisdiction and venue shall be the Commonwealth of
Massachusetts, USA.
(k) ARBITRATION. Any question, dispute, disagreement, or
difference of any kind whatsoever which may arise between the
Publisher and HealthGate under, out of, or in connection with
this Agreement, or the carrying out of the work hereunder
(whether during the progress of the work or after its
completion, and whether before or after the termination
abandonment or breach of this Agreement) shall be tried to be
settled amicably upon mutual consultation with good faith, and
in failing so shall be submitted to arbitration in Boston,
Massachusetts to a panel of one arbitrator under the rules of
the American Arbitration Association.
(l) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall take effect as an original,
and all of which, together, shall evidence one and the same
Agreement.
(m) SECTION HEADINGS; EXHIBITS. The section, subsection and
Schedule headings used herein are for reference and
convenience only, and shall not enter into the interpretation
hereof. The Schedules referred to herein and attached hereto,
or to be attached hereto, are incorporated herein to the same
extent as if set forth in full herein.
(n) NEUTRAL CONSTRUCTION. The parties to this Agreement agree that
this Agreement was negotiated fairly between them at arm's
length and that the final terms of this Agreement are the
product of the parties' negotiations. Each party warrants and
represents that it has sought and received legal counsel of
its own choosing with regard to the contents of this Agreement
and the rights and obligations affected hereby. The parties
agree that this Agreement shall be deemed to have been jointly
and equally drafted by them, and that the provisions of this
Agreement therefore should not be construed against a party or
parties on the grounds that the party or parties drafted or
was more responsible for drafting the provision(s).
(o) EMPLOYEES. Neither HealthGate nor the Publisher shall hire or
seek to engage the services of, nor offer to pay commissions,
compensation or any other form of incentives to the employees
or consultants of the other for any purpose whatsoever without
the express written consent of the other party. This provision
shall expire twelve (12) months
<PAGE>
after the termination of this Agreement.
(P) NO ASSIGNMENT. Neither party may sell, transfer, assign, or
subcontract, any right or obligation set forth in this
Agreement without the express advance written consent of the
other party, such consent shall not be unreasonably withheld.
(Q) COOPERATION. Each party shall cooperate with the other party
as is reasonably necessary to further the purposes of this
Agreement and the other party's performance hereunder.
Executed as of the date set forth above, as a document under seal, by the duly
authorized representatives of the parties hereto.
HealthGate Data Corp.
By: /s/ William S. Reece
-----------------------------------
William S. Reece
Chief Executive Officer
Blackwell Science Limited and and Munksgaard International Publishers Limited
By: /s/ Robert M. Campbell
-----------------------------------
Name: Robert M. Campbell
---------------------------------
Title: Managing Director
--------------------------------
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
1. List of Titles to be converted and Hosted
The journal titles comprising the Content are listed below. The titles included
in the list are subject to amendment during the term of the Agreement in that
the Publisher may delete a title, add a new title or modify information
regarding a specific title or titles. The Publisher will notify HealthGate of
all such amendments.
- --------------------------------------------------------------------------------
Publisher
3-letter Publisher
code Journal title Office
- --------------------------------------------------------------------------------
ACA Acta Chirurgica Austriaca Berlin
- --------------------------------------------------------------------------------
AMA Acta Medica Austriaca Berlin
- --------------------------------------------------------------------------------
ANE Acta Neurologica Scandinavica Copenhagen
- --------------------------------------------------------------------------------
AOS Acta Ophthalmologica Scandinavica Copenhagen
- --------------------------------------------------------------------------------
APS Acta Physiologica Scandinavica Oxford
- --------------------------------------------------------------------------------
ACP Acta Psychiatrica Scandinavica Copenhagen
- --------------------------------------------------------------------------------
AZO Acta Zoologica Oxford
- --------------------------------------------------------------------------------
AJE African Journal of Ecology Oxford
- --------------------------------------------------------------------------------
ption of having a cookie stored on
their local machine to facilitate auto login.
- --------------------------------------------------------------------------------
APT Alimentary Pharmacology & Therapeutics Oxford
- --------------------------------------------------------------------------------
AIN Allergology International Melbourne
- --------------------------------------------------------------------------------
ALL Allergy Copenhagen
- --------------------------------------------------------------------------------
ANA Anaesthesia Oxford
- --------------------------------------------------------------------------------
AUI Anasthesiologie & Intensivmedizin Berlin
- --------------------------------------------------------------------------------
AHE Anatomia, Histologia, Embryologia Berlin
- --------------------------------------------------------------------------------
AND Andrologia Berlin
- --------------------------------------------------------------------------------
AGE Animal Genetics Oxford
- --------------------------------------------------------------------------------
AFS Anzeiger fur Schadlingskunde Berlin
- --------------------------------------------------------------------------------
AEM Aquaculture Economics & Management Oxford
- --------------------------------------------------------------------------------
ANU Aquaculture Nutrition Oxford
- --------------------------------------------------------------------------------
ARE Aquaculture Research Oxford
- --------------------------------------------------------------------------------
AOR Artificial Organs Boston
- --------------------------------------------------------------------------------
AJC Asia Pacific Journals of Clinical Nutrition Melbourne
- --------------------------------------------------------------------------------
AJD Australasian Journal of Dermatology Melbourne
- --------------------------------------------------------------------------------
APY Australasian Psychiatry Melbourne
- --------------------------------------------------------------------------------
ARA Australasian Radiology Melbourne
- --------------------------------------------------------------------------------
ANM Australian and New Zealand Journal of Mental Health
Nursing Melbourne
- --------------------------------------------------------------------------------
ANO Australian and New Zealand Journal of Ophthalmology Melbourne
- --------------------------------------------------------------------------------
ANP Australian and New Zealand Journal of Psychiatry Melbourne
- --------------------------------------------------------------------------------
ANS Australian and New Zealand Journal of Surgery Melbourne
- --------------------------------------------------------------------------------
AES Australian Journal of Earth Sciences Melbourne
- --------------------------------------------------------------------------------
AEC Australian Journal of Ecology Melbourne
- --------------------------------------------------------------------------------
AJE Australian Journal of Entomology Melbourne
- --------------------------------------------------------------------------------
AJR Australian Journal of Rural Health Melbourne
- --------------------------------------------------------------------------------
AOT Australian Occupational Therapy Journal Melbourne
- --------------------------------------------------------------------------------
BRE Basin Research Oxford
- --------------------------------------------------------------------------------
BMT Berliner und Munchener Tierarztliche Wochenschrift Berlin
- --------------------------------------------------------------------------------
BIR Birth Boston
- --------------------------------------------------------------------------------
BCP British Journal of Clinical Pharmacology Oxford
- --------------------------------------------------------------------------------
BJD British Journal of Dermatology Oxford
- --------------------------------------------------------------------------------
BJH British Journal of Haematology Oxford
- --------------------------------------------------------------------------------
BJS British Journal of Surgery Oxford
- --------------------------------------------------------------------------------
BJU British Journal of Urology Oxford
- --------------------------------------------------------------------------------
CDP Cancer Detection & Prevention Boston
- --------------------------------------------------------------------------------
CPR Cancer Practice Boston
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 1 of 6
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CPR Cell Proliferation Oxford
- --------------------------------------------------------------------------------
CMI Cellular Microbiology Oxford
- --------------------------------------------------------------------------------
CFS Child & Family Social Work Oxford
- --------------------------------------------------------------------------------
CCH Child: Care, Health & Development Oxford
- --------------------------------------------------------------------------------
CEA Clinical & Experimental Allergy Oxford
- --------------------------------------------------------------------------------
CED Clinical & Experimental Dermatology Oxford
- --------------------------------------------------------------------------------
CEI Clinical & Experimental Immunology Oxford
- --------------------------------------------------------------------------------
CLH Clinical & Laboratory Haematology Oxford
- --------------------------------------------------------------------------------
CEP Clinical and Experimental Pharmacology and Physiology Melbourne
- --------------------------------------------------------------------------------
CEN Clinical Endocrinology Oxford
- --------------------------------------------------------------------------------
CGE Clinical Genetics Copenhagen
- --------------------------------------------------------------------------------
COA Clinical Otolaryngology & Allied Sciences Oxford
- --------------------------------------------------------------------------------
CPH Clinical Physiology Oxford
- --------------------------------------------------------------------------------
CTR Clinical Transplantation Copenhagen
- --------------------------------------------------------------------------------
CDI Colorectal Disease Oxford
- --------------------------------------------------------------------------------
CBI Conservation Biology Boston
- --------------------------------------------------------------------------------
CYT Cytopathology Oxford
- --------------------------------------------------------------------------------
DSU Dermatologic Surgery Boston
- --------------------------------------------------------------------------------
DGD Development, Growth and Differentation Melbourne
- --------------------------------------------------------------------------------
DOM Diabetes, Obesity and Metabolism Oxford
- --------------------------------------------------------------------------------
DME Diabetic Medicine Oxford
- --------------------------------------------------------------------------------
DDI Diversity & Distributions Oxford
- --------------------------------------------------------------------------------
EEN Ecological Entomology Oxford
- --------------------------------------------------------------------------------
ERE Ecological Research Melbourne
- --------------------------------------------------------------------------------
ELE Ecology Letters Oxford
- --------------------------------------------------------------------------------
EHE Ecosystem Health Boston
- --------------------------------------------------------------------------------
ECA Engineering Construction & Architectural Management Oxford
- --------------------------------------------------------------------------------
EGE Environmental Geosciences Boston
- --------------------------------------------------------------------------------
EMI Environmental Microbiology Oxford
- --------------------------------------------------------------------------------
EPP EPPO/OEPP Bulletin Oxford
- --------------------------------------------------------------------------------
EOB Erwerbsobstbau Berlin
- --------------------------------------------------------------------------------
ETH Ethology Berlin
- --------------------------------------------------------------------------------
EJA European Journal of Anaesthesiology Oxford
- --------------------------------------------------------------------------------
EJB European Journal of Biochemistry Oxford
- --------------------------------------------------------------------------------
ECC European Journal of Cancer Care Oxford
- --------------------------------------------------------------------------------
ECI European Journal of Clin Investigation Oxford
- --------------------------------------------------------------------------------
EFP European Journal of Forest Pathology Berlin
- --------------------------------------------------------------------------------
EJI European Journal of Immunogenetics Oxford
- --------------------------------------------------------------------------------
EJN European Journal of Neuroscience Oxford
- --------------------------------------------------------------------------------
PMR European Journal of Physical Medicine & Rehabilitation Berlin
- --------------------------------------------------------------------------------
EJS European Journal of Soil Science Oxford
- --------------------------------------------------------------------------------
ERJ European Respiratory Journal Copenhagen
- --------------------------------------------------------------------------------
FFE Fatigue & Fracture of Engineering Materials &
Structures Oxford
- --------------------------------------------------------------------------------
FBK First Break Oxford
- --------------------------------------------------------------------------------
FME Fisheries Management & Ecology Oxford
- --------------------------------------------------------------------------------
FOG Fisheries Oceanography Oxford
- --------------------------------------------------------------------------------
FAS Foot and Ankle Surgery Oxford
- --------------------------------------------------------------------------------
FCE Forstwissenschaftliches Centralblatt Berlin
- --------------------------------------------------------------------------------
FWB Freshwater Biology Oxford
- --------------------------------------------------------------------------------
FEC Functional Ecology Oxford
- --------------------------------------------------------------------------------
GAF Genes and Function Oxford
- --------------------------------------------------------------------------------
GTC Genes to Cells Oxford
- --------------------------------------------------------------------------------
GTO Geology Today Oxford
- --------------------------------------------------------------------------------
GJI Geophysical Journal International Oxford
- --------------------------------------------------------------------------------
GPR Geophysical Prospecting Oxford
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 2 of 6
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GPF Gesunde Pflanzen Berlin
- --------------------------------------------------------------------------------
GCB Global Change Biology Oxford
- --------------------------------------------------------------------------------
GEL Global Ecology & Biogeography Letters Oxford
- --------------------------------------------------------------------------------
GFS Grass & Forage Science Oxford
- --------------------------------------------------------------------------------
GEN Gynaecological Endoscopy Oxford
- --------------------------------------------------------------------------------
HUG H&G Zeitschrift fur Hautkrankheiten Berlin
- --------------------------------------------------------------------------------
HAE Haemophilia Oxford
- --------------------------------------------------------------------------------
HSC Health & Social Care in the Community Oxford
- --------------------------------------------------------------------------------
HEX Health Expectations Oxford
- --------------------------------------------------------------------------------
HLR Health Libraries Review Oxford
- --------------------------------------------------------------------------------
HEL Helicobacter Boston
- --------------------------------------------------------------------------------
HER Heredity Oxford
- --------------------------------------------------------------------------------
HIS Histopathology Oxford
- --------------------------------------------------------------------------------
ID Imaging Decisions MRI Berlin
- --------------------------------------------------------------------------------
IMM Immunology Oxford
- --------------------------------------------------------------------------------
ICB Immunology and Cell Biology Melbourne
- --------------------------------------------------------------------------------
ISJ Information Systems Journal Oxford
- --------------------------------------------------------------------------------
IMB Insect Molecular Biology Oxford
- --------------------------------------------------------------------------------
IJO Int Jrn of Oral and Max Surgery Copenhagen
- --------------------------------------------------------------------------------
IEJ International Entodontic Journal Oxford
- --------------------------------------------------------------------------------
IJA International Journal of Andrology Oxford
- --------------------------------------------------------------------------------
IJD International Journal of Dermatology Oxford
- --------------------------------------------------------------------------------
IEP International Journal of Experimental Pathology Oxford
- --------------------------------------------------------------------------------
IFS International Journal of Food Science & Technology Oxford
- --------------------------------------------------------------------------------
IJG International Journal of Gynecological Cancer Boston
- --------------------------------------------------------------------------------
IJN International Journal of Nursing Practice Melbourne
- --------------------------------------------------------------------------------
IPD International Journal of Pediatric Dentistry Oxford
- --------------------------------------------------------------------------------
Journal fur Ornithologie Berlin
- --------------------------------------------------------------------------------
JAN Journal of Advanced Nursing Oxford
- --------------------------------------------------------------------------------
JAC Journal of Agronomy & Crop Science Berlin
- --------------------------------------------------------------------------------
JBG Journal of Animal Breeding & Genetics Berlin
- --------------------------------------------------------------------------------
JAE Journal of Animal Ecology Oxford
- --------------------------------------------------------------------------------
JPN Journal of Animal Physiology & Animal Nutrition Berlin
- --------------------------------------------------------------------------------
JPE Journal of Applied Ecology Oxford
- --------------------------------------------------------------------------------
JEN Journal of Applied Entomology Berlin
- --------------------------------------------------------------------------------
JAI Journal of Applied Ichthyology Berlin
- --------------------------------------------------------------------------------
JAM Journal of Applied Microbiology Oxford
- --------------------------------------------------------------------------------
JAP Journal of Autonomic Pharmacology Oxford
- --------------------------------------------------------------------------------
JBI Journal of Biogeography Oxford
- --------------------------------------------------------------------------------
JCN Journal of Clinical Nursing Oxford
- --------------------------------------------------------------------------------
JCP Journal of Clinical Pharmacy & Therapeutics Oxford
- --------------------------------------------------------------------------------
JCA Journal of Computer Assisted Learning Oxford
- --------------------------------------------------------------------------------
JCS Journal of Consumer Studies & Home Economics Oxford
- --------------------------------------------------------------------------------
JEC Journal of Ecology Oxford
- --------------------------------------------------------------------------------
JEP Journal of Evaluation in Clinical Practice Oxford
- --------------------------------------------------------------------------------
JEB Journal of Evolutionary Biology Oxford
- --------------------------------------------------------------------------------
JFD Journal of Fish Diseases Oxford
- --------------------------------------------------------------------------------
JGH Journal of Gastroenterology and Hepatology Melbourne
- --------------------------------------------------------------------------------
JGI Journal of General Internal Medicine Boston
- --------------------------------------------------------------------------------
JHE Journal of Hepatology Copenhagen
- --------------------------------------------------------------------------------
JHN Journal of Human Nutrition & Dietetics Oxford
- --------------------------------------------------------------------------------
JIR Journal of Intellectual Disability Research Oxford
- --------------------------------------------------------------------------------
JIC Journal of Intensive Care Medicine Boston
- --------------------------------------------------------------------------------
JIM Journal of Internal Medicine Oxford
- --------------------------------------------------------------------------------
JID Journal of Investigative Dermatology Boston
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 3 of 6
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JLG Journal of Lower Genital Tract Disease Boston
- --------------------------------------------------------------------------------
JMG Journal of Metamorphic Geology Boston
- --------------------------------------------------------------------------------
JMI Journal of Microscopy Oxford
- --------------------------------------------------------------------------------
JNE Journal of Neuroendocrinology Oxford
- --------------------------------------------------------------------------------
JNM Journal of Nursing Management Oxford
- --------------------------------------------------------------------------------
JOR Journal of Oral Rehabilitation Oxford
- --------------------------------------------------------------------------------
JPC Journal of Paediatrics and Child Health Melbourne
- --------------------------------------------------------------------------------
JPR Journal of Peptide Research Copenhagen
- --------------------------------------------------------------------------------
JPH Journal of Phytopathology Berlin
- --------------------------------------------------------------------------------
JPM Journal of Psychiatric & Mental Health Nursing Oxford
- --------------------------------------------------------------------------------
JQC Journal of Quality in Clinical Practice Melbourne
- --------------------------------------------------------------------------------
JSR Journal of Sleep Research Oxford
- --------------------------------------------------------------------------------
JVA Journal of Veterinary Medicine Series A Berlin
- --------------------------------------------------------------------------------
JVB Journal of Veterinary Medicine Series B Berlin
- --------------------------------------------------------------------------------
JVP Journal of Veterinary Pharmacology & Therapeutics Oxford
- --------------------------------------------------------------------------------
JVH Journal of Viral Hepatitis Oxford
- --------------------------------------------------------------------------------
JZS Journal of Zoological Systematics & Evolutionary
Research Berlin
- --------------------------------------------------------------------------------
KID Kidney International Boston
- --------------------------------------------------------------------------------
JLM Laboratoriums Medizin Berlin
- --------------------------------------------------------------------------------
LRE Lakes and Reservoirs: Research and Management Melbourne
- --------------------------------------------------------------------------------
LAM Letters in Applied Microbiology Oxford
- --------------------------------------------------------------------------------
MAM Mammal Review Oxford
- --------------------------------------------------------------------------------
MAE Marine Ecology Berlin
- --------------------------------------------------------------------------------
MVE Medical & Veterinary Entomology Oxford
- --------------------------------------------------------------------------------
MED Medical Education Oxford
- --------------------------------------------------------------------------------
MMY Medical Mycology Oxford
- --------------------------------------------------------------------------------
MEC Molecular Ecology Oxford
- --------------------------------------------------------------------------------
MMI Molecular Microbiology Oxford
- --------------------------------------------------------------------------------
MNR Monthly Notices of the Royal Astronomical Society Oxford
- --------------------------------------------------------------------------------
MYC Mycoses Berlin
- --------------------------------------------------------------------------------
NUR Natur und Recht Berlin
- --------------------------------------------------------------------------------
NEP Nephrology Melbourne
- --------------------------------------------------------------------------------
NMO Neurogastroenterology & Motility Oxford
- --------------------------------------------------------------------------------
NER Neuromodulation Boston
- --------------------------------------------------------------------------------
NEU Neuropathology Melbourne
- --------------------------------------------------------------------------------
NAN Neuropathology & Applied Neurobiology Oxford
- --------------------------------------------------------------------------------
NIN Nursing Inquiry Melbourne
- --------------------------------------------------------------------------------
OMI Oral Microbiology and Immunology Copenhagen
- --------------------------------------------------------------------------------
ORY Oryx Oxford
- --------------------------------------------------------------------------------
PPE Paediatric & Perinatal Epidemiology Oxford
- --------------------------------------------------------------------------------
PAN Paediatric Anaesthesia Oxford
- --------------------------------------------------------------------------------
PIM Parasite Immunology Oxford
- --------------------------------------------------------------------------------
PIN Pathology International Melbourne
- --------------------------------------------------------------------------------
PAI Pediatric Allergy and Immunology Copenhagen
- --------------------------------------------------------------------------------
PDE Pediatric Dermatology Boston
- --------------------------------------------------------------------------------
PTR Pediatric Transplantation Copenhagen
- --------------------------------------------------------------------------------
PED Pediatrics International Melbourne
- --------------------------------------------------------------------------------
PRE Phycological Research Melbourne
- --------------------------------------------------------------------------------
PPL Physiologia Plantarum Copenhagen
- --------------------------------------------------------------------------------
PEN Physiological Entomology Oxford
- --------------------------------------------------------------------------------
PBR Plant Breeding Berlin
- --------------------------------------------------------------------------------
PCE Plant Cell & Environment Oxford
- --------------------------------------------------------------------------------
PPA Plant Pathology Oxford
- --------------------------------------------------------------------------------
PSE Proceeding of The Society for Experimental Biology &
Medicine Boston
- --------------------------------------------------------------------------------
PCN Psychiatry and Clinical Neurosciences Melbourne
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 4 of 6
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PHN Public Health Nursing Boston
- --------------------------------------------------------------------------------
PAC Pure & Applied Chemistry Oxford
- --------------------------------------------------------------------------------
RDA Reproduction in Domestic Animals Berlin
- --------------------------------------------------------------------------------
RES Respirology Melbourne
- --------------------------------------------------------------------------------
REC Restoration Ecology Boston
- --------------------------------------------------------------------------------
BDI Bipolar Disorders Copenhagen
- --------------------------------------------------------------------------------
SJI Scandinavian Journal of Immunology Oxford
- --------------------------------------------------------------------------------
SED Sedimentology Oxford
- --------------------------------------------------------------------------------
SDI Seminars in Dialysis Boston
- --------------------------------------------------------------------------------
SDY Sexual Dysfunction Oxford
- --------------------------------------------------------------------------------
SOM Somnologie Zeitschrift fur Schlafforschung und
Schlafmedizin Berlin
- --------------------------------------------------------------------------------
SPE Sports Engineering Oxford
- --------------------------------------------------------------------------------
SEN Systematic Entomology Oxford
- --------------------------------------------------------------------------------
TER Terra Nova Oxford
- --------------------------------------------------------------------------------
TBJ The Breast Journal Boston
- --------------------------------------------------------------------------------
IAR The Island Arc Melbourne
- --------------------------------------------------------------------------------
TPJ The Plant Journal Oxford
- --------------------------------------------------------------------------------
TPR The Prostate Journal Boston
- --------------------------------------------------------------------------------
TAP Therapeutic Apheresis Boston
- --------------------------------------------------------------------------------
TAN Tissue Antigens Copenhagen
- --------------------------------------------------------------------------------
TRA Traffic Copenhagen
- --------------------------------------------------------------------------------
TME Transfusion Medicine Oxford
- --------------------------------------------------------------------------------
TID Transplant Infection Diseases Copenhagen
- --------------------------------------------------------------------------------
TMI Tropical Medicine & International Health Oxford
- --------------------------------------------------------------------------------
VHE Value in Health Boston
- --------------------------------------------------------------------------------
VOP Veterinary Ophthalmology Oxford
- --------------------------------------------------------------------------------
WUB Wasser und Boden Berlin
- --------------------------------------------------------------------------------
WMR Waste Management and Research Copenhagen
- --------------------------------------------------------------------------------
WRE Weed Research Oxford
- --------------------------------------------------------------------------------
WMW Wiener Medizinische Wochenschrift Berlin
- --------------------------------------------------------------------------------
WRR Wound Repair and Regeneration Boston
- --------------------------------------------------------------------------------
XTR Xenotranplantation Copenhagen
- --------------------------------------------------------------------------------
ZFJ Zeitschrift fur Jagdwissenschaft Berlin
- --------------------------------------------------------------------------------
ZKL Zeitschrift fur Kulturtechnik und Landentwicklung Berlin
- --------------------------------------------------------------------------------
ZSC Zoologica Scripta Oxford
- --------------------------------------------------------------------------------
Molecular Plant Pathology Oxford
- --------------------------------------------------------------------------------
NIN Nursing Inquiry Oxford
- --------------------------------------------------------------------------------
INR International Nursing Review Oxford
- --------------------------------------------------------------------------------
NBU Nutrition Bulletin Oxford
- --------------------------------------------------------------------------------
JAR Journal of Applied Research in Intellectual
Disabilities Oxford
- --------------------------------------------------------------------------------
BLD British Journal of Learning Disability Oxford
- --------------------------------------------------------------------------------
Plant Biotechnology Oxford
- --------------------------------------------------------------------------------
Geofluids Oxford
- --------------------------------------------------------------------------------
Astronomy & Geophysics Oxford
- --------------------------------------------------------------------------------
Fish & Fisheries Oxford
- --------------------------------------------------------------------------------
Nursing Philosophy Oxford
- --------------------------------------------------------------------------------
Food Ethics Review Oxford
- --------------------------------------------------------------------------------
International Journal of Cosmetic Science Oxford
- --------------------------------------------------------------------------------
Veterinary Anaesthesia and Analgesia Oxford
- --------------------------------------------------------------------------------
Obesity Reviews Oxford
- --------------------------------------------------------------------------------
Genescreen Oxford
- --------------------------------------------------------------------------------
HIV Medicine Oxford
- --------------------------------------------------------------------------------
Clinical Microbiology and Infection Oxford
- --------------------------------------------------------------------------------
Headache Boston
- --------------------------------------------------------------------------------
Pain Boston
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 5 of 6
<PAGE>
Schedule A - Content
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Digestive Endoscopy Melbourne
- --------------------------------------------------------------------------------
Asian Oceanian Inst of Radiology Melbourne
- --------------------------------------------------------------------------------
Fisheries Science Melbourne
- --------------------------------------------------------------------------------
Mycoscience Melbourne
- --------------------------------------------------------------------------------
Japanese Journal of Limnology Melbourne
- --------------------------------------------------------------------------------
Hong Kong Inst of Paediatrics Melbourne
- --------------------------------------------------------------------------------
Hong Kong Inst of Emergency Medicine Melbourne
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 6 of 6
<PAGE>
Schedule B - Site Service Plan
- --------------------------------------------------------------------------------
1. Hardware and communication resources
The Hardware to host the Site shall be located at HealthGate's computer
facilities currently housed at Exodus Communications, Inc. Internet Data Center,
located in Waltham, Massachusetts, USA.
1.1 Site access
HealthGate shall maintain adequate Internet access via telecommunications to the
Site so that users of the Site may access the Site approximately 24 hours per
day, and receive information from the Site at speeds and response times
substantially equivalent or superior to HealthGate's own Web sites.
1.2 Software maintenance downtime
In order to maintain and update the Software, HealthGate schedules regular
downtime on Saturdays from 10.00 PM to 12.00 Midnight, US Eastern Time. Although
this downtime is scheduled every week the Site would probably only be down once
a month because the maintenance needs are not frequent. Where possible, during
the actual downtime the Site will display a page so that users accessing the
Site will be aware of the situation.
In order that HealthGate may fulfil it contractual obligations with regard to
maintenance of the Software, it may be necessary to schedule time when the Site
may be unavailable. In these cases, the Project Managers of both parties shall
mutually agree upon a time, at least 3 working days in advance, of when the site
will be unavailable.
1.3 Site monitoring
HealthGate's principal business activities rely upon uninterrupted Internet
access and, consequently, will use its best endeavours to ensure that the
Publisher's Site receives the best possible service. HealthGate remotely
monitors the Home Page of the Site every 60 seconds. If, for any reason, the
server does not respond, the redundant server switches in automatically to serve
the Site and a paging message is sent to HealthGate's duty staff member. Within
15 minutes of receiving the paged message, this staff member will check that the
redundant machine has correctly switched in within 15 minutes. If this process
fails, the duty staff member will restart the server remotely. If this is also
unsuccessful, the duty staff member will post a notice to users on the Site Home
Page and will contact other team members to ensure the Site is made available to
users as soon as possible.
In addition, a browser page on the server monitors the links to the database
tables every 180 seconds. If, for any reason, the links are defective a paging
message is sent to HealthGate's duty staff member and a similar procedure is
followed.
1.4 Site server hardware
The Site server is configured with two machines - one as live server, one as
redundant back up. If one machine ceases to operate, the redundant machine
automatically switches to serve the Site and a paging message is sent to
HealthGate's duty staff member. The storage device holding the Content has a
capacity of 200 gigabytes, but may be expanded to at least 400 gigabytes. Stored
data is backed up once every 24 hours and copies of back-up tapes are held off
site.
1.5 Proxy serving in the United Kingdom
HealthGate will arrange for a caching proxy server with approximately 50
gigabytes of usable cache to be hosted in the United Kingdom. This device will
hold some elements of the Site and should enable United Kingdom users accessing
Content on the Site to receive a faster service. It will also enable the Site to
use a United Kingdom Primary Domain Name.
- --------------------------------------------------------------------------------
Page 1 of 2
<PAGE>
Schedule B - Site Service Plan
- --------------------------------------------------------------------------------
2. Communication procedures
2.1 User support
The Help section of the User Interface of the Software contains telephone
numbers and an e-mail address to enable users to contact the customer support
service at HealthGate. The telephone support service shall be operational 8.00
AM to 6.00 PM, US Eastern Time, and shall be supported by voice mail at other
times. All e-mails sent to the support address shall be acknowledged within one
working day of receipt - for the purposes of this clause, the usual working days
are Monday to Friday from 09.00 AM to 5.00 PM, US Eastern Time, except in the
case of US National Holidays taken by HealthGate.
2.2 Publisher support
HealthGate will supply and update information to the Publisher Project Managers
to enable them to contact via telephone, telephone pager or e-mail either the
HealthGate Project Managers or HealthGate's Hardware operation duty staff at any
time during the week. Access exceptions may be mutually pre-notified and
mutually agreed in advance to take account of US National Holidays. The
telephone support service shall be operational 3.00 AM to 10.00 PM, US Eastern
Time, and shall be supported by voice mail at other times. All e-mails sent to
the support address shall be acknowledged within one working day of receipt.
2.3 Periodic meetings of Project Managers
Both parties will agree upon a fixed schedule of dates and locations of Project
Manager meetings for each year of the agreement. The principal purpose of these
meetings is to enable the Project Managers to discuss matters of mutual interest
with regard to any matters pertaining to the Agreement. At least one Project
Manager from each party will attend each meeting. In advance of such meetings
either party may elect to nominate additional employees to attend, subject to
the other party's approval. With respect to sickness or any other cause, either
party may request to postpone or cancel a meeting provided that the other party
is given reasonable notice of such a request and approval of such a request
shall not be unreasonably withheld.
2.4 Training arrangements
The Publisher retains remote control of the Site through the Publisher
Interface. In order for the Publisher's authorised staff to be able to manage
the Site efficiently and effectively one of HealthGate's Project Managers will
provide 2 days of training per year at the Publisher's main business location.
The Publisher can request HealthGate for additional training days and these may
be billed to the Publisher at a mutually agreed rate.
2.5 Changes to the Hardware
HealthGate shall supply with the Publisher with a graphical overview of the
Hardware installation. Each time that HealthGate makes a significant change to
the Hardware, the Publisher will be notified and supplied with an updated
graphical overview.
- --------------------------------------------------------------------------------
Page 2 of 2
<PAGE>
Schedule C - Content Maintenance Plan
- --------------------------------------------------------------------------------
1. Content conversion and enhancement
1.1 Receipt of content
The Publisher shall notify HealthGate by e-mail of new Content transferred via
FTP. The message will contain the following information: Journal code, Volume
number, Issue number, Number of files and file types (SGML, GIF and PDF files)
and Comments or Notes.
Upon receipt of this e-mail HealthGate will move the data into directories for
initial pre-processing staging. A master archive copy of all content is also
made. Any obvious gaps or errors will be reported to the Publisher.
1.2 Content conversion
The SGML text files are initially converted to HealthGate's Extensible Markup
Language (XML) format. HealthGate also produces a thumbnail version of each GIF
image scaled to an agreed standard. The Publisher may take on this conversion
step to give the Publisher greater flexibility. Mathematical formulae supplied
within SGML files in the AMS-LaTeX format are converted into GIF files or other
formats suitable for Web viewing. HealthGate and the Publisher will mutually
agree on future enhancements for the conversion and display of mathematical
formulae.
1.3 Content enhancement
The XML files are then parsed to add more information that may include either
tags to link each article's bibliographic references to references within other
bibliographic databases or tags to link to other articles within the Site. The
links for each journal title will be agreed by the Publisher and HealthGate.
Reciprocal linking between the Site and other bibliographic databases to
specific journal titles will be mutually agreed.
1.4 Error reporting
HealthGate will immediately notify the Publisher by e-mail, within two (2)
business days, of any content that is adjudged to be either incomplete or
defective in any other way such e-mail shall note the journal name, volume,
issue and article ID(s). In these cases, the Publisher will advise HealthGate
whether or not to process the issue. The Publisher will either re-supply the
complete issue or the defective components and the Publisher and HealthGate will
mutually agree the revised production timeframe for these issues on a
case-by-case basis.
1.5 Processing objectives
HealthGate's objective for processing the Content comprising a new journal issue
is 3 working days. This throughput time objective is defined as (a) starting
from the moment that all files comprising the new issue are supplied to
HealthGate and received by HealthGate in a full and complete format; and (b)
completing the moment that the new issue is moved to a mutually-agreed and
defined staging area on the Site. HealthGate's operating capacity for processing
the Publisher's Content is 30 issues per working day. This throughput time
objective does not apply in any of the following circumstances:
o If the Publisher requests HealthGate by e-mail to process particular
issues in advance of issues already supplied (such requests can only be
accepted by e-mail from an authorised employee of HealthGate)
o If any of the Content comprising an issue is incomplete or incorrectly
supplied
o If the volume of Content supplied exceeds HealthGate's operating capacity
- in this case HealthGate's capacity defines the throughput time
o If Content for new titles is supplied - the standard for these is
specifically addressed in Section 3 of this Schedule.
1.6 Monitoring and reporting
HealthGate will, throughout the production processes defined above, provide
regular, timely and accurate reports to the Publisher. HealthGate will work
towards the creation of an automated production monitoring system and will
provide the Publisher with access to information from the system regarding the
conversion status of a particular issue, article or object.
- --------------------------------------------------------------------------------
Page 1 of 4
<PAGE>
Schedule C - Content Maintenance Plan
- --------------------------------------------------------------------------------
1.7 Fully automated content processing
HealthGate will work towards the creation of a fully automatic process to
convert and load Content onto the live Site. Such a process will, if feasible,
be designed to pull files from the Publisher's FTP site. This system could also
be enhanced by mutual agreement between HealthGate and the Publisher to achieve
three other features: (a) to enable the Publisher to re-supply individual files
(GIF, PDF and SGML) so that these items are automatically re-integrated into the
issue; (b) to permit individual articles to be loaded independent of an issue
being available; and, (c) the generation of an e-mail message to the Publisher
that confirms receipt of files pulled from the FTP server.
HealthGate will enable the fully automated content processes to take account of
the Digital Object Identifier (DOI) or other non-bibliographic based
identifiers. Publisher and HealthGate will mutually agree the definition of such
identifiers.
- --------------------------------------------------------------------------------
Page 2 of 4
<PAGE>
Schedule C - Content Maintenance Plan
- --------------------------------------------------------------------------------
2. Content staging and release
2.1 Database loading
As soon as all the content from a particular journal issue is processed it is
loaded in the content repository database. Database records are made of each
article's bibliographic details (title, authors, article type, category, volume,
issue and pages) from which Tables of Contents are generated. HealthGate sends
an e-mail to the Publisher alerting the appropriate personnel that the issue is
available for review. Authorised employees of the Publisher are then able to see
the issue for proofing, but access is restricted to all others.
2.2 Content approval and release
The content will appear in the User Interface part of the Software. The
authorised employees of the Publisher can then review the content and decide
whether or not to release a journal issue for general user access. The "For Sale
Y/N" field of the Publisher Interface part of the Software can be used to
exclude general access to view the issue to enable the Publisher to review the
material on-line prior to releasing it. The database also includes fields for
copyright notices and other notices of right title and interest to the content
and these fields can also be adjusted using the Publisher Interface part of the
Software.
2.3 Error reporting
If any employee of the Publisher determines that content is missing, incomplete
or displaying incorrectly, an authorised employee of the Publisher will send an
e-mail to HealthGate clearly defining the problem. In appropriate cases, they
will also examine the original source files to determine if errors occurred in
the source material.
2.4 Table of Contents (TOC) e-mail
The action of changing the For Sale Y/N field of the Publisher Interface part of
the Software from N to Y will generate the distribution by e-mail of the journal
issue's TOC to those users that have requested receipt of TOC e-mails in the
User Interface part of the Software.
- --------------------------------------------------------------------------------
Page 3 of 4
<PAGE>
Schedule C - Content Maintenance Plan
- --------------------------------------------------------------------------------
3 New titles
3.1 Set-up
From time to time the Publisher might wish to include a new journal title in the
Site. At such a time the Publisher must send HealthGate via e-mail details
regarding the title and a banner GIF file to be displayed in the User Interface
of the Software. These details should include at least the following
information:
ISSN Paper; ISSN Electronic; Journal Name; Journal Abbreviation Code; Copyright
Line, Pricing information. The Publisher will provide all of this information at
the same time.
In addition, the Publisher could supply the MEDLINE Abbreviation; Database names
for external linking (including provision for HealthGate's access rights);
Society Name; Society Code; URL on the Publisher's own site(s); Subject
Group(s); and Document Type Definition (DTD).
HealthGate will use this information to do two things: (a) adapt the filter, if
necessary, for converting content from SGML into HealthGate's internal format;
and (b) set up the title in the user interface. If HealthGate receives content
for a new journal title without the necessary header information, their first
action will be to request the details.
3.2 Lead time for new titles
HealthGate will load the first issue of a new title within 10 working days of
full and complete data being supplied by the Publisher. Any such new title shall
be supplied in a previously agreed upon DTD. Where any new title taken on from a
Society has existing electronic files available (i.e. not produced by the
Publisher), the conversion and loading of these files will be subject to
evaluation and discussion by HealthGate and the Publisher.
- --------------------------------------------------------------------------------
Page 4 of 4
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
1. User Interface Description
The User Interface is constructed with a number of pages using Microsoft's
active server page (asp) tools. Each page is described below. Many of the pages
are directly linked to one another and most also have a navigation menu bar to
enable a user to browse through the pages efficiently and effectively. Unless
otherwise noted, all functionality described in this Schedule D which is not
available on the Effective Date of this Agreement shall be delivered as
released, but no later than 31 March 2000.
1.1 Home Page
The Home Page contains links to the following pages User Registration, User
Login, List of Journals and About.
1.2 User Registration
Registration: The user provides demographic information and selects a user name
and password.
User name creation: User names are unique and are allocated on a
first-come-first-served basis.
Confirmation of registration: Upon successful completion of registration, the
user receives an e-mail acknowledging their registration. Maintenance and
management of User names for the site is independent of Maintenance and
management of User names for HealthGate's other sites. During user registration,
the e-mail address entered will be compared with those on file. If the e-mail
address has already been used, the user is prompted with the choice of
continuing or receiving an e-mail of the username and password for the existing
account. The purpose is to stop multiple registrations from users that have
forgotten their passwords.
During registration the user will have the option of having a cookie stored on
their local machine to facilitate auto login.
1.3 User Login
In order to access many areas of the Site users must identify and authenticate
themselves against their User Name. Users can Login from the Home Page, but are
also referred to the Login page when attempting to access sections of the site
that require authentication.
Users enter their particular User Name and Password on the Login page.
Successful authentication passes the user either to their personal page ("Your
Home Page") or to the relevant page from which they were referred.
The page also contains a mechanism for the user to look up and find their
password without contacting customer support. The user inputs their User name or
e-mail address and the user database is searched for a match. If there is a
match, the user is asked if they wish to receive an e-mail sent to the e-mail
address associated with the User Name. If there is not a match, the user should
send an e-mail to or telephone the customer support service.
Once the user has successfully logged in, the user's name details will display
on subsequent pages.
If the user's Auto Login cookie is detected on the Site homepage, the user will
be automatically authenticated and taken to their Personal Homepage. Any pages
requiring authentication will also check the Auto Login cookie before prompting
for login.
1.4 List of Journals
This page contains a list of journal titles, sorted by Publisher, that have
issues available on line. Each title is linked to a page that lists all issues
available on line and the table of contents of the current issue. This page will
contain an "A-Z" bar to navigate to journal titles alphabetically. This page
will link to other pages listing the journals by different groupings: "All
Journals", "Journals by Publisher" and "Subject Groups".
1.5 About
The About Page is designed by the Publisher and contains general information
about the Site. The About page may link to other flat HTML pages that will be
supplied by the Publisher, or created using the HTML editor.
1.6 Your Home Page
This page is personal for each User Name. It contains information regarding a
user's current subscription and article purchases; a list of titles for which a
TOC e-mail has been selected; a listing of the user's
- --------------------------------------------------------------------------------
Page 1 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
saved searches; a link to a page listing journal titles for which the user may
select to receive a TOC e-mail and a link to a page containing links to
favourite articles and journals as defined by the user.
The page also has a link to an associated page - the Update User Registration
page. An authenticated user can change demographic details such as e-mail
address, password and postal address. Other options available from Your Home
Page include the facility to input an Offer Code, an Access Token and select any
personal preferences for customisation of the site.
The page has an area for displaying a message to a particular group of users as
defined in the Publisher Interface. Groups will include all subscribers to a
named journal and all users that have entered an Offer Code. Other users will
see a default message.
The Personal Homepage has a link to allow personal users on a machine with an
unrecognised institutional IP address to write the auto login cookie to the
machine's hard disk.
1.7 Table of Contents (TOC) e-mail Selection
On this page a user may select (or de-select) one or several titles for which
they want to receive a TOC e-mail. If users choose this feature, they will be
sent the new table of contents for each journal for which they have selected the
service. This feature is available to non-subscribing users as well as
subscribers. The format of the TOC e-mail will be defined by the publisher and
will contain a URL linking directly to the abstract of each article listed.
1.8 Simple Search
In order to perform a search a user is required to authenticate by going through
the Login page. The Simple Search form enables a user to search the database of
bibliographic records for each article accessible on the site. The fields
include: Author Last Name(s), Author Initial(s), Article Title, Journal Title,
Keywords, Year, Volume and Issue and Full text search. The search can be
restricted to (a) All journals, (b) Only favourite journals as defined by the
user (from Your Home Page list), (c) a single journal, (d) journals in a
selected subject group as defined in the Publisher Interface. The user will have
a choice to rank search results by publication date or relevancy.
1.9 Advanced Search
The advanced search form allows the user to perform a Standard Boolean fielded
search. The user can combine fielded search terms with other terms through
operators to include AND, OR and NOT. Wildcards can also be used to refine the
search. The search can be restricted to (a) All journals, (b) Favourite journals
as defined by the user (from Your Home Page list), (c) a selected journal, (d)
journals in a selected subject group as defined in the Publisher Interface. The
user will have a choice to rank search results by publication date or relevancy.
The advanced search can be further restricted to (a) all issues, (b) issues
published in the last 1,3,6,9 or 12 months, (c) between 2 specified dates.
The Publisher and HealthGate will mutually agree to the design of the search
form which will include some field names as well as a free-text field.
1.10 Search Results
The search results page lists article title information where the search
criteria are matched. The results are ordered by relevancy or publication date.
Where ordered by relevancy each item will display a percentage relevancy
ranking. Each item in the list of search results will have a check box. The user
may select one or more articles by checking the boxes and then view the
abstracts sequentially on a single page. Each abstract will contain links to the
Full Text and PDF article.
The user can select a name for the search and save the search criteria. The
Saved Search can be re-run from a link on the Personal Homepage. The user can
perform a new search or return to the simple or advanced page to refine the
search criteria.
1.11 List of Issues
This page lists the issues for a particular title that are currently available
on line. Each issue in the list is linked to its TOC. Some issues may be tagged
as "Free Samples" and these are available for registered and authenticated users
to view without charge.
A link is created on this page to take the user to the appropriate journal home
page of the Publisher's own site. A text field will allow a user to search for a
word in the keywords or abstract from that journal. Searching requires
authentication, so an unauthenticated user will be asked to login before the
search results are displayed.
- --------------------------------------------------------------------------------
Page 2 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
A button allows a user to add the journal to their list of favourites displayed
on Your Home Page.
Design will make provision for the inclusion of an indivdual GIF illustration
file associated with each issue.
The Publisher will have the ability to supply tables of contents for future
issues through the Publisher Interface. These future tables of contents will be
available to users via the List of Issues page. When a new issue goes live, the
new interactive table of contents will replace the flat one.
Users will be able to link directly to the table of contents for a particular
issue using an inbound URL resolver.
The List of Issues page will contain a link to the latest issue and a defined
number of recent issues. Older issues will be accessible via links to issues
published within a given year (e.g. links to "1999 Issues", "1998 Issues"). The
Publisher and HealthGate will agree upon a list of the journal titles for which
to create Tables of Contents and abstracts (where available) for previous years'
material. The data for creating these Tables of Contents will be loaded from
third party databases, such as MEDLINE. The content type will be indicated as
"Full text", "Abstracts" or "Bibliographic Data Only".
1.12 Table of Contents
This page lists all articles and other material (such as editorials, reviews and
correspondence) that constitute the issue grouped by article category and then
in page number order. Each article listed contains the title and primary
author(s) as well as page numbers. Each article could potentially be linked to
its Abstract, Full Text or PDF page and to supplementary material. The size of
the PDF file will be indicated adjacent to the PDF button.
Generally, access to Abstracts is provided free of charge, but access to
Full-Text and PDF is limited to users who have obtained subscription or document
delivery privileges.
A text field will allow a user to search for a word in the keywords or abstract
from that issue. Searching requires authentication, so an unauthenticated user
will be asked to login before the search results are displayed.
A link will be included to a page that lists, in alphabetical order, authors of
papers in the issue. The author names will be linked to the abstract, full text
or PDF of the articles.
Page design will make provision for the inclusion of an indivdual GIF
illustration file associated with each issue.
1.13 Abstract
This page contains the abstract and a link to the Full Text and PDF. It also
contains a link to the Notify A Colleague e-mail page. If Supplementary Material
is available and tags are provided in the source SGML, an icon will link to it
from this page.
The page will display a link to the MEDLINE record of the current article, if
such a record exists in MEDLINE. Similar links to the record of the current
article in other databases will also be included by mutual agreement between
HealthGate and the Publisher.
A button allows a user to add the abstract to their list of favourites displayed
on Your Home Page
1.14 Full Text
This page displays the Article in an HTML format. A user must have already
purchased a subscription to the particular Journal Title or purchased the
specific article before being passed to this page (except in the case of a Free
Sample issue). If a user does not validate on access to the page, a purchase an
offer page will be presented enabling the user to purchase a subscription or
article delivery on-line.
All references and figures within the body of the text are linked to the list of
references at the end of the Article or to the figure page. All references that
have links to predefined databases, such as MEDLINE, are linked to those
references. Figures and tables are referenced and linked to respective full page
displays. If Supplementary Material is available and tags are provided in the
source SGML, an icon will link to it from this page. In addition, authors of the
article are tagged to external (predefined) databases searches as are keywords
listed. Author and keyword searches to predefined databases, such as MEDLINE,
are linked to an intermediary page giving the users the opportunity to refine
these searches.
The page will display a link to the MEDLINE record of the current article, if
such a record exists in MEDLINE. Similar links to the record of the current
article in other databases will also be included by mutual agreement between
HealthGate and the Publisher.
A button allows a user to add the article to their list of favourites displayed
on Your Home Page.
- --------------------------------------------------------------------------------
Page 3 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
1.15 Maths
Mathematical formulae supplied as AMS-LaTeX are converted by HealthGate into GIF
format files for Web viewing. In the future, as part of development, delivery in
other formats such as LaTeX or a change to the Publisher's DTD to incorporate
the MathML standard will be mutually agreed by both parties and tested to the
satisfaction of both.
1.16 References
The references are currently present at the end of the main text file.
References may be presented in pop-up windows. This would permit selective
presentation of only relevant references. This also obviates the need to return
to the 'parent' file when viewing a citation within an object window. As an
example, if the article cites [1,2-5,8,9], the pop-up will include only these
refs. This pop-up window may be dynamically generated to facilitate linking to
standard databases.
1.17 Object Windows
As for the Full Text Section, but the dimensions will be specified by the
Publisher. Treatment of object windows as a pop-up will permit the user to
compare two or more figures, or to refer to the text.
1.18 Graphics
Graphics files will be available to the user in the most suitable format the
browser can use: Shock Wave Flash if enabled, GIF if not. In the future the
Publisher and HealthGate may mutually agree to the supply and use of additional
file formats, such as high resolution JPEG.
1.19 Supplementary Material
Supplementary Material (which may consist of textual, tabular, graphical, video,
audio or animated data), will be made available free of charge via an icon on
the Table of Contents and accessible from within the full text. Links to the
material will be will be supplied by the Publisher in the source SGML.
Links to helper applications will be included as necessary.
The data will be supplied by the Publisher. If the Publisher requests HealthGate
to convert the material and host it, HealthGate will charge the Publisher the
full costs associated with conversion.
1.20 Multiple-part documents
HealthGate and the Publisher will mutually agree on a specification for handling
Multiple-part documents.
1.21 Multiple-Abstract sections
HealthGate and the Publisher will mutually agree on a specification for handling
Multiple Abstract sections.
1.22 PDF
This page downloads the Article in a PDF file. A user must have already
purchased a subscription to the particular Journal Title or purchased the
specific article before being passed to this page (except in the case of a Free
Sample issue). If a user does not validate on access to the page, a purchase
offer page will be presented enabling the user to purchase a subscription or
article delivery on-line.
The size of the PDF file will be indicated adjacent to the PDF button used to
access the file.
In order to view the downloaded article, the user must obtain a copy of Adobe
Acrobat Reader. A link to Adobe's Home Page is available on the Help Page.
1.23 Notify a Colleague
This feature enables an authenticated user to send an e-mail to an acquaintance
that contains URL information and a link to an abstract or article. A user
completes the destination e-mail address or addresses and can then add their own
comments to the e-mail prior to sending it.
- --------------------------------------------------------------------------------
Page 4 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
1.24 Purchase Offer Page
This page contains the offers available for a user to purchase. It could contain
various purchase offers as follows Article, Regular Subscription and Discounted
Society Subscription. These offers could be listed in a variety of different
currencies.
User selection of an offer links to the secure Credit Card connection page.
The Publisher Interface can used to control the layout of this page on a title
by title basis. One or more of the following may be displayed for each title:
(a) document delivery offer, (b) subscription offer in one or more currencies,
(c) standard text including link to Publisher's web-site and (d) a piece of HTML
text for each journal entered with an HTML editor from the Publisher Interface.
1.25 Credit Card Validation
Once the offer has been selected, the user will then be shown a page that
provides a secure connection for credit card information. The user will be asked
to give the credit card number, type (VISA, MasterCard, AMEX, Discover), and
expiration date.
The credit card is then validated and the user is shown the cost that has been
charged to the credit card. A unique receipt number is displayed on the page and
a copy is e-mailed to the e-mail address supplied by the user during
registration.
1.26 Society Membership Validation and Offer Code
The Publisher can supply lists of names and membership numbers of learned
societies. In this way registered users can verify their society membership and
incorporate these details as part of their User Profiles.
A link to this validation page is contained within Your Home Page. A user
selects the Offer Code link and inputs a code relevant to a particular society
offer - this code is supplied to the society member by the Publisher. The user
then inputs the validation information - usually Surname and Membership number.
A society offer may include free on-line subscriptions to one or more titles or
special discounts to titles. Once the society membership information is
validated these offers are presented to the user - free subscriptions are
automatically listed on Your Home Page. A choice of offers may be made
available, such as selecting one or more titles from a package. Upon selecting
an offer the user will be taken to the credit card validation page. Upon
successfully completing the transaction, the subscriptions will be added to Your
Home Page.
If a user successfully validates society membership, but does not, at the same
time, take up an offer that requires payment, the offer will be presented on the
Purchase Offer page when the user subsequently tries to access content covered
by the offer.
1.27 Publisher Access Tokens
The Publisher can accept subscription orders from users off-line and would wish
users to validate them on-line. The Publisher may also wish to provide free
access to users such as editorial board members. The Publisher interface
contains a tool to generate Access Tokens. These Tokens can cover single or
multiple titles and the Publisher can define their expiry date. Each token can
only be used once.
A user supplied with a Token links to the Access Token validation page from Your
Home Page. The Token is input and the subscription is linked to that User Name
or Institutional Name.
1.28 Help
The Help page contains e-mail and telephone contact details for users to submit
their queries to. It also contains linked URL's for Microsoft and Netscape
browser and for the Adobe Acrobat Reader software downloads. The help page can
be edited and linked to newly created pages via the Publisher Interface. To
standardise the communication routes and to facilitate the direction of queries
to the relevant HealthGate and Publisher e-mail addresses a help form will be
designed by the Publisher. This form will enable a user to send e-mail from
their browser. The user will enter their e-mail address (defaulted if an
authenticated personal user), name, subject and free text message. The user will
be able to choose from a number of categories to be defined by the Publisher,
such as "subscription queries", "technical problems", and "other queries". The
user has the option of sending themselves a copy of the mail. The mail is routed
to a pre-defined e-mail address for each category of query. The body of the
e-mail will contain header information including (where known) username, e-mail
address, name, subject, browser type and version being used, IP address, time
and date sent and the user-entered message text.
- --------------------------------------------------------------------------------
Page 5 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
The Publisher will design a similar form so that users can send feedback to the
Publisher.
1.29 Menu Bar
The Menu Bar can be included on any page as defined by the Publisher and it can
display different elements according to the page it displays on. The elements
that can be included are links to the following: Home Page, Your Home Page, List
of Journals, List of Issues, Table of Contents, Notify A Colleague, Search and
Help.
1.30 Access to the MEDLINE database
HealthGate hosts the MEDLINE database under licence from the US National Library
of Medicine. The references of full-text of articles from some journals will be
linked to their specific MEDLINE record. In addition, the interface contains a
link to a MEDLINE search form. This search form will be HealthGate's Advanced
Search Form. A user can use the form to enter a query against the MEDLINE
database. If records are found that match the query this displays as a hit list.
A user may then select to view the abstract of a particular record from the hit
list. The abstract display will also include (where available):
Related articles
The related articles of a specific abstract are those abstracts in the MEDLINE
database that are the most similar to it. The similarity between documents is
measured by the words they have in common with some adjustment for abstract
lengths.
Link to full text of an abstract
When a MEDLINE abstract contains a link to the full-text of an article, a button
will display in the abstract display. This button links to the Web site
belonging to the publishing copyright owner of the journal where the full text
article resides. These publisher Web sites may require a subscription or fee in
order to view the full-text of an article.
The user will be able to view the abstract in both MEDLINE and bibliographic
citation manager formats and be able to save the abstract in MAC, PC or UNIX
format as either text or HTML.
1.31 Linking from other databases
The Publisher will supply some third party database hosts with a resolver that
permits users of these databases to link into the Site using the bibliographic
details supplied by the Publisher to the third party. A user of a third party
database will gain access to the Site as follows - (a) if the user is recognised
by the Site (by valid IP address, previous session login or auto-login cookie)
and has access rights to the content, the user will gain access the to the
Abstract, PDF, or Full Text as determined by the referring resolver; or (b) if
the user's access rights cannot be recognised, the user will be presented with a
page to either login or register and, if the login is successful, the user will
gain access to the Abstract, PDF, or Full Text as determined by the referring
resolver.
1.32 Reciprocal linking to other publisher on-line systems
By reciprocal agreement with other publishers, the Publisher will supply
HealthGate with bibliographic citations that are linked directly to other third
party on-line systems. The Publisher will then permit users referred from these
third party sites to view full-text files without the requirement to
authenticate. Where possible, this type of relationship will take into account
Forward Linking, so that each time such a link is generated, the linked-to
publisher is notified and can append a forward link to the cited file.
1.33 Forward Linking
When each new intra-Synergy link is created, the article that has been
referenced will have added to it a 'Forward link'. These will be listed at the
bottom of the article under a section headed "Articles citing this work". For
each link, the following information will be displayed: Authors (surnames,
initials), year, article title, publication title, volume number and page range.
1.34 Toll Free Links
o Where one of the Publisher's articles refers to another article available
on the Site, a user with access rights to the article containing the
reference will be able to follow the reference link to the full text of
the article cited without requiring access rights to the cited article.
- --------------------------------------------------------------------------------
Page 6 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
o Where a Toll free Linking agreement exists between the Publisher and a
third party, users with access rights to an article on the Site can also
link to an article hosted by the third party without requiring access
rights. This may be achieved by embedding a code in the referring URL.
o Where a Toll free Linking agreement exists between the Publisher and a
third party, users with access rights to an article on the third party
site can link to an article hosted on the Site without requiring access
rights. This may be achieved by embedding a code in the referring URL.
o Free access is only available to the article referred to - not all
articles in that issue or journal.
- --------------------------------------------------------------------------------
Page 7 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
2. Publisher Interface
The overall purpose of the Publisher Interface is twofold - (a) to provide the
Publisher with as much control as is feasible (at the detail level) of its own
titles; and (b) to enable the Publisher to know as much as possible about its
users.
The Publisher has secure access to these functions and authorises employees
accordingly. Much of the information contained within parts of this interface is
used to deliver dynamic details to the User Interface pages. In general the
information can be changed on a real-time basis by the Publisher, thus affecting
the real-time information on the User Interface.
There will be two levels of access rights. One level permits access to just the
Access Token generator and the other level permits access to all other parts of
the interface. The Publisher will be issued with a "master" access right that
can create Publisher access accounts - each access account could have access to
one or both levels of access.
2.1 Journal Information
The procedure to set-up new journals and their initial entry into the system is
initiated by the Publisher. The authorised Publisher employee enters all
applicable information for a new Title such as the title name, copyright
statement and ISSN. The interface also permits the Publisher to remove the title
from sale. The Publisher can also assign a journal to be part of one or more
Subject Groups.
2.2 Issue Information
As a new issue is processed and loaded for delivery to the User Interface pages,
information about the issue populates a database. The information includes
Volume Number, Issue Number, Publication Date, Issue Date, Number of Pages, URL,
For Sale Y/N, Banner GIF and Free Sample Y/N.
2.3 Article Information
Each article loaded in the database contains associated information - the record
fields include Unique Article ID, Issue, Article Name, Page Start, Page End,
Abstract URL, Article URL and PDF URL.
2.4 SKUs and Offers
Each journal title can be sold to users as a time-based subscription and
individual articles of the title can be sold individually. The SKU and Offer
section of the Publisher Interface enables the Publisher to enter combinations
of prices, currencies and time of access for each title at both a subscription
and article level. The prices can also be tied to Society Membership validation
so that Society Offers can be created and later redeemed at the User Interface.
2.5 Societies and Membership lists
This component of the interface enables the Publisher to set up a new society
and upload membership validation details.
Each society has associated with it a code which users input on the Offer Code
part of Your Home Page. Membership lists are uploaded into the database for
corresponding society codes. The validation mechanism checks that a user is
inputting the correct surname associated with the membership number.
The Publisher interface component enables the Publisher to refresh or amend
membership details and, used in conjunction, with the SKU/Offer part permits
special journal subscription prices to be offered to society members. The
membership number and last name can also be amended.
The Publisher Interface allows updated membership data to be checked against the
existing records on file for uniqueness. Duplicates will be reported in an
agreed format.
The Publisher Interface allows the Publisher to generate reports of usernames
and registration details as follows:
(a) society members loaded for a particular offer code
(b) society members that have validated their membership on the Site
(c) society members that have not validated their membership on the Site
(d) validated society members that haven taken up an offer requiring payment
- --------------------------------------------------------------------------------
Page 8 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
2.6 Access Token Generation
This page contains a list of journal titles that are available for sale. The
Publisher can select one or more titles and generate one or more access tokens.
The page enables the Publisher to set the expiry date of the subscription
associated with the token and also include an associated reference number.
The Publisher can select to either (a) output the Access Token to the browser
page, or (b) have the titles automatically added to a registered user's account
by specifying a valid User Name.
2.7 User Demographic Information
Each registered user has associated with it the following demographic
information: Title, First Name, Last Name, Honours, E-Mail Address, Username,
Password, Country, Job Title, Company/Institution, Department, Phone, Fax,
Street Number, Street, City/Town, State/Province/County, Post/ZIP Code, VAT
Registered?, VAT Registration Number and area of professional responsibility
(dropdown or free text).
2.8 HTML editor
HealthGate will supply the Publisher with an HTML editor. This editor can be
used by the Publisher to insert HTML text at fixed positions within the
following pages of the Site:
Home Page
List of Journals Page
List of Issues Page
Table of Contents Page
Your Home Page
Table of Contents E-Mail Selection Page
Registration Pages
Society Membership Validation Pages
Access Token Input and Confirmation Pages
Search Pages
Help
Each of these pages may contain one or more areas of customisable text.
Publisher and HealthGate will mutually agree the positions within each page that
maybe customisable. The Publisher is responsible for the text and/or wording for
these pages.
2.9 Table of Contents (TOC) e-mail Messages
This component of the interface enables the Publisher to add a message to the
TOC e-mails for particular journals. This message can be issue specific or
time-based.
2.10 Subject Groups
The Publisher Interface allows the Publisher to create, edit and delete Subject
Groups. The Publisher assigns a name for the Subject Group to be displayed on
the subject list area of the List of Journals page. A journal can be assigned to
one or more subject groups. These subject groupings can also be specified as
filters when searching.
2.11 Institutional Activation
This component of the interface enables the Publisher to generate an Activation
Code for use by an administrator of an institutional user name. The Publisher
enters the institution name and an Activation Code is generated The Publisher
can then assign journal subscriptions to the account by selecting journal titles
and expiration dates. The Publisher then supplies the Activation Code to the
Institutional Administrator.
Upon receipt, the Institutional Administrator enters the Activation Code to set
up their Administrator Homepage.
The Publisher can edit administrator information and check the activation status
and entry date for a particular Activation Code.
The Publisher can search for a record by Activation Code, institution name or
other fields completed by the administrator on activation. The Publisher can
generate reports based on this activation information.
- --------------------------------------------------------------------------------
Page 9 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
3. Institutional Access Interface
The Publisher sells bundles of subscriptions to a wide variety of institutions.
Members of these institutions require access to the subscriptions purchased on
their behalf, but the institutions do not want their members to be authenticated
in the same way as individual users - they want access privileges to be granted
according to IP address. However, institutions may also wish to supply a User
Name and Password for their members to access their subscriptions when these
member are away from their physical site.
The institutions also maintain journal holding information for subscriptions
purchased from a wide-variety of other sources and will likely build links
directly to the list of issues pages for each title. All parts of this Section 3
shall be delivered by 31 December 1999.
3.1 IP address validation
Each page of the site as described above will be sensitive to the user's
referring IP address. If a user comes in from a recognised IP address, the name
of the institution (as defined by an institutional administrator during
activation) is displayed on each page.
3.2 Institutional List of Journals
A page will display the list of titles purchased by the institution. Users can
then link to issues, tables of contents, full text and PDF articles without
being prompted to login. A link will also allow institutional users to access a
full list of all journals. Users attempting to access the full text of PDF
article from a title that the institution does not subscribe will be given the
choice of logging in as a personal user, or purchasing through document
delivery. The Institutional List of Journals page also allows users to login as
personal users, or register as personal users.
3.3 Table Maintenance of IP valid addresses
Each institution will be issued with an Activation Code. A designated
institutional administrator will enter this number to activate their
institution's subscriptions. The administrator is required to enter contact
details and choose an administrator username and password. The administrator can
then enter the IP addresses, and IP ranges for that institution. The
administrator can login at any time with the administrator username and
password. The administrator pages will allow the administrator to (a) edit the
IP addresses, (b) update contact information, (c) create and delete
institutional passwords and (d) generate and download pre-defined usage reports
for that institution.
3.4 Institutional Password Access
Members of an institution accessing via an IP address that is not recognised by
the system can login as either a personal user with a personal username and
password, or as an institutional user with an institutional username and
password. The Institutional Administrator can create institutional username and
passwords for distribution to off-site users through the administrator pages. On
entering a valid institutional username and password, users are taken to the
institutional list of journals with the institution name displayed on the page.
All other activities during that session are identical to those for a user that
has been IP validated.
3.5 Moving Between Institutional and Personal States
Validated institutional users (whether via a recognised IP address or a valid
institutional password) can change state to "personal user" by clicking the
"Your Homepage" link. After logging in, the usual personal homepage will be
displayed, with the addition of an extra link to "Institutional List of
Journals". This link allows the user to change state back to "institutional" and
will authenticate the user (IP or institutional username and password) and take
the user to the Institutional List of Journals.
3.6 Direct Access
Institutions will be able to gain direct access to the list of issues for each
title by following URL links from other library resources. When accessing the
list of issues, the institution name will be displayed on the page if the IP
address was recognised. When a user attempts to access the full text or PDF
article an IP check will be carried out to verify access rights for this
account. If the IP address is not recognised, the
- --------------------------------------------------------------------------------
Page 10 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
user is prompted to login. After successfully authenticating, the user will
either be granted access or be presented with a variety of offers.
- --------------------------------------------------------------------------------
Page 11 of 12
<PAGE>
Schedule D - Software Maintenance Plan
- --------------------------------------------------------------------------------
4. Maintenance, Minor Changes and New Developments
4.1 Routine maintenance
On a periodic basis HealthGate shall maintain and upgrade the Software. These
updates will generally be in conjunction with third party vendor upgrades to
their respective software tools. In addition, HealthGate reserves the right to
make changes and enhancements to the Software from time to time in order to
improve the effectiveness and efficiency of its functionality as described
above.
4.2 Allowance for small changes
The Publisher retains HealthGate to provide a number of days of labour time to
make small changes and enhancements to the Software. Such changes should be
requested in writing by the Publisher. HealthGate will evaluate each request and
provide a time estimate to the Publisher expressed in labour hours for
developing and testing the changes. Actual time worked on these changes will be
logged and HealthGate will provide a copy of the log at the end of every month.
4.3 New Development
From time to time The Publisher may elect to request that HealthGate develop new
functionality for the Software. HealthGate will evaluate each request and
provide a time estimate to the Publisher expressed in labour days for defining,
designing, developing, fully testing and deploying these changes. Some
development work may be charged at a mutually agreed fixed fee rather than per
labour day.
- --------------------------------------------------------------------------------
Page 12 of 12
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
1. Usage Reporting for the publishers
Access to statistical reports is provided via web-based reporting systems.
HealthGate maintains access to tabular statistical data through the site, which
can be accessed, aggregated, ranked and manipulated. These data can also be made
available in flat files containing specified elements that can be downloaded and
manipulated locally. HealthGate also presents some data as graphs and charts
where appropriate. Access to these usage data can be either by the secure
Publisher Interface or delivered by e-mail to controlled addresses. Features
noted in this Schedule E, Sections 2, 3, and 4 shall be released on or before 31
March 2000.
1.1 Usage Data Requirements
Each Use Element defined below can be delineated by the following subdivisions:
o By title
o By subscribing institution username
o By total consortium (defined group of institutional identifiers)
o By individual user
o By society (defined group of individuals)
o By time period. The site minimally reports by month. For each month, each
type of use is reported by hour of the day, US Eastern Standard Time
o HealthGate will hold 24 months of historical data and then provide an
archive to the Publisher in a mutually agreed standard format.
1.2 Use Elements
The following Use Elements are provided:
Number of sessions (Logins) broken down by:
o Guests without authentication
o Registered user without any rights to subscriptions or articles
o Registered user with rights to subscriptions or articles
o Authenticated institutional IP users
o Number of Searches, including number of searches which produce zero
results.
Number of Menu Selections made through browsing, categorised as browsing from,
as available through a standard log analysis tool:
o Personal Homepage list of journals
o Institutional - list of journals
o Full list of journals
o List of issues
o Tables of Contents.
Number of items examined (i.e. viewed, downloaded or e-mailed) to the extent
these can be recorded and controlled by the server rather than the browser. The
results can be broken down by title with ISSN listed and categorised as:
o Tables of Contents displayed
o Abstracts displayed
o Abstracts sent to a colleague
o HTML Articles viewed
o PDF articles downloaded
o Other (e.g., image / AV files, ads, reviews, etc., as appropriate)
This analysis is available sorted by title, issue or article.
- --------------------------------------------------------------------------------
Page 1 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
2. Access to usage reports by Institutional Administrators
2.1 Institution Statistics
Institutional Administrators have access to a subset of the data relating to
usage at their Institution (defined by the IP Address range and/or institutional
username). The interface, functionality and design of the reports is
substantially the same as the Publisher reports, but should follow the
guidelines laid down by the International Coalition of Library Consortia,
November 1998 - a copy of this document is available on the World Wide Web at
http://lsounix1.library.yale.edu/consortia/webstats.html. HealthGate and the
Publishers will review any subsequent drafts of these guidelines with the
intention of mutually agreeing to incorporate changes into the software, where
reasonable and appropriate.
2.2 Comparative Statistics
HealthGate will provide comparative statistics that give Institutional
Administrators a context in which to analyse statistics. The Publisher will
define which statistics to compare and which institutions can be grouped for
purposes of comparison.
- --------------------------------------------------------------------------------
Page 2 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
3. User behaviour and site design
HealthGate can produce data and reports that can be used to determine which
parts of the Site itself are being accessed.
3.1 Registration and authentication
Records and reports on the number of times the following areas of the site are
accessed:
o Help
o "About"
o Register Now - broken down into successful and unsuccessful registration
attempts, with details of the point at which the unsuccessful attempts
were aborted.
o Offer Code entry - broken down into successful and unsuccessful
authentication attempts, with details of the point at which the
unsuccessful attempts were aborted.
o Access Token entry - broken down into successful and unsuccessful
authentication attempts, with details of the point at which the
unsuccessful attempts were aborted.
o Forgotten Password
o Update registration details
o Sign up page for e-mail tables of content alerts
3.2 Search behaviour
Reports on the following search behaviour:
o Comparative use of each search field
o Comparative use of full-text or bibliographic search
o Listing of most frequently used search terms
3.3 Session reports
Reports on the following session characteristics:
o User's browser type and version
o Referring URL
o Entry URL in to site
o Exit URL from site
o Monthly frequency of repeat visits by registered and authenticated users
- --------------------------------------------------------------------------------
Page 3 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
4. Profiling and contacting users
The site allows the publisher to generate reports using any combination of the
users' registration details (name, address, society affiliation, e-mail alert
profile etc.) and access rights (subscriptions or article purchases with
initiation and expiry dates).
4.1 Contacting users that match a specified profile
The output of these reports can be put to the following uses, commissioned by
the Publisher and facilitated by HealthGate:
o A flat-file report
o Generate a list of e-mail addresses of users that match a set of criteria
defined by the Publisher and send an e-mail to these addresses with text
provided by the Publisher
o Post a message (with text provided by the Publisher) on the personal
Homepages of users that match a set of criteria defined by the Publisher.
Default messages can automatically be displayed if a set of criteria is
met. This includes the ability to display customisable text on the
Personal Home Page of registered users with subscriptions due to expire
within a given number of days. This text can include a hyperlink that can
incorporate user registration information and information identifying the
titles due to expire.
- --------------------------------------------------------------------------------
Page 4 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
5. Confidentiality of usage information
All usage data is treated by HealthGate as the Publisher's Confidential
Information as defined in Section 18, Intellectual Property Rights.
5.1 Privacy and user confidentiality
Statistical reports or data that reveal confidential information about
individual users will not be released or sold by either party to any third
party.
5.2 Institutional or Consortia confidentiality
HealthGate will not release or sell statistical usage information for
institutions or consortia without the written permission of the Publisher.
- --------------------------------------------------------------------------------
Page 5 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
6. Sales Reporting
HealthGate records all on-line purchases made by users in a format that
facilitates integration with the Publishers' financial and customer management
systems. HealthGate provides access to tabular statistical data on the Site
which can be accessed, aggregated, ranked and manipulated. Access to these sales
data is via the secure Publisher Interface.
6.1 Sales of Individual Articles
HealthGate records the following information for reporting purposes o Journal
title, year, volume, issue, first page number
o US Eastern Standard Time and date
o Quantity sold
o Unit price
o Currency
o Gross sale value
o HealthGate fee
o Value Added Taxes
o Net sales value to Publisher
o Username and registered address details
HealthGate will generate these data in a flat file at the end of each month
containing the specified data elements. This report provides details of net
sales by title and a payment from HealthGate to the Publisher will follow
according to the agreed terms in Section 11. Schedule of Fees.
6.2 Sales of Subscriptions
The Publisher will provide unique customer id's for each registered user to
HealthGate. These will be added daily to the user details on the site and allow
reports to be reconciled with the publishers subscription management systems.
HealthGate will record the following information for sales reporting purposes
o Journal title
o Publishers' Office
o US Eastern Standard Time and date of sale
o Expiry date of subscription
o Unit price
o Currency
o Value Added Taxes
o Total sales value to publisher including Value Added Taxes
o Username and registered address details
o Publishers' customer id
HealthGate will generate these data in a flat file on a daily basis in reports
that contain the specified data elements. At the end of each month HealthGate
will produce a monthly summary report and a payment to the Publisher will follow
according to the agreed terms in Section 11. Schedule of Fees..
- --------------------------------------------------------------------------------
Page 6 of 7
<PAGE>
Schedule E - Activity Reporting Plan
- --------------------------------------------------------------------------------
7. Site maintenance reporting
HealthGate remotely monitors the Home Page of the Site every 60 seconds. In
addition, HealthGate monitors some individual pages on the Site and links to
other servers that support the Site. HealthGate will generate a monthly report
that aggregates the log files from the monitoring services and supply this
report to the Publisher. This report will enable the Publisher to track the
availablity of the Site.
- --------------------------------------------------------------------------------
Page 7 of 7
<PAGE>
CONTINUING EDUCATION SERVICES AGREEMENT
BETWEEN HEALTHSTREAM & HEALTHGATE DATA CORP.
This Continuing Education Services Agreement ("Agreement") is entered
into by and between HealthStream, Inc., a Tennessee corporation having its
principal place of business at 209 10th Avenue South, Suite 450, Nashville,
Tennessee 37203 ("HealthStream") and HealthGate Data Corp., a Delaware
corporation having its principal place of business at 25 Corporate Drive, Suite
310, Burlington, Massachusetts 01803 ("HealthGate").
WHEREAS, HealthStream is a provider of computer and Web-based education
and training services organizations and individuals within the healthcare
industry;
WHEREAS, HealthStream is a provider of healthcare and education
courseware and courseware management tools delivered via the Internet, corporate
intranets and networks;
WHEREAS, HealthStream has developed and marketed and continues to
develop and market a computer-based education system known as the Training
Navigator(R) ("T.NAV(R)") that delivers and monitors World Wide Web based
content;
WHEREAS, HealthGate enables hospitals and health systems to provide
their users with access to healthcare content for professionals, patients, and
consumers under its CHOICE(TM) brand name for their Web sites On the Internet
and on their corporate intranets;
WHEREAS, HealthGate and HealthStream wish to enter into a cooperative
effort to provide HealthStream branded, hosted and managed educational offerings
via HealthGate's distribution channels; market said educational offerings, and
sell the ad space inventory available within said educational offerings;
WHEREAS, HealthGate and HealthStream wish to provide appropriate
consideration for those efforts that each party has agreed to undertake;
WHEREAS, HealthGate and HealthStream each acknowledge the sufficiency
and adequacy of the value, concessions, and recitations set forth herein;
NOW THEREFORE, HealthGate and HealthStream agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms below shall have the following
meanings:
1.1. "ACCME" means the Accreditation Council for Continuing Medical
Education.
1.2. "Ad Inventory" means the advertising space on any of the pages in
the Joint Site.
1.3. "Available Ad Inventory" means any Ad Inventory unsold from the monthly
available at the beginning of the month.
1.4. "CEU Courses" means those educational courses that have been reviewed
for continuing education units by an institution recognized by an
accredited professional organization. Those individuals completing the
courses may receive credit toward continuing education requirements.
1.5. "CHOICE(TM)" means HealthGate's suite of products that provide
healthcare content to hospitals and health systems for use on their Web
sites and intranets. CHOICE(TM) is a trademark of HealthGate.
1.6. "CME Courses" means those educational courses that have been reviewed
for continuing medical education by an ACCME accredited institution.
Those individuals completing the courses may receive credit toward
continuing education requirements.
1.7. "Course" means healthcare related Internet based curricula designed to
be delivered by T.NAV(R) through
<PAGE>
HealthStream Sites.
1.8. "Effective Date" means September 15, 1999, the date on which both
parties to this Agreement have executed same.
1.9. "HealthGate" means HealthGate Data Corp. and any affiliated entity of
HealthGate. HealthGate is said to be a HealthStream Site Partner via
the execution of this Agreement.
1.10. "HealthGate Courses" means Courses that are licensed to HealthGate or
are the proprietary property of HealthGate including training and
education content including, but not limited to OSHA and JCAHO mandated
training, continuing medical education, and office training.
1.11. "HealthGate Sites" means the various branded Internet sites licensing
products and services from HealthGate, including its CHOICE(TM)
product.
1.12. "HealthStream" means HealthStream, Inc. and any Subsidiary of
HealthStream, Inc.
1.13. "HealthStream Courses" means Courses that are licensed to HealthStream
or are the proprietary property of HealthStream including training and
education content including, but not limited to OSHA and JCAHO mandated
training, continuing medical education, and office training.
1.14. "HealthStream Server Facility" means those facilities either maintained
by HealthStream, whether by subcontract with HealthStream Service
Associates or via independent means, where HealthStream Sites are
hosted and connected to the World Wide Web and other private networks.
A HealthStream Server Facility will be comprised of software, server
computers and connectivity hardware required to deliver HealthStream
Sites.
1.15. "HealthStream Service Associates" means those companies that assist
HealthStream in delivering HealthStream Services. HealthStream Service
Associates include, but are not limited to, customer support companies,
credit card collections companies and Internet service provider
companies.
1.16. "HealthStream Services" means HealthStream branded, hosted and managed
healthcare educational offerings delivered via HealthStream Sites.
1.17. "HealthStream Sites" means those HealthStream managed and hosted
Internet sites that deliver educational and other content via the
T.NAV(R). HealthStream Sites may be available via the World Wide Web or
through a private Intranet.
1.18. "HealthStream Site Partners" means those entities managing
healthcare-related World Wide Web sites that partner with HealthStream
in delivering a HealthStream Site for the use of HealthStream Site
Partner clients.
1.19. "Internet" means the international network of computers and computer
networks accessible by the public at large of which the World Wide Web
is a subset.
1.20. "Intranet" means an internal network protected from unauthorized users
by a firewall and accessible only by individuals within the
organization serving the network.
1.21. "Joint Site" means one or more Internet sites available from HealthGate
Sites containing HealthStream Services. The Joint Sites are also said
to be a subset of HealthStream Sites. Joint Sites will contain branding
from both HealthStream and HealthGate.
1.22. "Linked Site" means the World Wide Web site operated by HealthStream
Site Partners that links to a HealthStream Site. HealthStream attempts
to provide each Linked Site with a distinct Personalization.
1.23. "Marketing Initiatives" means those significant HealthGate marketing
activities that prominently include mention and promotion of
HealthStream and the Joint Site services. Marketing Initiatives include
but are not limited to the following: trade shows and exhibitions,
seminars, direct mailing campaigns, third party publication
advertisement campaigns, online banner advertisement campaigns.
HealthGate and HealthStream will jointly determine the scope, total
cost and cost allocation of Marketing Initiatives funded by both
parties. Notwithstanding other considerations,
<PAGE>
HealthStream financial participation in each Marketing Initiative will
be determined in part by the extent of Joint Site and HealthStream
promotion in said Marketing Initiative.
1.24. "Net Revenue" means gross revenue derived by HealthGate or HealthStream
from Transactions Fees and sales of Ad Inventory less any discounts,
refunds, rebates, or returns.
1.25. "Personalization" means the unique graphic features of a HealthStream
Site, as distinguished from other HealthStream Sites. Personalization
is enabled via features of the T.NAV(R) that are designed to best match
each HealthStream Site's appearance to its corresponding Linked Site.
The scope and specification of T.NAV(R)'s Personalization capability
will change over time as T.NAV(R) is advanced to best meet the needs of
HealthStream Site Partners. Exhibit A outlines the scope of T.NAV(R)'s
present Personalization capabilities.
1.26. "Subsidiary" means a company in which, on a class-by-class basis, more
than fifty percent (50%) of the stock entitled to vote for the election
of directors is owned or controlled by another company, but only so
long as such ownership or control exists.
1.27. "Third Party Courses" means interactive content that is licensed to a
third party to this Agreement or is the proprietary property of a third
party to this Agreement
1.28. "T.NAV(R)" means HealthStream's computer based training product that
delivers and monitors World Wide Web based Content. T.NAV(R) is
available in multiple configurations, each containing common core
functionalitY with unique features applicable for a given application's
distribution and access requirements, e.g. Internet eCommerce,
Intranet, local area networks, etc. T.NAV(R) is a registered trademark
of HealthStream. T.NAV(R) is also branded as Training Navigator(TM), a
trademark of HealthStream.
1.29. "Transaction" means those purchases of HealthStream Courses, HealthGate
Courses, or Third Party Courses by customers of the Joint Site.
1.30. "Transaction Fees" means fees received by HealthStream for
Transactions.
ARTICLE 2
RESPONSIBILITIES AND STRATEGIC RIGHTS GRANTS
2.1. During the term of this Agreement, HealthGate shall:
2.1.1. Include on the home page(s) of those HealthGate Sites through
which the HealthStream Courses are available a logo of the
HealthStream trademark and a hyperlink to the Joint Site.
2.1.2. Promote the Joint Site as a part of HealthGate's public
advertising strategy. HealthGate and HealthStream will jointly
develop a specific promotion plan within ninety (90) days of
the Effective Date that will include a minimum of one (1)
Marketing Initiative per month. HealthGate will include the
use of the HealthStream trademark logo on all HealthGate
marketing materials that reference the services provided by
the Joint Site. All such Marketing Initiatives will be jointly
approved by HealthStream and HealthGate.
2.1.3. Have HealthStream's content development services made
available to HealthGate's clients on a commercially reasonable
best efforts basis, upon mutually agreeable terms. A referral
fee outlined in Section 4.3.1 shall be paid to HealthGate by
HealthStream for these services.
2.2. During the term of this Agreement, HealthStream shall:
2.2.1. Host and maintain the Joint Site on its World Wide Web
servers. The Joint Site will be a subset of HealthStream Sites
residing at a HealthStream Server Facility. The Joint Site
will be operational on or before one month following the
Effective Date.
2.2.2. Provide customer support and customer account collections
services for the Joint Site, either independently or via
HealthStream Service Associates.
2.2.3. Assign a partner manager to the HealthGate account who will be
responsible for maintaining
<PAGE>
communication with HealthGate personnel regarding site
functionality, marketing, and other business issues.
2.2.4. Include on the home page of the Joint Site a logo of the
HealthGate trademark and a hyperlink to the HealthGate Sites.
2.2.5. Provide one (1) distinct Personalization for each HealthGate
Site. The scope of each personalization is defined in Exhibit
A. Each distinct Personalization will become a Joint Site.
2.2.6. Have a right of first refusal to provide development services
to Third Party Course providers with whom HealthGate contracts
to place content within the Joint Sites, upon mutually
agreeable terms.
2.2.7. Refrain from communicating via e-mail with individual members
of the Joint Sites without prior approval from HealthGate.
ARTICLE 3
LICENSE GRANTS
3.1. Subject to the agreement of the providers of the HealthGate Courses,
HealthGate grants HealthStream worldwide, non-exclusive Internet rights
as the host and marketing agent for HealthGate Courses during the term
of this agreement.
3.2. Subject to the payment of the consideration set forth in Article 4,
HealthStream grants HealthGate the right to sell Ad Inventory in the
Joint Site. HealthStream will have the first right to Available Ad
Inventory.
3.3. Both parties to this Agreement shall have equal rights to the
client-specific data associated with the Joint Site. Rights to said
data will be subject to privacy provisions guaranteed by HealthStream
to Joint Site customers.
3.4. Any and all rights not expressly granted by either of the parties to
the other are reserved by the respective party claiming reservation of
that right.
ARTICLE 4
PRICE AND PAYMENT
4.1. HealthGate and HealthStream will meet as necessary to review pricing,
discounting policy and the rationale behind any discounts granted from
the previous quarter for healthcare related training courses, ad space
inventory, and Intranet products and services. HealthStream has
discretion over Course and Ad Inventory pricing.
4.2. During the term of this Agreement, HealthGate shall pay to HealthStream
fifteen percent (15%) of all Net Revenue derived from Ad Inventory sold
and collected by HealthGate.
4.3. During the term of this Agreement, HealthStream shall pay to
HealthGate:
4.3.1. A referral fee equal to five percent (5%) of the Net Revenue
derived from content development services described in Section
2.1.3;
4.3.2. Seventeen and one-half percent (17.5%) of all Net Revenue
derived from Transaction Fees from HealthStream Courses and
Third Party Courses procured by HealthStream;
4.3.3. Seventy-five percent (75%) of all Net Revenue derived from
Transaction Fees from HealthGate Courses and Third Party
Courses procured by HealthGate;
4.3.4. Fifteen percent (15%) of all Net Revenue derived from Ad
Inventory sold by HealthStream.
4.4. HealthStream shall guarantee to HealthGate minimum payments of two
hundred fifty thousand dollars (US$250,000) per annum, payable in
twelve equal installments, for the purposes of sponsoring the
HealthGate Sites, during the term of this Agreement.
<PAGE>
4.5. HealthGate and HealthStream agree to deliver monthly statements
detailing Joint Site Net Revenue collected by each party and all
payments due according to the percentages outlined in this Article 4
within forty-five (45) days after the end of each calendar month. These
monthly reports shall indicate the total number of Transactions and Ad
Inventory for which either party derives revenue, the details of said
reports are outlined in Exhibit B. Each party shall submit monthly
reports even if no royalties or other amounts are due for such month. A
monthly finance charge based on an annual rate of prime plus 2% will be
assessed on all amounts that are paid later than forty five (45) days
after the end of the last month.
ARTICLE 5
INDEMNIFICATION FOR INFRINGEMENT
5.1. HealthStream represents and warrants that to the best of its knowledge:
5.1.1. T.NAV(R) does not infringe any copyright or patent enforceable
under the laws of any country.
5.1.2. T.NAV(R) does not violate the trade secret rights of any third
party.
5.2. HealthStream agrees to indemnify, hold harmless, and defend HealthGate
from any and all damages, costs, and expenses, including reasonable
attorneys' fees, incurred in connection with a claim which constitutes
a breach of the warranties set forth in Section 5.1 and where judgment
has been rendered (hereinafter claims under Subsections 5.1.1 and 5.1.2
shall collectively be referred to as "Infringement Judgments");
provided, HealthStream is notified promptly in writing of an
Infringement Judgment and has sole control over its defense or
settlement, and HealthGate provides reasonable assistance in the
defense of the same.
5.3. HealthStream warrants that to the best of its knowledge its performance
of this Agreement will not violate or infringe upon the rights of third
parties, including but not limited to property, contractual,
employment, trade secret, proprietary information and non-disclosure
rights, or any United States trademark, copyright or patent right.
HealthStream will, at its own expense, defend any suit or proceeding
brought against HealthGate based on a claim that the HealthStream
Courses infringe upon any copyright, patent, trademark, trade secret,
or other intellectual property right, provided that HealthStream is
notified promptly in writing and given full and complete authority,
information and assistance for the defense of such suit or proceeding.
HealthStream may, at its option and expense, either obtain the right to
continue usage of affected HealthStream Courses free of any claim of
infringement, modify such HealthStream Courses so that affected
HealthStream Courses is not subject to a claim of infringement, or
remove the affected HealthStream Courses from the Joint Site.
5.4. HealthGate represents and warrants that to the best of its knowledge:
5.4.1. CHOICE(TM) does not infringe any copyright or patent
enforceable under the laws of any country.
5.4.2. CHOICE(TM) does not violate the trade secret rights of any
third party.
5.5. HealthGate agrees to indemnify, hold harmless, and defend HealthStream
from any and all damages, costs, and expenses, including reasonable
attorneys' fees, incurred in connection with a claim which constitutes
a breach of the warranties set forth in Section 3.3 and where judgment
has been rendered (hereinafter claims under Subsections 3.3.1 and 3.3.2
shall collectively be referred to as "Infringement Judgments");
provided, HealthGate is notified promptly in writing of an Infringement
Judgment and has sole control over its defense or settlement, and
HealthStream provides reasonable assistance in the defense of the same.
5.6. HealthGate warrants that to the best of its knowledge its performance
of this agreement will not violate or infringe upon the rights of third
parties, including but not limited to property, contractual,
employment, trade secret, proprietary information and non-disclosure
rights, or any United States trademark, copyright or patent right.
HealthGate will, at its own expense, defend any suit or proceeding
brought against HealthStream based on a claim that the HealthGate
Courses infringe upon any copyright, patent, trademark, trade secret,
or other intellectual property right, provided
<PAGE>
that HealthGate is notified promptly in writing and given full and
complete authority, information and assistance for the defense of such
suit or proceeding. HealthGate may, at its option and expense, either
obtain the right to continue usage of affected HealthGate Courses free
of any claim of infringement, modify such HealthGate Courses so that
affected HealthGate Courses is not subject to a claim of infringement,
or remove the affected HealthGate Courses from the Joint Site.
ARTICLE 6
INTELLECTUAL PROPERTY PROVISIONS
6.1. Both parties will cause to appear on all marketing or promotional
materials concerning the Joint Site, the other party's copyright,
trademark, or patent notices.
6.2. The parties agree that ownership for any invention conceived or
developed during the course of this Agreement shall vest in accordance
with the patent rules governing inventorship.
6.3. Each party is responsible for protecting, documenting, and maintaining
its own intellectual property. Except as expressly set forth herein,
this Agreement does not grant either party any proprietary rights of
any type in the other party's materials, services, software code or
Content.
6.4. Both parties acknowledge that, except as otherwise provided herein,
each party owns and retains all right, title and interest in and to its
own Courses provided each party for use on the Joint Site.
6.5. HealthStream acknowledges that HealthGate owns and retains all right,
title and interest in and to the HealthGate Sites and all HealthGate's
products, services and derivatives thereof arising from the performance
of this Agreement.
6.6. HealthGate acknowledges that, subject to the license granted to
HealthGate in Section 3.1 herein, HealthStream owns and retains all
right, title and interest in and to T.NAV(R) and HealthStream Sites.
ARTICLE 7
PROHIBITION AGAINST ASSIGNMENT AND SUBLICENSE
This Agreement, and any rights or obligations hereunder, shall not be assigned
or sublicensed (except as permitted in this Article 7) by either party.
Notwithstanding the foregoing, this Agreement may be assigned to a successor in
interest to all of a party's assets or substantially all of a party's assets and
shall inure to the benefit of and be binding upon successors or purchasers of
substantially all of either party's assets.
ARTICLE 8
TERM OF AGREEMENT
Provided this Agreement has been properly executed by an officer of HealthGate
and by an officer of HealthStream, the term of this Agreement ("Term") shall run
from the Effective Date until two (2) years after the Effective Date, and
thereafter be automatically extended for additional one (1) year periods unless
either party provides thirty (30) days written notice to the non-terminating
party.
ARTICLE 9
DEFAULT AND TERMINATION
9.1. The non-defaulting party may terminate this Agreement in its entirety
if any of the following events of default occur:
9.1.1. If the defaulting party materially fails to perform or comply
with this Agreement or any provision hereof;
<PAGE>
9.1.2. If the defaulting party fails to strictly comply with the
provisions of Article 12, or makes an assignment in violation
of Article 7;
9.1.3. If a party becomes insolvent or admits in writing its
inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors;
9.1.4. If a petition under any foreign, state, or United States
bankruptcy act, receivership statute, or the like, as they now
exist, or as they may be amended, is filed by a party; or
9.1.5. If such a petition is filed by any third party, or an
application for a receiver of a party is made by anyone and
such petition or application is not resolved favorably or
discharged to such party within ninety (90) days.
9.2. Termination due to a breach of Articles 7 or 12 shall be effective upon
notice. In all other cases termination shall be effective sixty (60)
days after notice of termination to the defaulting party if the
defaults have not been cured within such sixty (60) day period. The
rights and remedies of the parties provided herein shall not be
exclusive and are in addition to any other rights and remedies provided
by law or this Agreement.
ARTICLE 10
OBLIGATIONS UPON TERMINATION
10.1. From and after termination or expiration of this Agreement, both
parties shall discontinue the operation of the Joint Site, cease and
desist from all use of the other party's name(s) and associated
trademark(s), and, upon request, deliver to the other party or its
authorized representatives or destroy all material upon which those
name(s) and the associated trademarks appear.
10.2. Articles 5, 6, 10, 11, 12, 13, 14, Section 16.1, and Article 17 shall
survive termination or expiration of this Agreement.
ARTICLE 11
WARRANTIES, LIMITATION OF LIABILITY AND REMEDIES
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER
WARRANTIES. ANY AND ALL OTHER IMPLIED WARRANTIES OF ANY KIND WHATSOEVER,
INCLUDING THOSE FOR MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE, ARE
EXPRESSLY EXCLUDED. NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL
(INCLUDING WITHOUT LIMITATION LOST PROFITS, UNLIQUIDATED INVENTORY, ETC.),
INCIDENTAL, INDIRECT, ECONOMIC, OR PUNITIVE DAMAGES EVEN IF THE OTHER PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 12
NONDISCLOSURE AGREEMENT
12.1. HealthStream expressly undertakes to retain in confidence all
information and know-how transmitted to HealthStream by HealthGate that
HealthGate has identified as being proprietary and/or confidential or
that, by the nature of the circumstances surrounding the disclosure,
ought in good faith to be treated as proprietary and/or confidential,
and will make no use of such information and know-how except under the
terms and during the existence of this Agreement. HealthStream shall
not disclose, disseminate or distribute any such confidential
information or know how to any third party without HealthGate's prior
written consent. HealthStream agrees to use the same degree of care to
protect HealthGate confidential information as HealthStream takes to
protect its own confidential information of like importance. However,
HealthStream shall have no obligation to maintain the confidentiality
of information that:
12.1.1. Is received rightfully from another party prior to its receipt
from HealthGate;
12.1.2. HealthGate has disclosed to a third party without any
obligation to maintain such information in
<PAGE>
confidence; or
12.1.3. Has been or is independently developed by HealthStream.
12.2. Further, HealthStream may disclose confidential information as required
by governmental or judicial order, provided HealthStream gives
HealthGate prompt notice of such order and complies with any
confidentiality or protective order (or equivalent) imposed on such
disclosure. HealthStream shall treat the terms and conditions of this
Agreement as confidential; however, HealthStream may disclose such
information in confidence to its immediate legal and financial
consultants as required in the ordinary course of HealthStream's
business. HealthStream's obligation under this Article 12 shall extend
to the earlier of such time as the information protected hereby is in
the public domain through no fault of HealthStream or five (5) years
following termination or expiration of this Agreement. HealthStream
shall not disclose any information on HealthGate's unannounced products
to HealthStream's employees or any third party.
12.3. HealthGate shall have the same obligations in Sections 12.1 and 12.2
above with respect to HealthStream's information and know-how. In
addition, HealthGate shall treat all T.NAV(R) materials (including
source code if obtained) as confidential information and shall not
disclose, disseminate, or distribute such materials to any third party
without HealthStream's prior written permission.
12.4. Both parties shall prepare a mutually acceptable press release, if any,
to announce this Agreement.
ARTICLE 13
AUDITS
13.1. During the term of this Agreement, the parties hereto agree to keep all
usual and proper records and books of account and all usual and proper
entries relating to Transactions and sales of Ad Inventory consistent
with generally accepted accounting principles.
13.2. HealthStream may cause an audit to be made of the applicable HealthGate
records that pertain to this Agreement for the sole purpose of
verifying royalty reports issued by HealthGate to HealthStream and
prompt adjustment shall be made to compensate for any errors or
omissions disclosed by such audit. Any such audit shall be conducted by
an independent certified public accountant of national stature (E.G.,
Deloitte) selected by HealthStream (other than on a contingent fee
basis) and shall be conducted during regular business hours at
HealthGate's offices and in such a manner as not to interfere with
HealthGate's normal business activities. Any such audit shall occur no
more than once per calendar year and within six (6) months of the end
of the calendar year. HealthStream shall pay for any such audit unless
Material discrepancies are disclosed. "Material" shall mean the lesser
of Five Thousand Dollars (US$5,000.00) or five percent (5%) of the
amount that should have been reported. If Material discrepancies are
disclosed, HealthGate agrees to pay HealthStream the costs associated
with the audit not to exceed Five Thousand Dollars (US$5,000.00). The
auditor shall only disclose the correct data and amounts as called for
on the royalty reports.
13.3. HealthGate may cause an audit to be made of the applicable HealthStream
records and facilities for the sole purpose of verifying any reports
issued by HealthStream to HealthGate, and prompt adjustment shall be
made to compensate for any errors or omissions disclosed by such audit.
Any such audit shall be conducted by an independent certified public
accountant of national stature (E.G., Deloitte) selected by HealthGate
(other than on a contingent fee basis) and shall be conducted during
regular business hours at HealthStream's offices and in such a manner
as not to interfere with HealthStream's normal business activities. Any
such audit shall be paid for by HealthGate unless Material
discrepancies are disclosed. "Material" shall mean the lesser of Five
Thousand Dollars (US$5,000.00) or five percent (5%) of the amount that
should have been reported. If Material discrepancies are disclosed,
HealthStream agrees to pay HealthGate for the costs associated with the
audit not to exceed Five Thousand Dollars (US$5,000.00). In no event
shall audits be made more frequently than annually unless the
immediately preceding audit
<PAGE>
disclosed a Material discrepancy. The auditor shall only disclose the
correct data and amounts as called for on the royalty reports.
13.4. Any statement shall affect neither the right to examine and audit nor
the right to receive an adjustment to the contrary, appearing on checks
or otherwise, unless expressly agreed to in writing by the party having
such right.
13.5. In the event that either party makes any claim with respect to an
audit, upon the audited party's written request the party who has
requested such audit will make available to the audited party the
records and reports pertaining to such audit prepared by the
independent auditor who performed such audit.
ARTICLE 14
NOTICES AND REQUESTS
All notices, authorizations, and requests in connection with this Agreement
shall be deemed given on the day they are deposited in the U.S. mails, postage
prepaid, certified or registered, return receipt requested, or sent by air
express courier, charges prepaid; and addressed as follows:
HealthGate: HealthGate, Inc.
Attn: Rick Lawson
Vice President
25 Corporate Drive, Suite 310
Burlington, Massachusetts 01803
HEALTHSTREAM: HealthStream, Inc.
Attn: Robert H. Laird
209 10th Avenue South
Suite 450
Nashville, Tennessee 37203
or to such other address as the party to receive the notice or request so
designates by written notice to the other.
ARTICLE 15
MEDIA
Each party agrees it will not use the other party's name, marks, or logos in any
advertising, promotional material, press release, publication, public
announcement, or through other media, written or oral, whether to the press, to
holders of publicly owned stock without the prior written consent of the other
party. Such consent shall not be unreasonably withheld or delayed. Accurate
statements made by either party as to the basic terms of this Agreement are said
to have the consent of the other party
ARTICLE 16
CONTROLLING LAW
16.1 This Agreement shall be construed and controlled by the laws of the
State of Tennessee.
16.2 Neither this Agreement, nor any terms and conditions contained herein,
shall be construed as creating a partnership, joint venture or agency
relationship or as granting a franchise as defined in 16 CFR Section
436.2(a). The price and payment described in Article 4 of this
Agreement shall be construed as a royalty fee for the rights granted in
Article 3 of this Agreement, and not as a
<PAGE>
franchise fee.
ARTICLE 17
ATTORNEYS' FEES
If either HealthStream or HealthGate employs attorneys to enforce any rights
arising out of or relating to this Agreement, the prevailing party in any
proceeding shall be entitled to recover its reasonable attorneys' fees, costs
and other expenses.
ARTICLE 18
GENERAL
18.1 This Agreement does not constitute an offer by HealthStream and it
shall not be effective until signed by both parties. Upon execution by
both parties, this Agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof and
replaces and supplants all prior and contemporaneous communications. It
shall not be modified except by a written agreement signed on behalf of
HealthGate and HealthStream by their respective duly authorized
representatives. Unless agreed to in a separate writing signed by both
parties, any statement appearing as a restrictive endorsement on a
check or other document which purports to modify a right, obligation or
liability of either party shall be of no force and effect.
18.2 If any provision of this Agreement shall be held by a court of
competent jurisdiction to be illegal, invalid, or unenforceable, the
remaining provisions shall remain in full force and effect. If this
Agreement as it relates to any product(s) licensed hereunder shall be
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable or if this Agreement is terminated as to particular
product(s), this Agreement shall remain in full force and effect as to
the remaining product(s).
18.3 No waiver of any breach of any provision of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of
the same or any other provisions hereof, and no waiver shall be
effective unless made in writing and signed by an authorized
representative of the waiving party.
18.4 The Article headings used in this Agreement and the attached Exhibits
are intended for convenience only and shall not be deemed to supersede
or modify any provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth in Section 1.8 above. All signed copies of this Agreement shall
be deemed originals.
/s/ Robert A. Frist, Jr.
- ------------------------------
HealthStream, Inc.
Robert A. Frist, Jr.
Chief Executive Officer
/s/ Mary B. Miller
- ------------------------------
HealthGate Data Corp.
Mary B. Miller
Chief Financial Officer
<PAGE>
Exhibit
PERSONALIZATION ITEMS
HealthStream's online education Web site and T.NAV iCommerce systems can be
personalized to reflect Distributor's brand image. The following items are
standard elements of that Personalization:
1. Left navigation bar light color
2. Left navigation bar dark color
3. The color that is the background of the main logo in the upper left
4. The color for the ad banner section
5. The light color for the catalog listing
6. The dark color for the catalog listing
7. The light color for the Your Menu listing
8. The dark for the Your Menu listing
9. The logo to display in the upper left
10. The name to display in the site (i.e. "[email protected]")
11. The phone number of technical support
12. The email for tech support
13. The address for tech support
14. The first custom link to display
15. The second custom link to display
16. The third custom link to display
17. The fourth custom link to display
18. The fifth custom link to display
19. The people support link to display
20. Code to pre-populate the discount field
21. Text to display on page for custom link 1
22. Text to display for custom link 2
23. Text to display for custom link 3
24. Text to display for custom link 4
25. Text to display for custom link 5
26. Text to display for the people support link
27. Default background color
28. The path and file to call when doing an auto-logoff
29. The background color for the title bar
Continuing Education Services Agreement - HealthGate and HealthStream
Page 11 of 11
<PAGE>
EXHIBIT 10.36
[GRAPHIC] CO-BRANDED CHOICE-TM- WEB SITE AGREEMENT
THIS CO-BRANDED CHOICE WEB SITE AGREEMENT ("Agreement") dated as of November
2, 1999, entered into by and between Columbia Information Systems, Inc.
("Licensee"), a Tennessee corporation with a notice address of 2555 Park
Plaza, Nashville, TN 37203, and HealthGate Data Corp. ("HealthGate"), a
Delaware corporation with a notice address of 25 Corporate Drive, Suite 310,
Burlington Massachusetts 01803.
WHEREAS, HealthGate provides access to information products and services
through the Internet using its proprietary CHOICE platform;
WHEREAS, HealthGate and Licensee wish to enter into an agreement providing
for the licensing of certain of HealthGate's products and services through a
health portal site and the CHOICE Web Sites.
NOW, THEREFORE, in consideration of the mutual promises set forth herein and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings:
1.1. "Affiliated Providers" shall mean C/HCA Providers, Triad Providers, or
LifePoint Providers.
1.2. "Authorized Users" shall mean (i) Licensee, (ii) Affiliated Providers and
HPG Members to which Licensee provides the HealthGate Products under this
Agreement, (iii) persons who access portions of the HealthGate Products
that may require user registration and authentication in compliance with
HealthGate's software licenses, and (iv) persons who access portions of
the HealthGate Products that may not require user registration and
passwords.
1.3. "C/HCA Providers" shall mean those healthcare providers owned, controlled
or operated by any entity owned or controlled by Columbia/HCA Healthcare
Corporation.
1.4. "CHOICE Web Sites" shall mean the eight (8) co-branded template web sites
designed, developed, and maintained for Licensee in accordance with this
Agreement.
1.5. "Confidential Information" shall mean the identity of patients, the
content of medical records, financial and tax information, information
regarding Medicare and Medicaid claims submission and reimbursements,
the object and source codes and documentation for proprietary software,
and such other information that is confidential or proprietary business
information and delivered or disclosed pursuant to this Agreement.
1.6. "Expiration Date" shall mean November 1, 2002.
1.7. "GAO" shall mean the Government Accounting Office.
1.8. "HealthGate Products" shall mean the Portal, the CHOICE Web Sites, and
any customized CHOICE Web Site provided under this Agreement for an
Affiliated Provider or HPG Member as described in SCHEDULES A, B, AND C.
1.9. "HHS" shall mean the Department of Health and Human Services.
1.10. "HealthGate Trademarks" shall mean HealthGate's name, logos, trademarks,
servicemarks, and trade dress created or used by HealthGate.
1.11. "HPG Members" shall mean HealthTrust Purchasing Group, L.P. and
healthcare providers which are or become members of HealthTrust
Purchasing Group, LP.
1.12. "Information" shall mean that content and services provided by or through
HealthGate under this Agreement as set forth on SCHEDULE C.
<PAGE>
1.13. "Information Partners" shall mean those entities that have licensed
HealthGate certain information or content included in the Information.
1.14. "Licensee Trademarks" shall mean Licensee's name, logos, trademarks,
servicemarks, and trade dress created or used by Licensee.
1.15. "LifePoint Providers" shall mean those healthcare providers owned,
controlled, or operated by any entity owned or controlled by LifePoint
Hospitals, Inc.
1.16. "Net Advertising Revenues" shall mean all advertising and sponsorship
monies received for advertising or sponsorship placements on the
HealthGate Products less the cost of preparing such displays or
placements, agency discounts, frequency discounts, sales commissions,
any other third party obligations or revenue sharing commitments, and any
sales or use taxes, if applicable, related to such advertising and
sponsorship placements.
1.17. "Net E-Commerce Revenues" shall mean the revenue for all products sold
through a customized CHOICE Web Site provided under this Agreement for
an Affiliated Provider or HPG Member less the cost of such product,
including the manufacturing, shipping, and storage of such product,
agency discounts, frequency discounts, sales commissions, any other third
party obligations or revenue sharing commitments, and any sales or use
taxes, if applicable, related to such product revenue.
1.18. "Portal" shall mean the co-branded health portal site designed,
developed, and maintained for Licensee in accordance with this Agreement.
1.19. "Provider Content" shall mean content developed, owned, or licensed by an
Affiliated Member of HPG Member and provided by the applicable Affiliated
Member or HPG Member to HealthGate.
1.20. "Related Materials" shall mean the software and content and materials
associated with the HealthGate Products, used to provide the Information.
1.21. "Termination Notice" shall mean a written notice of termination.
1.22. "Triad Providers" shall mean those healthcare providers owned,
controlled, or operated by any entity owned or controlled by Triad
Hospitals, Inc.
2. HEALTH PORTAL SITE; CO-BRANDED CHOICE WEB SITE; AUTHORIZED USERS; LICENSE;
PROHIBITED ACTIONS
2.1. HEALTH PORTAL SITE. HealthGate shall design, develop, and maintain the
Portal on the World Wide Web that can be accessed by Authorized Users for
Licensee in accordance with the functional requirements listed in SCHEDULE
A. The Portal shall be co-branded with both the Licensee's Trademarks and
HealthGate's Trademarks, in a manner acceptable to both parties.
2.2. CO-BRANDED CHOICE WEB SITE. HealthGate shall design, develop, and maintain
the CHOICE Web Sites for Licensee that can be accessed by Authorized Users
in accordance with the functional requirements listed in SCHEDULE B. The
CHOICE Web Sites shall be co-branded with both the Licensee's Trademarks
and HealthGate's Trademarks, in a manner acceptable to both parties.
2.3 CONTENT AND SERVICE. HealthGate shall provide to the Portal and/or for the
CHOICE Web Sites the content and services outlined in SCHEDULE C. Licensee
may use up to two thousand and eighty (2080) hours of HealthGate
development time (averaging forty (40) hours per week over fifty-two (52)
weeks) in the aggregate for developing the Portal and the CHOICE Web Sites.
2.4 LICENSE.
(a) HealthGate grants to Licensee a non-exclusive, non-transferable
license to provide access to the Information through the HealthGate
Products to Authorized Users. The rights granted by HealthGate shall
be for Licensee to use the HealthGate Products for itself, C/HCA
Providers, LifePoint Providers,
<PAGE>
Triad Providers, and HPG Members. The maximum number of healthcare
providers to which Licensee can provide the HealthGate Products
shall be limited to a total of two hundred and eighty (280)
Affiliated Providers; provided, however, if Licensee provides any
HealthGate Products to any HPG Member, the total number of
healthcare providers to which Licensee can provide Healthcare
Products shall be limited to two hundred and fifty (250) healthcare
providers among Affiliated Providers and HPG Members.
(b) The Information and the Related Materials are the property of
HealthGate or an Information Partner and is protected by applicable
laws. Licensee shall abide by and shall use commercially reasonable
efforts to cause Authorized Users to abide by all copyright notices,
information, or restrictions contained in any Information accessed
through the HealthGate Products.
(c) Any rights not expressly granted in this Agreement with regard to
the HealthGate Products, the Information, and the Related Materials
are reserved to HealthGate and its Information Partners.
2.5 PERMITTED USES. During the term of this Agreement, Licensee and its
Authorized Users may:
(a) make searches of and access the Information;
(b) make a very limited number of hard copies of any search output that
does not contain a significant segment of a database, which copies
may be used only internally but may not be sold, provided that all
copyright and other notices contained in such Information are
maintained.
(c) make one copy of any search output in electronic form (i.e. diskette,
hard disk, or tape) to be used for editing or temporary storage only,
provided that all copyright and other notices contained in such
Information are maintained.
With respect to subsection 2.5(b), provided that Licensee, Affiliated
Providers, and HPG Members, and their respective physicians, employees,
agents, contractors, and subcontractors, (collectively, "Affiliated Users")
shall use commercially reasonable efforts to ensure that Authorized Users
who are not Affiliated Users abide by this provision and shall promptly
report to HealthGate any suspected or actual violations of subsection
2.5(b), Licensee and its Affiliated Users shall not be liable for any
breach of subsection 2.5(b) by Authorized Users who are not Affiliated
Users.
2.6 PROHIBITED ACTIONS. Licensee agrees that it is prohibited from and shall
not:
(a) de-compile or reverse engineer the HealthGate Products, the
Information, or any of the Related Materials;
(b) sell, re-license, distribute or commercially exploit the Information
or any of the Related Materials except as set forth in Sections 3.2
and 3.3 below.
(c) except as specifically permitted herein, make the Information
available through any means or media other than the HealthGate
Products;
(d) except as specifically permitted herein, modify, publish, transmit,
participate in the license, transfer or sale of, reproduce, create
derivative works from, distribute, perform, display, or in anyway
exploit the HealthGate Products, the Information or any of the Related
Materials, in whole or in part, without the prior written consent of
HealthGate.
DEVELOPMENT AND DELIVERY OF THE HEALTHGATE PRODUCTS
3.1 Delivery dates for the HealthGate Products are set forth on SCHEDULE D.
3.2 The HealthGate Products shall be designed to provide advertising and
sponsorship messages from commercial vendors to Authorized Users. Both
parties shall cooperate on obtaining advertising and sponsor messages and
on providing e-commerce opportunities on the Portal or a customized CHOICE
Web Site provided under this Agreement for an Affiliated Provider or HPG
Member. HealthGate shall have the exclusive right to sell and serve
advertising, sponsorship and e-commerce opportunities on the HealthGate
Products. Licensee shall have the right to approve all advertising,
sponsorship, and e-commerce opportunities on the Portal or customized
CHOICE Web Site provided under this Agreement for an Affiliated Provider
or HPG Member, including the method for displaying or causing the
advertising to be displayed, which approval shall not be unreasonably
withheld. HealthGate shall provide notice at least five (5) business days
before release of such messages by HealthGate and Licensee must approve
such messages within three (3) days of receipt of such notice otherwise
Licensee will be deemed to have approved any such message.
<PAGE>
3.3 The HealthGate Products shall be designed to provide Licensee the
opportunity to serve promotional messages to Authorized Users. All such
messages shall be administered by HealthGate on behalf of Licensee.
HealthGate shall have the right to approve such promotional messages,
which approval shall not be unreasonably withheld. HealthGate shall
provide notice at least five (5) business days before release of such
messages by HealthGate and Licensee must approve such messages within
three (3) days of receipt of such notice otherwise Licensee will be deemed
to have approved any such message.
4. MARKETING AND RE-SELLING SITES
4.1 Licensee shall have the right to market and provide HealthGate Products
and services covered under this Agreement to Affiliated Providers and HPG
Members. HealthGate shall not market HealthGate Products and services
directly to the Affiliated Providers.
4.2 Any Affiliated Provider or HPG Member facility which is sold to an
independent third party may continue to utilize the HealthGate Products
provided Licensee is providing data processing services to such divested
entity. If Licensee is not continuing to provide data processing services
to such divested entity, then such entity shall have the right to continue
to use the HealthGate Products for the remainder of the current year, or
ninety (90) days, whichever is longer. After such time, the entity will
have to obtain its own license.
5. ACTIVEPRESS LIGHT WEB PUBLISHING SERVICES
5.1 HealthGate shall provide, at no additional charge, the following
activePress Light modules for the purpose of hosting and providing access
to Provider Content for up to fifty (50) Affiliated Providers and HPG
Members: content normalization, "linkMEDLINE" (links to the MEDLINE
database from article bibliographies), content review, content release, and
content access and control.
5.2 HealthGate shall provide all redundant hardware and software required for
activePress Light at the HealthGate facilities.
5.3 HealthGate shall provide, maintain, and upgrade as necessary all system
administration tools, Internet connections, and applicable bandwidth
required for activePress Light.
5.4 HealthGate shall make the Provider Content available through the Portal or
applicable customized CHOICE Web Site provided under this Agreement for an
Affiliated Provider or HPG Member utilizing activePress Light.
5.5 HealthGate shall provide a secure connection for uploading the Provider
Content to activePress Light on a monthly basis. HealthGate shall integrate
the Provider Content into activePress Light and then release the Provider
Content on the Web at a day and time to be determined by the applicable
Affiliated Provider or HPG Member. The applicable Affiliated Provider or
HPG Member shall provide each issue of the Provider Content in a
pre-defined tagged format, which shall be mutually agreed upon by Licensee
and HealthGate, at least five (5) business days prior to the designated Web
release date. The applicable Affiliated Provider or HPG Member shall be
responsible for all quality assurance for the actual content within the
five (5) business days.
5.6 HealthGate will create space for advertising banners on each page of the
Provider Content. Both parties shall cooperate on obtaining advertising
messages for the banners. HealthGate shall have the exclusive right to sell
and serve advertising on the banners. The applicable Affiliated Provider or
HPG Member shall have the right to approve all advertising on the banners,
including the method for displaying or causing the advertising to be
displayed, which approval shall not be unreasonably withheld. HealthGate
shall provide notice at least five (5) business days before release of such
messages by HealthGate and Licensee must approve such messages within three
(3) days of receipt of such notice otherwise Licensee will be deemed to
have approved any such message.
5.7 HealthGate, acting as an agent on behalf of the applicable Affiliated
Provider or HPG Member, shall have the right to sell individual articles
and subscriptions to the Provider Content through its own Web sites in a
<PAGE>
manner that shall be mutually agreed upon by the parties.
6. FEES
6.1 LICENSE FEES. Annual fees payable by Licensee to HealthGate are set forth
in SCHEDULE E.
6.2 ADVERTISING AND SPONSORSHIP. As set forth in SCHEDULE E, Licensee shall
receive a commission based on Net Advertising Revenues and Net E-Commerce
Revenues.
6.3 ADJUSTMENTS IN FEES. The annual license fee due hereunder and set forth in
SCHEDULE E may be subject to an adjustment prior to the Expiration Date.
6.3.1 MOST FAVORED NATION PRICING TERMS. If HealthGate provides the same
HealthGate Product to another licensee at prices less than the prices
being paid by Licensee for all Affiliated Providers and HPG Members,
HealthGate and Licensee shall mutually agree to an appropriate
reduction in the price; provided, however the reduced price shall not
be less than the price paid by the other licensee.
6.3.2 DECREASE IN NUMBER OF CHOICE WEB SITES. If after full implementation
of this Agreement, the aggregate number of customized CHOICE Web
Sites provided under this Agreement for the Affiliated Providers
(including divested facilities where Licensee continues to provide
data processing services) falls below or is below two hundred (200)
facilities, the annual license fee will be reduced by $145,000 per
each reduction of ten (10) providers until the annual license fee is
$2,500,000; provided, however, that if the total number of Affiliate
Providers increases and exceeds two hundred and eighty (280)
providers, the annual fee will be increased by $145,000 per each
increase of ten (10) providers.
6.4 FEES RELATED TO ADDITIONAL PRODUCTS AND SERVICES. Notwithstanding anything
to the contrary contained in the fee adjustment procedures described in
this Agreement or the fee schedule set forth in SCHEDULE B, any
modification to the Information and/or the HealthGate Products, which are
requested by Licensee, may be accompanied by additional fees as determined
by HealthGate, and approved in writing by Licensee prior to initiation of
such modification. If HealthGate initiates a modification on its own
initiative without a request by Licensee, then there will be no additional
costs or fees for such modification prior to the Expiration Date.
6.5 LATE FEES. Any payment not received within ten (10) days of its due date
shall accrue interest at the rate of one and a half (1.5) percent per
month; provided, however, if such rate is not then lawful, any such payment
shall accrue interest at the highest lawful rate then available.
7. TERM AND TERMINATION
7.1 TERM. This Agreement shall be effective from the date first set forth above
until the Expiration Date, unless otherwise terminated as provided
hereunder.
7.2 TERMINATION WITHOUT CAUSE. Licensee shall have the right to terminate this
Agreement without cause on June 1, 2001; provided, however, that no
such termination shall be effective unless (i) Licensee provides a
Termination Notice via overnight courier to HealthGate and (ii) Licensee
remits $1,000,000 to HealthGate.
7.3 TERMINATION FOR BREACH. Either party shall have the right to terminate this
Agreement in the event that the other party hereto has materially breached
this Agreement; provided, however, that no such termination shall be
effective unless (i) the terminating party provides the Termination Notice
via overnight courier to the other party setting forth the facts and
circumstances constituting the breach, and (ii) the party alleged to be in
default does not cure such default within ten (10) business days following
receipt of the Termination Notice. In the event that the nature of the
default specified in the Termination Notice cannot be reasonably cured
within ten (10) business days following receipt of the Termination Notice,
a party shall not be deemed to be in default if such party shall, within
such ten (10) day period, present a schedule to cure the default, commences
curing such default and thereafter diligently executes the same to
completion within six months.
<PAGE>
If the breach specified in the Termination Notice is timely cured or cure
is commenced and diligently pursued, as provided above, the Termination
Notice shall be deemed rescinded and this Agreement shall continue in full
force and effect. Notwithstanding the foregoing, all Termination Notices
for non-payment must be cured with thirty (30) days of receipt. In the
event the default specified in the Termination Notice cannot be reasonably
cured at all, a party shall be deemed to be in default.
7.4 POST TERMINATION OBLIGATIONS. In the event of termination of this Agreement
by any party, all fees previously due or owing by any party as of the date
of termination will be immediately due and payable in full.
8. HEALTHGATE TRADEMARKS AND TRADEMARKS OF OTHERS
8.1 HEALTHGATE TRADEMARKS. Notwithstanding the limited right to use the
HealthGate Trademarks on the HealthGate Products, Licensee recognizes and
acknowledges HealthGate is the sole owner of the HealthGate Trademarks; and
all rights therein and the goodwill pertaining thereto belong exclusively
to HealthGate. Accordingly, any use by Licensee of the HealthGate Products,
or of any HealthGate Trademarks pursuant to this Agreement, shall be
subject to HealthGate's approval, which HealthGate may deny or revoke at
any time if in HealthGate's sole judgment such use is not consistent with
the goodwill otherwise associated with the HealthGate Trademarks. Neither
this Agreement nor any rights granted hereunder will operate as a transfer
to Licensee or the HealthGate Products of any rights in or to any
HealthGate Trademark, except for the limited rights expressly granted under
this Agreement.
8.2 LICENSEE TRADEMARKS. Notwithstanding the limited right to use the Licensee
Trademarks on the HealthGate Products, HealthGate recognizes and
acknowledges Licensee is the sole owner of the Licensee Trademarks; and all
rights therein and the goodwill pertaining thereto belong exclusively to
Licensee. Accordingly, any use by HealthGate of the Licensee Trademarks
pursuant to this Agreement, shall be subject to Licensee's approval, which
Licensee may deny or revoke at any time if in Licensee's sole judgment such
use is not consistent with the goodwill otherwise associated with the
Licensee Trademarks. Neither this Agreement nor any rights granted
hereunder will operate as a transfer to HealthGate of any rights in or to
any Licensee Trademark, except for the limited rights expressly granted
under this Agreement.
8.3 THIRD PARTIES' TRADEMARKS. In entering into this license to Licensee,
HealthGate is also acting on behalf of its Information Partners.
9. WARRANTY, INDEMNIFICATION AND LIMITATION OF WARRANTIES AND LIABILITY
9.1 WARRANTY.
9.1.1 HealthGate warrants to Licensee that it has the full legal right to
grant the license granted under this Agreement. HealthGate warrants
to Licensee that the HealthGate Products, in the forms delivered to
Licensee by HealthGate and when properly used for the purpose and in
the manner specifically authorized by this Agreement do not infringe
upon any patent, copyright, or trademark and do not misappropriate a
trade secret or other proprietary right of any person. To the extent
HealthGate has received a warranty of title from a Licensor with
respect to any specific intellectual property, HealthGate hereby
warrants to Licensee that it or its licensor has title to such
intellectual property only.
9.1.2 HealthGate warrants to Licensee that for a period of ninety (90) days
from the date of delivery of the HealthGate Products or an upgrade
thereto to Licensee that the HealthGate Products shall substantially
perform in accordance with Licensee's specifications; provided,
however, that any ninety (90) day warranty period for an update shall
only apply to that update and not to the HealthGate Product otherwise
existing as of the date of the upgrade. Licensee's sole and exclusive
remedy for breach of this warranty shall be for HealthGate to modify
or correct the HealthGate Products. This warranty shall not apply to
any HealthGate Product which has been modified by Licensee or by any
other party other than HealthGate, or which has been used in any
other manner other than as authorized under this Agreement.
9.1.3 With respect to the development services provided in Section 2.3,
HealthGate warrants to Licensee
<PAGE>
that any software products delivered to Licensee are not capable of
permitting any of the following: (1) unauthorized access to or
intrusion upon; (2) disabling of; (3) erasure of; or (4) interference
with any hardware, software, data or peripheral equipment; provided,
however, this warranty shall not apply to e-mails, electronic
transfers, or other database sharing.
9.1.4 HealthGate expressly warrants that HealthGate Products are currently
Year 2000 complaint. "Year 2000 compliant is defined to mean
HealthGate Products accurately and unambiguously process (including,
but not limited to, compare, calculate, manipulate, sequence,
display, and exchange data with other systems) data containing time
and/or dates prior to, at, and after the year 2000 without error or
interruption, and the products operate properly and in conformance
with applicable specifications, continuously, before, at, and after
the year 2000."
9.1.5 With respect to the development services provided in Section 2.3,
each of HealthGate's employees, agents or representatives assigned
to perform services hereunder shall have the proper skill, training
and background so as to be able to perform in a competent and
professional manner and all work will be so performed.
9.2 HEALTHGATE INDEMNITY. HealthGate shall defend or settle, at its own
expense, any cause of action or proceeding brought against Licensee which
is based on a claim that the use of the Information as provided hereunder
infringes any patent, copyright, trade secret or other proprietary right.
HealthGate shall indemnify and hold Licensee harmless against all damages,
judgments, and attorneys' fees arising out of the foregoing, provided that
Licensee gives HealthGate prompt written notice of such claim. If a claim
is made that the use of the Information as provided hereunder infringes any
patent, copyright, trade secret or other proprietary right, HealthGate
shall either procure for Licensee the right to continue using the
Information, modify it to make it non-infringing but continue to meet the
specifications therefor, or replace it with a similar non-infringing
content as determined by the sole discretion of HealthGate.
9.3 LICENSEE'S INDEMNIFICATION OBLIGATIONS. Excluding claims arising out of or
relating to the violation by HealthGate or an Information Partner of any
third party copyright, trade secrets, or trademark, Licensee, to the extent
permitted by applicable law, agrees to indemnify HealthGate and its
Information Partners and hold them harmless from and against any and all
claims of Licensee, Authorized Users or other third parties arising out of
or related to the use of the HealthGate Products, the Information or other
licensed materials, regardless of whether such claims were foreseeable by
HealthGate or the Information Partner. The provisions of this Section 9.3
will survive any termination.
9.4 DISCLAIMER OF WARRANTIES, LIMITATION TO WARRANTIES AND LIABILITIES.
THE WARRANTIES EXPRESSED IN SECTION 9.1 ABOVE REPRESENT THE ENTIRE
WARRANTY OF HEALTHGATE WITH RESPECT TO THIS AGREEMENT, AND ARE IN LIEU OF
ANY AND ALL OTHER WARRANTIES, WRITTEN OR ORAL, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR WARRANTIES
OF FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH HEALTHGATE DISCLAIMS.
DUE TO THE NUMBER OF SOURCES FROM WHICH INFORMATION ON THE HEALTHGATE
PRODUCTS IS OR WILL BE OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC
DISTRIBUTION, THERE MAY BE DELAYS, OMISSIONS OR INACCURACIES IN SUCH
INFORMATION AND THE HEALTHGATE PRODUCTS. THE HEALTHGATE PRODUCTS COULD
INCLUDE TECHNICAL OR OTHER INACCURACIES OR TYPOGRAPHICAL ERRORS.
PERIODICALLY, CHANGES MAY BE MADE IN THE INFORMATION PROVIDED IN THE
HEALTHGATE PRODUCTS. HEALTHGATE AND ITS AFFILIATES, AGENTS AND ITS
INFORMATION PARTNERS CANNOT AND DO NOT WARRANT THE ACCURACY,
COMPLETENESS, CURRENTNESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE INFORMATION AND CONTENT AVAILABLE THROUGH THE HEALTHGATE
PRODUCTS, OR THE HEALTHGATE PRODUCTS THEMSELVES, OR ANY OTHER INFORMATION
WHICH IS REFERENCED BY OR LINKED TO THE HEALTHGATE PRODUCTS. THE PRESENCE
IN OR ABSENCE FROM THE INFORMATION, RELATED MATERIALS, DATA, EVENTS,
RESEARCH OR DEVELOPMENTS DOES NOT IMPLY THE SPECIFIC EXISTENCE OR THE
NON-EXISTENCE THEREOF, NOR DOES HEALTHGATE CLAIM COMPREHENSIVENESS OR THE
ABSENCE OF ERRORS. HEALTHGATE ASSUMES NO RESPONSIBILITY FOR THE USE OF
<PAGE>
THE HEALTHGATE PRODUCTS BY THE LICENSEE OR AUTHORIZED USERS. HEALTHGATE
AND ITS INFORMATION PARTNERS SHALL NOT BE LIABLE FOR LOSS OF PROFITS,
LOSS OF USE, OR INCIDENTAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES AS A
RESULT OF USE OF THE HEALTHGATE PRODUCTS OR THE INFORMATION, EVEN IF
EXPRESSLY MADE AWARE OF THE POSSIBILITY THEREOF. EXCEPT FOR ANY CLAIM FOR
INDEMNITY UNDER SECTION 9.2, IN NO EVENT MAY ANY ACTION BE BROUGHT
AGAINST HEALTHGATE, OR AN INFORMATION PARTNER ARISING OUT OF THIS
AGREEMENT MORE THAN ONE YEAR AFTER THE CLAIM OR CAUSE OF ACTION ARISES,
DETERMINED WITHOUT REGARD TO WHEN THE LICENSEE OR AUTHORIZED USER SHALL
HAVE LEARNED OF THE ALLEGED DEFECT, INJURY, OR LOSS. IN NO EVENT SHALL
HEALTHGATE'S LIABILITY UNDER THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT
OF LICENSE FEES PAID BY LICENSEE PURSUANT TO THIS AGREEMENT (WHETHER SUCH
LIABILITY ARISES FROM BREACH OF WARRANTY, BREACH OF THIS CONTRACT OR
OTHERWISE, AND WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE AND
STRICT LIABILITY). THE PROVISIONS OF THIS SECTION 9.4 SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT.
10. MISCELLANEOUS
10.1 With respect to the development services provided in Section 2.3,
HealthGate acknowledges that Confidential Information provided by
Licensee may also be protected by law. HealthGate will neither disclose
such information, directly or indirectly, nor use such information for
any purpose except to perform the services described in this Agreement.
Patient medical and financial files and all documents or records of
Licensee which may be used or received by HealthGate shall remain
exclusive property of Licensee.
Licensee, on behalf of itself and the Affiliated Providers and HPG
Members, acknowledges that Confidential Information provided by
HealthGate may also be protected by law. Licensee, the Affiliated
Providers and HPG Members will neither disclose such information,
directly or indirectly, nor use such information for any purpose except
to perform the services described in this Agreement.
Either party shall take appropriate action, by instruction to or
agreement with its employees, agents and subcontractors, to maintain the
confidentiality of the Confidential Information. Either party agrees to
execute written Confidentiality Agreements with its employees, agents,
and subcontractors addressing either party's obligations set forth in
this section. Either party shall promptly notify the other party in the
event that it learns of any unauthorized release of Confidential
Information.
Either party shall have no obligation with respect to:
(a) Confidential Information made available to the general public
without restriction by the other party or by an authorized third
party;
(b) Confidential Information rightfully known to either party
independently of disclosures by the other party under this
Agreement;
(c) Confidential Information independently developed by either party;
(d) Confidential Information that either party may be required to
disclosure pursuant to subpoena or other lawful process;
provided, however, that the party notifies the other party in a
timely manner to allow the other party to appear and protect its
interests; or
(e) Any information regarding any Authorized User of the HealthGate
Products obtained from or through their use of those products.
Upon the termination of this Agreement, either party shall:
(a) Immediately cease to use the Confidential Information.
(b) Return to the other party, Confidential Information and all
copies thereof within thirty (30) days of the termination or
destroy the Confidential Information in accordance with the other
party's policy and all-applicable state and federal laws.
(c) Upon request, certify in writing to the other party that it has
complied with its obligations set forth in this Section.
<PAGE>
The parties acknowledge that monetary remedies may be inadequate to
protect their rights with respect to Confidential Information and that,
in addition to legal remedies otherwise available to either party,
injunctive relief is an appropriate judicial remedy to protect either
party's rights in Confidential Information.
Either party hereby agrees to indemnity and hold harmless the other
party from and against any and all liability, loss, damage, claims or
causes of action and expenses associated therewith (including attorney's
fees) caused directly or indirectly by the party's breach of its
obligations under this Section 10.1. Either party may enforce the other
party's obligations hereunder by seeking equitable relief which remedy
shall be nonexclusive. Either party agrees to provide reasonable
assistance and cooperation upon the request of the other party in
connection with any litigation against third parties to protect
Confidential Information.
10.2 INDEPENDENT CONTRACTOR. HealthGate and Licensee are and shall remain
independent contractors with respect to all matters pursuant to the
Agreement.
10.3 ASSIGNMENT. Licensee may sell, transfer, assign, or subcontract, any right,
license or obligation set forth in this Agreement without the express
advance written consent of HealthGate; provided, however, Licensee may not
sell, transfer, assign, or subcontract, any right, license or obligation
set forth in this Agreement to Medscape, WebMD, Healtheon, and Dr. Koop or
any of their successors or assigns.
10.4 AMENDMENTS IN WRITING. No amendment, modification, or waiver of any
provision of this Agreement shall be effective unless it is set forth in a
writing that refers to this Agreement and is executed by an authorized
representative of each party hereto. No failure or delay by any party in
exercising any right, power, or remedy will operate as a waiver of any such
right, power, or remedy.
10.5 NOTICES. All notices required hereunder (except invoice or purchase orders
as provided herein) shall be in writing and shall be deemed to have been
duly given upon receipt, and shall be either delivered in person, by
registered or certified mail, postage prepaid, return receipt requested, or
by overnight delivery service with proof of delivery, and addressed as
follows:
To HealthGate: Rick Lawson
HealthGate Data Corp.
25 Corporate Drive
Suite 310
Burlington, Massachusetts 01803
with a copy to:
Keith Higgins, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts, 02110
To Licensee: Attn: Director, I/S Contracts
Columbia Information Systems, Inc.
2555 Park Plaza
Nashville, Tennessee 37203
with a copy to any person listed herein or in an Exhibit, and to:
General Counsel
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, Tennessee 37203
10.4 PUBLICITY. HealthGate and Licensee agree not to advertise or to use the
other party's name in any advertising, except as contemplated by this
Agreement, without first obtaining written consent from the other party,
which
<PAGE>
consent shall not be unreasonably withheld.
10.5 BOOKS AND RECORDS. Pursuant to the requirements of 42 CFR 420.300 et seq.,
HealthGate agrees to make available to the Secretary of HHS, the
Comptroller General of GAO or their authorized representatives, all
contracts, books, documents and records necessary to verify the nature and
extent of the costs of the services provided hereunder for a period of four
(4) years after the furnishing of services hereunder for any and all
services furnished under this Agreement. In addition, HealthGate hereby
agrees to require by contract that each subcontractor makes available to
the HHS and GAO, or their authorized representative, all contracts, books,
documents and records necessary to verify the nature and extent of the
costs of the services provided thereunder for a period of four (4) years
after the furnishing of services thereunder.
HealthGate agrees to comply at all times with the regulations issued by
HHS, published at 42 CFR 1001, and which relate to HealthGate's obligation
to report and disclose discounts, rebates and other reductions to Licensee
for products purchased by Licensee under this Agreement.
If HealthGate carries out the duties of this Agreement through a
subcontract worth $10,000 or more over a twelve month period with a related
organization, the subcontract will also contain a clause substantially
identical to those contained in the foregoing sections of this Agreement to
permit access by Licensee, the Secretary, the United States Comptroller
General and their representatives to the related organization's books and
records.
Licensee rights under this Section shall survive for a period of four (4)
years after termination or expiration of this Agreement.
HealthGate represents and warrants that it has not been excluded from
participation in any Federal healthcare program as defined in 42 U.S.C.
Section 1320a-7b(f).
10.6 AUDIT/REPORTING. Licensee shall have the right, during normal business
hours and with reasonable advance notice, to review and photocopy
HealthGate's books and records that pertain directly to the accounts of
Licensee, HPG Members, or Authorized Users. The audit may be conducted by
Licensee's employees or by an external auditing firm selected by Licensee.
The cost of audit, including the cost of the auditors and reasonable cost
of copies of books and records shall be paid by Licensee. Licensee shall
have no obligation to pay the cost incurred by employees and agents of
HealthGate in cooperating with Licensee in such audit. Licensee does not
have the right to review the books and records that pertain to the accounts
of other HealthGate customers or business partners. Licensee may not
conduct more than one such audit per year. Any personnel of Licensee shall
sign a mutually agreeable confidentiality agreement before such audit is
done.
10.7 THIRD PARTY RIGHTS. This Agreement is not intended and shall not be
construed to create any rights for any third party.
10.8 FORCE MAJEURE. Neither party shall be liable nor deemed to be in default of
its obligations hereunder for any delay or failure in performance under
this Agreement or other interruption of service resulting, directly or
indirectly, from acts of God, civil or military authority, act of war,
accidents, natural disasters or catastrophes, strikes, or other work
stoppages or any other cause beyond the reasonable control of the party
affected thereby. However, each party shall utilize it best good faith
efforts to perform such obligations to the extent of its ability to do so
in the event of any such occurrence or circumstances. If a single force
majeure condition causes a delay or failure in performance under this
Agreement or other interruption of service exceeding ninety (90) days, the
nonaffected party may terminate subject to the requirements of Section 7.5
above by providing a Termination Notice to the affected party.
<PAGE>
10.9 INSURANCE. HealthGate shall maintain liability coverage for errors and
omissions with coverage of at least $1,000,000 per incident and
$3,000,000 in the aggregate. Licensee shall be provided a copy of the
certificate of insurance upon signing of this Agreement. Licensee shall
be promptly notified at least thirty (30) days prior to any cancellation
of policy or reduction in coverage below the required amounts specified
in this Section 10.9.
10.10 LEGAL FEES. In the event of any litigation between the parties concerning
this Agreement, the prevailing party shall be awarded reasonable
attorney's fees and other costs and expenses incurred in connection with
such action.
10.11 GOVERNING LAW. The validity, interpretation, and performance of this
Agreement shall be governed by and construed in accordance with the laws
of the State of Tennessee.
10.12 ENTIRE AGREEMENT; SEVERABILITY. This Agreement, together with the
schedules and other attachments referenced herein, contains a full and
complete expression of the rights and obligations of the parties hereto.
If any provision of this Agreement conflicts with any schedule or
attachment to this Agreement, this Agreement shall control with respect
to the subject matter of such attachment. This Agreement supersedes any
and all other previous agreements, written or oral, made by the parties
concerning the subject matter hereof. If any provision of this Agreement
is finally held by a court or arbitration panel of competent jurisdiction
to be unlawful, the remaining provisions of this Agreement shall remain in
full force and effect to the extent that the parties' intent can be
lawfully enforced. Without limiting the generality of the foregoing, it
is expressly agreed that the terms of any Licensee purchase order will be
subject to the terms of this Agreement and that any acceptance of a
purchase order by HealthGate will be for acknowledgment purposes only and
none of the terms set forth in the purchase order will be binding upon
HealthGate.
<PAGE>
IN WITNESS WHEREOF, duly authorized representatives of the parties have executed
this Agreement under seal as of and effective the date first written above:
HEALTHGATE DATA CORP. LICENSEE
By: /s/ William S. Reece By: /s/ Noel Williams
-------------------------- ------------------------------
Name: William S. Reece Name: Noel Williams
------------------------ ----------------------------
Title: Chief Executive Officer Title: President
----------------------- ---------------------------
<PAGE>
Schedule A: Functional Requirements for the Portal
o HealthGate Content
o Health Communities (enhanced Wellness Centers)
o Licensee Facility Finder
o Search
o Home Page News Lead
o Health Tip of the Day
o Weather
o Licensee will have the ability to select the content topics to be
included in the Portal.
o Licensee shall have the right to have HealthGate make enhancements
and changes to the Portal, drawing upon the two thousand and eighty
(2080) hours bank for customization.
o Registration: Users will only be required to register only once to
access the Portal and any number of CHOICE Web Sites provided under
this Agreement for an Affiliated Provider or HPG Member. Licensee
will control (on the applicable Affiliated Providers' or HPG
Members' CHOICE Web Site or Portal) when/where they are asked to
register. Users' origin will be tracked (i.e. the applicable
Affiliated Providers' or HPG Members' CHOICE Web Site or Portal and
home page URL will be associated with each user record in the
registration database). Licensee will have access to the
registration database for Licensee, the applicable Affiliated
Providers' or HPG Members' CHOICE Web Site, the Portal, and any
additional new web properties.
o Personalization: Users will be identifiable upon reentry after
registration by use of a cookie left on user's computer. Email to
users will be designated to the user as being from the applicable
Affiliated Providers or HPG Members or from the Portal.
The following two features will be phased into the Portal within sixty (60) days
of delivery of the Portal:
o Discussions
o Chats
A mutually agreed upon delivery date of the following feature will be scheduled
after Licensee provides a specification of requirements to HealthGate:
o The Spotlight
<PAGE>
Schedule B: Functional Requirements for CHOICE Web Site
o Licensee will provide the applicable Affiliated Providers or HPG Members
the ability, through Licensee's ICU tool, to select the HealthGate content
topics to be included in the facility's web site.
o Content will be integrated into each applicable Affiliated Providers' or
HPG Members' web presence (generated by ICU tool) as well as the Portal.
All pages will maintain the applicable Affiliated Providers' or HPG
Members' or the Portal's look, feel, branding, images, colors, etc, along
with mutually agreed upon co-branding. All content will be delivered using
one of the eight (8) Licensee-defined and developed templates. HealthGate
and Licensee may mutually agree to additional Licensee-defined and
developed templates.
o Co-branding will feature a "powered by HealthGate" logo (similar to the
http://choice.healthgate.com/swedish/default.asp?a=cons site on the
Internet today) on the applicable Affiliated Providers' or HPG Members'
site and the Portal on the pages that contain HealthGate content. The
applicable Affiliated Providers' or HPG Members' or the Portal's branding
will be the predominant brand.
o Licensee will have the ability to build a program or community by
selecting content in a given category and combining it with our original
content. Licensee will have the ability to integrate sponsor-provided
content along with HealthGate content in a community/program. Licensee and
HealthGate will work out logistics for reviewing and incorporating
original content from individual providers and physicians into HealthGate
content on the CHOICE Web Sites.
o "Home" buttons will go to the applicable Affiliated Providers' or HPG
Members' home page or the Portal home page. A "Contact Us" button will go
to individual provider's site administrator or the Portal site
administrator.
o Links to facility specific content will appear on all pages. Licensee will
send an XML document for the applicable Affiliated Providers' or HPG
Members' CHOICE Web Site. HealthGate will incorporate this Licensee
information into a sidebar on each site.
o Licensee will have the ability to embed hyperlinks into content pages.
Licensee will send an XML document for the applicable Affiliated
Providers' or HPG Members' CHOICE Web Site. HealthGate will incorporate
this Licensee information into a sidebar on each site.
o Registration: Users will only be required to register only once to access
the Portal and any number of Licensee CHOICE Web Sites. Licensee will
control (on the applicable Affiliated Providers' or HPG Members' CHOICE
Web Site or the Portal) when/where they are asked to register. Users'
origin will be tracked (i.e. the applicable Affiliated Providers' or HPG
Members' CHOICE Web Site or Portal and home page URL will be associated
with each user record in the registration database). Licensee will have
access to the registration database for Licensee, the applicable
Affiliated Providers or HPG Members, the Portal, and any additional new
web properties.
o Personalization: Users will be identifiable upon reentry after
registration by use of a cookie left on user's computer. Email to users
will be designated to the user as being from the applicable Affiliated
Providers or HPG Members or from the Portal.
o Search: Users will be able to select to search facility content,
HealthGate Patient and Consumer content, or all. The date of availability
to search HealthGate Professional content is to be determined.
<PAGE>
Schedule C: Customized Content and Services for the
Portal and the CHOICE Web Site
1. Content and Features Available on the Portal and/or through the affiliated
CHOICE Web Sites
o Healthy Living Webzines, enhanced to include links to and from
Wellness Centers, includes Healthy Eating, Healthy Woman, Healthy
Man, Healthy Sexuality, Healthy Parenting, Healthy Mind, Alternative
Health, Healthy Rx, Healthy Athlete, Healthy Traveler, and Healthy
After 50.
o Wellness Centers
o Merriam-Webster Medical Dictionary
o Health Advisors, includes Adult, Behavioral, Pediatric, Women's and
Senior (Adult, Women's and Pediatric includes both English and
Spanish topics)
o Partial access to Portal (40% of Health Advisor topics for
free)
o Full access to affiliated CHOICE
o Well-Connected Reports
o Partial access to Portal
o Full access to affiliated CHOICE
o A comprehensive patient/consumer drug source
o The USP Drug book for consumers
o To define requirements for links to and from Wellness Centers
o Omni-search capabilities for consumer and patient content on the
Health Portal site
o Related Topics Context development for e-commerce
o Digital coupons for affiliateds with CHOICE
o Health News
o Complete Guide to Symptoms, Illness, and Surgery
o Diagnostic Procedures Handbook
o Vitamins and Minerals
o Mastering Stress
o Access to affiliated organizations with CHOICE only
o Health Calculators, cholesterol, aging, BMI, etc.
o Risk Assessment
o "Where does it Hurt?", an interactive user component
o New England Journal of Medicine Weekly Briefings
o Access to affiliated organizations with CHOICE via connection
to the HealthGate Network
o AIDSDRUGS
o AIDSLINE
o AIDSTRIALS
o BIOETHICSLINE
o CANCERLIT
o Detweiler's Directory of Health and Medical Resources
o HealthStar
o MEDLINE
o Registration module
o An integrated registration system to allow registering a
visitor to both the Columbia-eHC.com components as well as the
HealthGate components of the portal site and the co-branded
CHOICE site
2. Content and Features Available to CHOICE Web Sites
o A liability disclaimer, provided by Licensee is to appear on each
page of the site.
o The Resource Locator module, which currently includes "Find a
Doctor." "Find a Facility," and "Find a Training Program" is still
under development and will be made available at a later date.
Implementation of "Find a Doctor" requires Licensee to populate an
Access database, template of which will be provided by HealthGate.
o Providing Resource Locator Administration capabilities for
Columbia-eHC.com affiliated organizations
<PAGE>
o The Intelligent Promotional module.
o "Send to a Friend" email application
o An on-line bookstore
o School Nurse Module
o "Send to a Librarian" email function
o Print customization module
o Usage reports
<PAGE>
Schedule D: Delivery
1. Portal Delivery: The Portal shall be delivered on or before January 31,
2000. Delivery is contingent upon a complete specification being mutually
agreed to by the parties and received by HealthGate no later than October
31, 1999. (Delivery will be possible 90 days after receipt of a complete
specification.)
2. CHOICE Web Site: The CHOICE Web Site shall be delivered on or before
November 1, 1999. Delivery is contingent upon a fully executed agreement
being completed on or before October 8, 1999.
3. Content and Services: The Content and Services to the Portal and/or the
CHOICE Web Site shall be delivered on or no later than January 31, 2000,
or when the Portal is delivered, whichever comes later.
<PAGE>
Schedule E: Fees
1. License Fees: Licensee shall remit to HealthGate a license fee of
$3,500,000 annually for the HealthGate Products and services received. The
license fee shall be payable as follows: i) the first quarterly payment
shall be paid on ______________, 1999, ii) the second quarterly payment
shall be paid on or before _________, 1999, and iii) thereafter the
balance shall be paid monthly in equal installments of $291,667 per month
on or before the first day of each month.
2. Commissions on Net Advertising Revenue: During the term of this Agreement,
including any extensions, Licensee shall receive, as commission on
advertising and sponsorship, 25% of the Net Advertising Revenue and as
commission on e-commerce, 25% of the Net E-Commerce Revenue for
non-pharmaceutical e-commerce of non-Medicare reimbursed products and
services. Commission shall be paid quarterly, within 45 days after the
close of the quarter. HealthGate shall retain 75% of the Net Advertising
Revenue, 75% of the Net E-Commerce Revenue for non-pharmaceutical or
non-Medicare reimbursed products or services, and 100% of the Net
E-Commerce for pharmaceutical e-commerce of Medicare reimbursed products
or services.
<PAGE>
EXHIBIT 10.39
SNAP STRATEGIC ALLIANCE AGREEMENT
HEALTHGATE DATA CORP.
This Strategic Alliance Agreement (the "Agreement") is made and entered into as
of October 29, 1999 (the "Effective Date") between Snap! LLC, a Delaware limited
liability company, with its principal place of business at One Beach Street, San
Francisco, California 94133 ("Snap"), Xoom.com, Inc., a Delaware corporation
with its principal place of business at 300 Montgomery Street, Suite 300, San
Francisco, California 94104 ("Xoom"), and HealthGate Data Corp., a Delaware
corporation, with its principal place of business at 25 Corporate Drive, Suite
310, Burlington, Massachusetts 01803 (the "Company"). Pursuant to this
Agreement, Snap will provide various services to the Company to assist the
Company in promoting its Internet site and the products and services offered
through its Internet site. Accordingly, the parties hereby agree as follows:
1. BACKGROUND.
1.1. The Company operates an Internet site located at
http://www.healthgate.com,which is designed to provide
Internet-based personal health and medical information,
products and services to online consumers.
1.2. Snap operates a search and aggregation "portal" site on the
Web.
1.3. Xoom operates a direct marketing site on the Web.
1.4. Snap has entered into an Agreement and Plan of Contribution
and Merger, dated as of May 9, 1999 with Xoom and others, and
the Second Amended and Restated Agreement and Plan of
Contribution, Investment and Merger dated as of July 8, 1999
with National Broadcasting Company, Inc. ("NBC") and others
(collectively, as such agreements may be amended, the "Merger
Agreements") pursuant to which the existing businesses of
Xoom, Snap and other assets of NBC will be combined to form
NBC Internet, Inc. ("NBCi"). The closing of the transactions
contemplated by the Merger Agreements is expected to occur
prior to December 31, 1999 (the "NBCi Closing"). Following the
NBCi Closing, Xoom and Snap may assign their rights and
obligations hereunder to NBCi. If the NBCi Closing does not
occur, Snap and Xoom shall remain as separate parties under
this Agreement, unless this Agreement is terminated by one of
the parties as provided herein.
2. CERTAIN DEFINITIONS. As used in this Agreement, the terms set forth
below shall have the following meanings:
2.1. "Above the Fold" means that a particular item on a Web page is
viewable on a computer screen at an 800 x 600 pixels
resolution when the User first accesses such Web page, without
scrolling down to view more of the Web page.
2.2. "Anchor Tenant" means a preferred Web content provider whose
position is greater in size and prominence than that of any
non-affiliated third party within the relevant Snap Site page
or area of a page.
1
<PAGE>
2.3. "Best of Breed" means (i) those personal health and/or medical
content and shopping services available on the Internet with
the most advanced and commercially successful, functionality,
performance, content, and features, whether utilitarian or
aesthetic, and (ii) the ability of the Company Site and the
Co-Branded Site to scale easily with only additional hardware
and to accommodate, at a minimum, the peak traffic volume of
the third most visited Internet personal health and/or medical
site.
2.4. "Business Day" shall mean any day on which banks in both New
York City and Los Angeles and the New York Stock Exchange are
open for the conduct of regular business.
2.5. "Click Thrus" means any type of link from the Snap Sites or
Wires that a User (as tagged by Snap pursuant to SECTION 11.2)
depresses or "clicks-on" and that delivers the User to the
Company Site or the Co-Branded Site.
2.6. "Co-Branded Site" means the co-branded version of the Company
Site, and successors to the foregoing, that is created
pursuant to SECTION 5.
2.7. "Commerce Offering" means any text, content, links or
promotions providing a direct or indirect opportunity for
Users on the Snap Sites or the Co-Branded Site to engage in a
commerce, purchase, trade, exchange, or purchase transaction,
whether paid or unpaid, or any registration or membership
opportunity for Users to provide User Profile Data, including,
without limitation, content purchase opportunities,
registration or membership sign-up opportunities, for-fee or
subscription-based content or services, other purchase
opportunities for products or services offered by the Company
directly or indirectly, links to any such opportunities
presented to Users on the Snap Sites or the Co-Branded Site,
or other content areas of the Snap Sites or Co-Branded Site.
2.8. "Company Content" means the Company's and its licensors' text
links, logos, graphic links, and other materials, tools,
content, or text that are delivered by the Company to Snap
hereunder.
2.9. "Company Database" means User Profile Data and any other
information relating to Users of the Company Site or other
customers of the Company or purchasers of Company Products who
have had information about them collected or otherwise
obtained by the Company, or for the Company's use or benefit,
for the purpose of direct marketing or other communication
activities, and all updates or additional information that may
be added to such database during the Term.
2.10. "Company Marks" means the Company's and its licensors'
trademarks, trade names, service marks and logos that may be
delivered by the Company to Snap hereunder.
2.11. "Company Products" means all personal health and medical
products and related services offered through the Company Site
or the Co-Branded Site.
2.12. "Company Site" means the Internet site operated by the Company
at http://www.healthgate.com, together with any mirror sites,
and successors to any of the foregoing.
2.13. "Competitor" means a Web site or person providing products or
services that compete with products or services provided by
Snap, as Snap shall determine from time to time.
2
<PAGE>
2.14. "Contract Year" shall mean Year One, Year Two or Year Three,
as applicable.
2.15. "Front Door Highlight Link" means a text link on the front
door of the Snap Site, including any one of the three front
doors of the Snap Site: Home, Local, and My Snap, and any
other front door created by Snap in the future for the Snap
Site. Snap, in its sole discretion, may cease use of the Front
Door Highlight Link at any time for any reason. In such an
event, the parties shall mutually agree on a specific
Promotion of substantially equivalent value to replace the
Front Door Highlight Link and such specific Promotion shall
for all purposes of this Agreement be deemed a Front Door
Highlight Link.
2.16. "Front Door Window" means the promotional box on the front
door of the Snap Site, including any one of the three front
doors of the Snap Site: Home, Local, and My Snap, and any
other front door created by Snap in the future for the Snap
Site. Snap, in its sole discretion, may cease use of the Front
Door Window at any time for any reason. In such an event, the
parties shall mutually agree on a specific Promotion of
substantially equivalent value to replace the Front Door
Window and such specific Promotion shall for all purposes of
this Agreement be deemed a Front Door Window
2.17. "Health Channel" means the Health Channel on the Snap Sites.
2.18. "Health Content Portal(s)" means the specific aggregations of
linked content within areas of the Health Channel organized
around the Company Content, and relating to personal health
and medical information, products and services.
2.19. "Impression" means the display of any Promotion on any Snap
Site.
2.20. "Initial Registration Date" means the effective date of the
Registration Statement.
2.21. "Keyword Promotions" means any Promotion tied to one of the
keywords selected pursuant to Exhibit A attached hereto.
2.22. "Launch Date" means the date during the period set forth in
SECTION 5.4 on which the Co-Branded Site functions properly
and is made accessible to Users.
2.23. "Look and Feel" means the look and feel, User interface and
flow of User experience of an Internet site.
2.24. "Promotions" means (i) banners, buttons, windows, portals,
Keyword Promotions, Front Door Windows, text links, and other
promotions that are offered by Snap now or in the future and
link directly to the Company Site and/or the Co-Branded Site
from the Snap Sites; (ii) text links within email newsletters
distributed by Snap (including, without limitation, Wires) and
other promotions that are offered by Snap now or in the future
and link directly to the Company Site and/or the Co-Branded
Site; and/or (iii) a Front Door Highlight Link that links to
the Health Channel.
2.25. "Registration Statement" means the first registration
statement for a public offering of securities of the Company
on Form S-1, pursuant to and in accordance with the
requirements of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, in which the
gross proceeds to the Company of such offering exceed
$20,000,000.
3
<PAGE>
2.26. "Snap Marks" means any trademarks, trade names, service marks
and logos that may be delivered by Snap to the Company
hereunder.
2.27. "Snap Member" means a User who has registered to become a
member of one of Snap's registration-based services including,
without limitation, the Snap Sites and the free email service
available at http://www.email.com.
2.28. "Snap Product Manager" means a Snap employee or independent
contractor holding editorial authority and responsibility for
a portal, site, collection, area, center or page on the Snap
Sites.
2.29. "Snap Sites" means: (i) subject to the "Distributor" (as
defined in SECTION 6.1 below) exclusion in SECTION 6.1, any
and all search and aggregation "portal," direct marketing and
Web commerce sites, whether operated by Snap or a third party
under the "Snap" brand, including, without limitation, the Web
site located at http://www.snap.com and, if the NBCi Closing
occurs, http://www.xoom.com, http://www.nbc.com and
http://www.videoseeker.com, together with any mirror sites,
any co-branded editions of such site that have been or may be
developed for Distributors, and successors to the foregoing;
(ii) if Snap so elects within its sole discretion, the
Enhanced Site and/or the International Editions, subject to
SECTION 6.2 and (iii) if Snap so elects within its sole
discretion, the Web site located at http://www.nbcin.com and
successors thereto, and NBC's network of affiliate Web
stations' Web sites, as updated from time to time by Snap in
its sole discretion.
2.30. "Snap Wire" means Snap's weekly email newsletter sent by Snap
to Snap Members.
2.31. "User" means any end-user of the Web.
2.32. "User Profile Data" means data regarding a User provided by
the User on the Snap Sites or the Co-Branded Site or otherwise
to Snap or the Company, including without limitation the
User's name, e-mail address, telephone number and other
information about the User.
2.33. "Web" means the World Wide Web part of the Internet.
2.34. "Wires" means, collectively, Snap Wires and Xoom Wires.
2.35. "Xoom Marks" means any trademarks, trade names, service marks
and logos delivered by Xoom to the Company hereunder.
2.36. "Xoom Wire" means Xoom's email newsletter sent by Xoom to
Users who have registered to become a member of the Web site
located at HTTP://WWW.XOOM.COM.
2.37. "Year One" means the thirteen month period beginning on the
Effective Date and ending upon the day before the thirteen
month anniversary of the Effective Date.
2.38. "Year Two" means the twelve month period beginning on the
thirteen month anniversary of the Effective Date and ending
upon the day before the twenty-five month anniversary of the
Effective Date.
4
<PAGE>
2.39. "Year Three" means the twelve month period beginning on the
twenty-five month anniversary of the Effective Date and ending
upon the day before the thirty-seven month anniversary of the
Effective Date.
3. PROMOTIONS; CONTENT; PERFORMANCE; AND ACCOUNT MANAGEMENT.
3.1. PROMOTION DESIGN. The Company will design any graphics and
other materials required for the Promotions and will supply
digital copies of such materials to Snap on the Launch Date.
Such materials will be designed and delivered in accordance
with Snap's reasonable technical and editorial guidelines, as
updated from time to time, including those set forth at
http://www.snap.com/media or any successor URL designated by
Snap. If the Company delivers such materials to Snap after the
Launch Date, then for each day thereafter, a pro-rata number
of the Impressions and Click Thrus required to be delivered
pursuant to this Agreement will be deemed to have been
delivered by Snap.
3.2. COMPANY CONTENT. Company agrees to provide Snap with the
Company Content as soon as practicable after the Effective
Date, and no later than ten days after the Effective Date,
except for Company Content which the Company is prohibited by
written contract to deliver and which the Company has
identified as such in a written notice to Snap at or prior to
the time of delivery of Company Content; provided, however,
that the Company will use its best efforts during the sixty
days from and after the Effective Date to obtain the
consent(s) of the other parties to such contracts to deliver
and use Company Content as contemplated by this Agreement.
During such sixty day period from and after the Effective
Date, so long as the Company is using its best efforts to
obtain such consents, Snap will not use on the Snap Sites
content, such as content not provided by the Company, that
Snap would otherwise have the right to use on the Snap Sites
pursuant to SECTION 4.1. Unless and until the Company obtains
the required consents of the relevant counterparties, Snap
will not use on the Snap Sites any content for which use on
the Snap Sites is prohibited by the terms of a written
contract to which the Company is a party and which the Company
has identified as such in a written notice to Snap at or prior
to the time of delivery of Company Content. In the event that
the Company fails to obtain the consents of relevant
counterparties to deliver all Company Content as contemplated
by this Agreement during the sixty days from and after the
Effective Date, then the Company shall continue to use its
best efforts to obtain all of such consents. The Company shall
ensure that the Company Content remains at all times current
by continually providing Snap with timely updates to the
Company Content. Furthermore, under no circumstances shall
Company Content include any content of a Competitor.
3.3. IMPRESSION AND CLICK THRU DELIVERIES.
3.3.1. IMPRESSIONS. Beginning on the Launch Date, Snap will
use commercially reasonable efforts to deliver a
total number of Impressions in the aggregate dollar
amounts of $7,500,000 during Year One, $7,500,000
during Year Two and $7,500,000 during Year Three.
Delivery of the Impressions hereunder will be based
on a schedule and placement guidelines selected by
Snap in its reasonable discretion, taking into
consideration the reasonable requests of the Company,
and at a 30% discount from the rates set forth in the
applicable Snap's standard rate card attached hereto
as EXHIBIT B; provided, however, that if all of the
rates set forth in Snap's then current standard rate
card decrease during the Term by more than 15%
relative to all of the rates set forth in EXHIBIT B,
then the number of Impressions to be reasonably
calculated by Snap and to be delivered by Snap
5
<PAGE>
hereunder shall increase in proportion to the amount
of decrease in rates in excess of the aforementioned
15%, with the number such additional Impressions to
be reasonably calculated by Snap and to be delivered
by Snap at such time and in such manner as Snap in
its sole discretion shall decide during the remainder
of the Term. Any Impression not listed in the
applicable Snap standard rate card shall be assigned
the value of a comparable Impression on such rate
card by Snap.
3.3.2. UNDERDELIVERY. If Snap fails to deliver the required
number of Impressions during the Term, the Company
agrees that Snap shall have an additional six months
to deliver such Impressions on any Web site operated
by Snap, Xoom or NBC, at Snap's discretion, taking
into consideration the reasonable requests of the
Company. If Snap underdelivers on the required number
of Impressions during such additional six months,
Snap will refund to the Company the pro rata amount
of the media fees set forth in SECTION 9.3 for such
undelivered Impressions. Snap shall not underdeliver
the required number of Impressions during any year of
the Term by greater than 15% of the number of
Impressions required to be delivered by Snap pursuant
to SECTION 3.3.1 during such year.
3.3.3. OVERDELIVERY. In the event that Snap delivers in
excess of the number of Impressions required to be
delivered pursuant to this SECTION 3.3 during any of
Year One, Year Two or Year Three, then such
over-delivery of Impressions, which shall not exceed
10% of the total number of Impressions required to be
delivered by SECTION 3.3.1 for such year, shall be
credited towards satisfaction of the next year's
obligations for Snap to deliver Impressions until all
obligations through the end of the Term have been
fulfilled, after which the Company will pay for any
additional Keyword Promotions delivered, with payment
to be at Snap's then applicable rate card charges for
Keyword Promotions.
3.3.4. CLICK THRU DELIVERY. During the Term, Snap will use
reasonable efforts to deliver Click Thrus to the
Co-Branded Site or the Company Site.
3.4. LINKS; PERFORMANCE STANDARDS. The Company will be responsible
for ensuring that each link embedded within a Promotion takes
the User to the appropriate area within the Company Site or
the Co-Branded Site (other than links to the Health Channel
for which Snap will be responsible), and that such sites
function with reasonable reliability and in a commercially
reasonable manner throughout the Term. In particular, the
Company agrees that the Company Site and the Co-Branded Site
will comply with the performance standards set forth in
EXHIBIT C attached hereto throughout the Term. Any failure by
the Company to comply with this Section will be deemed to be a
material breach of this Agreement. In the event of such
breach, Snap shall be deemed to have delivered Impressions and
Click Thrus required to be delivered pursuant to this
Agreement on a daily, straight-line, pro-rata basis for the
duration of such breach.
3.5. BEST OF BREED. During the Term, in the event that Snap, in its
reasonable discretion, determines that the Company has failed
to maintain the Company Site, Company Content, or the
Co-Branded Site as Best of Breed in any material respect, Snap
shall have the right to terminate this Agreement in accordance
with SECTION 10.2 and shall have the right to remove any
deficient Company Content from the Snap Sites and the
Co-Branded Site until the Company has corrected such failure.
Snap acknowledges that all Company Content and the Company
Site are Best of Breed as of the Effective Date.
6
<PAGE>
3.6. ACCOUNT MANAGEMENT.
3.6.1. ACCOUNT AND CONTACT MANAGERS. For the purposes of
this Agreement, Rita Han shall be Snap's account
manager for the Company and Rick Lawson shall be the
Company's contact manager for Snap (collectively, the
"Managers"). Subject to SECTION 17.12, the Managers
shall be the primary points of contact for inquiries
and requests, and each Manager shall provide the
other with such information and assistance as may be
reasonably requested by the other from time to time.
Either party to this Agreement may change its
designated Manager by giving the other party written
notice of such change.
3.6.2. QUARTERLY MEETINGS. At least once each quarter, the
Managers shall discuss the Company's Promotions for
the next quarter, the effectiveness of the last
quarter's Promotions, the reports provided under
SECTION 11, and any other items under this Agreement
either Manager wishes to bring to the attention of
the other Manager.
4. ANCHOR TENANCY.
4.1. ANCHOR TENANT OF CERTAIN HEALTH CHANNEL CONTENT AREAS. After
the Launch Date and during the Term, Snap will feature the
Company as the Anchor Tenant within seven of the following
nine major content areas within the Health Channel:
Alternative Medicine, Drugs & Medications, Diseases &
Conditions, Nutrition, Women's Health, Sexual Health, Men's
Health, Child & Youth Health and Public Health. The Company
shall specify in writing its preference for the seven major
content areas in which it wishes to be featured as Anchor
Tenant at least thirty days prior to the Launch Date. Snap
Product Managers shall determine the major content areas in
which the Company shall be featured as the Anchor Tenant.
Subject to this SECTION 4, Snap may, in the exercise of its
reasonable discretion, make changes to the design and
functionality of the Health Channel including, without
limitation, the names of major content areas; provided,
however, that major content areas similar to, or addressing
the general categories listed above shall exist within the
Health Channel during the Term. As the Anchor Tenant of seven
major content areas of the Health Channel, the Company will
receive the most prominent positioning within each of such
major content areas. During the Term, there shall be no other
Anchor Tenant of any of the seven major content areas of the
Health Channel in which the Company is then the Anchor Tenant;
provided, however, that other major content areas, content not
provided by the Company, subject to the terms of SECTION 3.2,
and/or links to other, non-Company sites may exist on the same
Web page and elsewhere within the Health Channel. The Company
acknowledges that Snap may feature Anchor Tenants other than
the Company on any major content area within the Health
Channel that is not one of the seven major content areas of
the Health Channel in which the Company is the Anchor Tenant.
Snap and the Company shall negotiate in good faith to
incorporate additional health-related Company content, so long
as such content is Best of Breed, within the content areas of
the Health Channel in which the Company is not the Anchor
Tenant, provided; however, Snap shall not be obligated to
negotiate with respect to such Company content if an agreement
with Company regarding such Company content would be
interpreted or operate to cause Snap to breach any existing
contract or agreement between Snap and any other party, or
impair the rights of any such contract party pursuant to an
existing contract or agreement with Snap. In the event that
Snap elects to add new content areas on the Health Channel or
elsewhere on the Snap Sites, Snap will in good faith first
discuss with the Company obtaining
7
<PAGE>
additional health-related Company content, so long as such
content is Best of Breed, for such additional new content
areas. Snap will not enter into an agreement to add or create
new health-related content areas on the Health Channel with
another party pursuant to an agreement which is comparable in
number of content areas or total consideration to those of
this Agreement. On the Health Channel, the Company will have
the right to program up to five Health Content Portals, each
measuring no larger than approximately 150 x 400 pixels, with
relevant content and links to the Company Site. Snap shall
have the right, in its sole discretion, to add additional
content portals on the Health Channel; provided, however, the
Company shall have the right to program one additional Health
Content Portal, with the specifications set forth in the
foregoing sentence, for each health content portal on the
Health Channel greater than three that Snap elects to add in
addition to the five Health Content Portals. Company will
provide the appropriate Company Content, subject to the
reasonable discretion of a Snap Product Manager, for the
Health Content Portals. The Snap Product Manager may provide
the Company with reasonable assistance to enable the Company
to effectively design the Health Content Portals. Subject to
this SECTION 4.1, the Snap Product Manager will determine the
size and location, and the Look and Feel, of the Health
Content Portals; provided, however, that the Health Content
Portals will begin Above the Fold within five of the seven
major content areas of the Health Channel in which the Company
is the Anchor Tenant.
4.2. HARVESTING. The Company shall provide Company Content as
required herein pursuant to Snap's technical specification
policies for harvesting set forth in EXHIBIT D attached hereto
(unless otherwise mutually agreed to by the parties), as
updated from time to time in Snap's sole discretion. Snap
shall have the right, in its sole discretion, to harvest such
Company Content in a manner requiring a User of the Snap Sites
to "click through" as many as two Web pages within the Snap
Sites before the User is transferred to the Company Site or
the Co-Branded Site. Harvested Company Content will maintain
the Snap Sites' Look and Feel and will include branding for
the Company using Company Marks, in such form and placement as
a Snap Product Manager shall determine in his or her sole
discretion. Harvested Company Content shall not include any
Commerce Offering, except at Snap's sole discretion.
4.3. INTERNAL PROMOTIONS. Subject to the discretion of a Snap
Product Manager, during the Term, Snap shall promote and link
the Health Channel within and throughout the Snap Sites.
Subject to the discretion of a Snap Product Manager, the
Company may receive internal promotional links within relevant
sub-areas of the Snap Sites that link to the Co-Branded Site.
Such relevant sub-areas may include, without limitation, the
following: Shopping, Local, Education, Kids and Family. =
Snap, in its sole discretion, has the right to create,
maintain or discontinue any of the foregoing sub-areas on the
Snap Sites. In addition, Snap may include a link to the Health
Channel and/or the Co-Branded Site within issues of Snap Wire,
as determined by Snap in its sole discretion.
4.4. HOSTING. Snap will host the Health Channel, the Health Content
Portals and any Company Content harvested pursuant to SECTION
4.2 on its servers (or on servers within its control) and will
provide all computer hardware, software and personnel
necessary to operate and maintain the Health Channel, the
Health Content Portals and any harvested Company Content as
functional pages accessible to Users.
4.5. ADVERTISING. Snap shall own and have the right to use or sell
all of the advertising inventory on the Health Channel and on
the Company Content it may harvest. The Company acknowledges
that any advertising for and/or links to other sites similar
to or in
8
<PAGE>
competition with the Company may exist in the Health Channel.
Notwithstanding anything in this Agreement to the contrary,
any third party content or links may exist on any area of the
Health Channel. Moreover, other than as expressly set forth
herein, Snap shall have the right to display any third party
links, media, banner advertisements, other promotions, and/or
paid or unpaid editorial content anywhere on the Snap Sites.
5. CO-BRANDED SITE.
5.1. CO-BRANDED SITE DESCRIBED. The Company will develop the
Co-Branded Site in accordance with this SECTION 5 and Snap
will provide reasonable assistance in connection therewith.
The Co-Branded Site will provide all of the features and
functionality provided by, and will perform in a manner
substantially identical to, the Company Site, as the Company
Site may be updated and enhanced from time to time.
5.2. CHANGES. Snap acknowledges that the Company may change the
design and functionality of the Company Site from time to
time, in which case the design and functionality of the
Co-Branded Site will be changed in a similar fashion.
Notwithstanding the foregoing, the Company will ensure that
the Co-Branded Site at all times maintains the Snap Sites'
Look and Feel and will make all changes reasonably suggested
by a Snap Product Manager for editorial consistency. Snap
agrees that all such changes shall refer to the Look and Feel
of the Co-Branded Site and not to Company Content on the
Co-Branded Site. Snap shall provide reasonable written notice
to the Company prior to modifying the Look and Feel of the
Snap Sites.
5.3. CO-BRANDING FEATURES. Each page on the Co-Branded Site will
include branding for Snap and the Company so that the Snap
Marks and Company Marks are both Above the Fold and are of
substantially equivalent value and prominence to each other.
Each page of the Co-Branded Site will also comply with Snap's
co-branding technical specifications, as updated in Snap's
sole discretion from time to time, including those set forth
at http://partnermarketing.snap.com/cobrand/cobranded_specs.
html or any other successor URL designated by Snap, and
include appropriate navigation features, such as an embedded
link on each Snap logo to the front door of the Snap Sites,
drop down menus, breadcrumb trails linking the User to the
page of the Snap Sites from which the User originated,
navigation bars and a Snap search box, that will include links
to the Snap Sites. Snap Marks and links to the Snap Sites will
have placement on the Co-Branded Site that is at least as
prominent as any promotions or links to other portal or search
engine companies that may be promoted on the Co-Branded Site.
5.4. LAUNCH DATE. The Company will use its best efforts to achieve
a Launch Date for the Co-Branded Site not sooner than the date
on which the Company has paid Snap pursuant to SECTION 9.1 and
paid Snap the initial fees pursuant to SECTIONS 9.2 AND 9.3
("Initial Payment Date") and not later than seven days after
such Initial Payment Date; provided, however, that if the
Launch Date occurs later than seven days after the Initial
Payment Date or does not occur due to the fault of the
Company, then such failure will be deemed a material breach of
this Agreement by Company. Snap shall provide the Company with
reasonable assistance to launch the Co-Branded Site.
Notwithstanding the Launch Date, Snap shall have the right to
begin displaying Impressions immediately upon the Effective
Date. If the Launch Date of the Co-Branded Site does not occur
by seven days after the Initial Payment Date, due to the fault
of the Company, Snap shall be deemed to have delivered
Impressions and Click Thrus required to be delivered pursuant
to this Agreement on a daily, straight-line, pro-rata basis
for each day thereafter.
9
<PAGE>
5.5. HOSTING. The Company will host the Co-Branded Site on its
servers (or on servers within its control) and will provide
all computer hardware, software and personnel necessary to
operate and maintain the Co-Branded Site as a functional site
accessible to Users.
5.6. ADVERTISEMENTS. The Company shall own and have the right to
use or sell all of the advertising inventory on the Co-Branded
Site. The Company will display advertising on the Co-Branded
Site consistent with the number, type, and placement of
advertising displayed on the Company Site; provided, however,
that all advertisements on the Co-Branded Site must also
comply with Snap's reasonable editorial guidelines in effect
from time to time. The Company will not display advertisements
of Competitors on the Co-Branded Site. Further, if any
advertisement on the Co-Branded Site is reasonably deemed
inappropriate by Snap, the Company shall upon notice from Snap
immediately remove the advertisement from the Co-Branded Site.
For example, pornography would reasonably be deemed
inappropriate by Snap, but advertisements for the Healthy
Sexuality magazine of the Company would not reasonably be
deemed inappropriate.
5.7. DNS MAPPING. Using Domain Name System mapping, the URL for the
Co-Branded Site will begin with http://healthgate.snap.com.
The Company agrees that Snap will be entitled to count all
page views of the Co-Branded Site towards Snap's traffic as
measured by Media Metrix and other Internet traffic-auditing
firms.
5.8. MOST FAVORED CUSTOMER PRICING. The Company shall offer on the
Co-Branded Site and the Company Site to Users from the Snap
Sites the Company's most favored customer pricing, which means
pricing and terms substantially similar to the lowest pricing
and most favorable terms offered by the Company to any other
Users of the Company Site. The Company shall maintain
competitive pricing for the products and services it offers.
6. CO-BRANDED, ENHANCED, AND INTERNATIONAL EDITIONS.
6.1. CO-BRANDED EDITIONS. Company acknowledges that Snap produces
co-branded editions of the Snap Sites for various resellers,
distributors, other licensees and/or joint venture partners
(collectively the "Distributors"). In some cases, such
Distributors are entitled to replace Snap's default content
with other content within their own co-branded editions of any
Snap Site. Notwithstanding any other provisions of this
Agreement, if any such Distributor has exercised its right to
replace Company Content with other content, then Snap will not
be required to display the Promotions or Company Content
within such Distributor's co-branded edition of the Snap
Sites. If Snap does display the Promotions or Company Content
within a co-branded edition of any Snap Site, such display
will be governed by this Agreement.
6.2. ENHANCED AND INTERNATIONAL EDITIONS. Snap has created an
enhanced, high-speed version of the Snap Sites focused on rich
media content (together with any successor service(s) or
site(s) thereof and any co-branded editions of such service
that have been or may be developed for Snap's third party
distribution partners and licensees, the "Enhanced Sites") and
may desire to include appropriate rich media Company Content
within the Enhanced Sites. Snap is currently considering
creating one or more international editions of the Snap Sites
to reflect appropriate localized and local partner content
("International Editions") and may desire to include localized
Company Content within the International Site. At Snap's sole
discretion, but subject to SECTION 3.2, all terms and
conditions contained in the Agreement related to the "Snap
Sites" may also apply to the Enhanced Site and International
Editions, and any Impressions and Click Thrus required under
10
<PAGE>
the Agreement may be delivered on the Enhanced Sites,
International Editions, and/or the existing Snap Sites.
Subject to SECTION 3.2, the Company hereby acknowledges that,
Snap, in its sole discretion, may use appropriate content,
promotions and other material provided by Company within the
Enhanced Sites and the International Editions, and all
licenses set forth in this Agreement are hereby expanded to
include the Enhanced Sites and International Editions. In the
event that the Company does not have the legal right to
deliver to Snap any Company Content for use as contemplated by
this Agreement in certain geographical markets, then the
Company will use its best efforts to obtain the consent(s) of
the other parties to such contracts to deliver and use all
Company Content as contemplated by this Agreement in such
geographical markets. So long as the Company is using its best
efforts to obtain such consents, Snap will not, unless and
until such consent is obtained, use on any International
Edition such content for which delivery to or use on the
International Edition in a certain geographical location is
prohibited by the terms of a written contract to which the
Company is a party. The Company acknowledges that the Look and
Feel of the Enhanced Site will be designed for a
high-bandwidth audience and therefore may substantially differ
from the Look and Feel of the primary Snap Sites. The Company
further acknowledges that the Look and Feel of the
International Editions will be localized for the relevant
target audience (e.g., in terms of language, culture, and
ethnicity) and therefore may substantially differ from the
Look and Feel of the primary Snap Sites.
7. NBC ON-AIR PROMOTION. During the Term, Snap will create and run a
series (i.e., no less than two) of dedicated thirty-second Snap
television advertisements which air during morning or daytime programs
appearing on the NBC Television Network, local television stations or
cable services for health, wellness and/or medicine related content
areas on the Snap Sites (the "Spots"). Snap agrees that the Company
will be featured in the Spots, in Snap's discretion, through either (i)
a promotional tag (meaning a text or graphic promoting the Company's
brands or services) of at least four seconds appearing at the end of
such Spots, or (ii) an integrated sales message within the body of such
Spots which at a minimum will consist of a voice over of at least four
seconds in length regarding the Company's brand or service. Snap shall
have sole discretion regarding the form and content of such
advertisements but will consult with the Company regarding how the
Company's brand or services will be featured in the Spots. Beginning no
less than thirty days following the Effective Date and continuing
throughout the rest of the Term, the Spots will run an average of four
times per month. The Company acknowledges that all placement of brands
or services within the Spots, as well as the Spots themselves, will be
subject to the NBC Advertising Standard Terms and Conditions as well as
the Advertising Standards set by NBC Broadcast Standards and Practices,
and Snap will have no right or power to cause NBC to make any exception
thereto for the Company or the Spots. The Company acknowledges that
neither Snap nor NBC makes any guarantee regarding what the actual
rating for any particular Spot will be and, therefore, will not be
obligated to provide any make-goods hereunder.
8. USER PROFILE DATA, COMMERCE OFFERINGS, AND DIRECT MARKETING.
8.1. DATA OWNERSHIP. The Company will be the sole owner of any
information that the Company collects from Users through the
Company Site, Snap will be the sole owner of any information
that Snap collects from Users through the Snap Sites, and the
Company and Snap shall jointly own any information that either
the Company or Snap collects from Users through the Co-Branded
Site. Further, if a User whose User Profile Data is contained
in the Company Database receives an email from Xoom pursuant
to SECTION 8.4 and purchases products offered in such email
through Xoom or an affiliated Web site,
11
<PAGE>
then the User Profile Data for such User shall be owned
jointly by Xoom and the Company from and after the time of
such purchase.
8.2. USE OF INFORMATION AND CONFIDENTIALITY. The Company and Snap
shall exchange User Profile Data and other information
relating to Users of the Co-Branded Site at times and in a
manner as reasonably requested by either party and mutually
agreed between the parties, but in any event at least once per
month. Each party will have the right to use any information
provided by the other party pursuant to SECTION 11 subject to
the confidentiality restrictions set forth in SECTION 17.6.
Unless otherwise clearly disclosed to Users on the respective
site, all data collected from Users through the Co-Branded
Site will be kept confidential and not disclosed to third
parties in accordance with the published privacy policy of
Snap and Xoom.
8.3. SNAP MEMBER REGISTRATION. If any Company Content accessed
through links appearing on the Snap Sites or the Co-Branded
Site contains any Commerce Offering that requires the User to
register or submit any User Profile Data, then Snap has the
right in its sole discretion to cause any of the following:
(i) the Web page that requests the User Profile Data, (ii) any
other page relating to the Commerce Offering, or (iii) a
separate Snap Member registration page, to present the User
with an opportunity to register to become a Snap Member.
8.4. DIRECT MARKETING. During the Term, Xoom and, following the
NBCi Closing, NBCi, shall have the right to use, with the
prior approval of the Company which approval shall not be
unreasonably withheld, the information contained in the
Company Database for direct marketing purposes as set forth in
this Section. Xoom shall have a right to execute, or cause to
be executed, at least one promotional email offer per month
approved by the Company, which approval shall not be
unreasonably withheld, to all or some of the Users described
in the Company Database. Such email offers shall be drafted by
Xoom, approved by Company (and such approval shall not be
unreasonably withheld) and will appear to come from
"HealthGate and Xoom". Such email messages may have links to
the Snap Sites or the Co-Branded Site, as Xoom shall decide in
its sole discretion. Products offered in such emails may
include Xoom's products or services or third party products
and/or services that Xoom has the right to offer, and Xoom
shall select all of such products to be offered in its sole
discretion. Xoom shall also have the option to create and host
"sell" pages for any marketing campaign, arrange for purchase
orders to be processed and fulfilled, and for customer service
and inventory matters to be coordinated in relation to the
products offered in emails distributed pursuant to this
Section, as Xoom shall determine in its sole discretion. Xoom
shall send a copy of the email offer to the Company at least
forty-eight hours prior to the time at which the email
messages are to be sent. The Company may reject, but not
unreasonably, promotional email offers proposed by Xoom.
8.5. COMPANY OFFERS. Xoom shall, if the Company requests, make up
to one promotional email offer per month containing a Company
Product offer to Users described in the Company Database,
provided that such email messages will be sent by Xoom in
consultation with the Company. Xoom may reject promotional
email offers proposed by the Company that include products or
services which compete with products or services then offered
to Users of the Snap Sites (other than Company Products
offered through the Co-Branded Site or harvested Company
Content), or if such offer otherwise conflicts with a Snap
and/or Xoom contractual agreement or Snap's and/or Xoom's
privacy or merchandising philosophy.
12
<PAGE>
9. PAYMENTS AND CREDITS.
9.1. PRODUCTION FEE. On the day which is thirty days after the
Initial Registration Date, the Company will pay Snap a
$250,000 production and content integration fee, which shall
be non-refundable except as provided in SECTION 10.6.
9.2. ANCHOR TENANCY FEES. The Company will pay Snap a $7,500,000
fee for the Anchor Tenant positions on the Health Channel
during Year One (the "Year One AT Fee"). $2,500,000 of the
Year One AT Fee shall be payable in Common Stock of the
Company as further provided in SECTION 9.8. The balance of the
Year One AT Fee shall be payable in cash on the day which is
thirty days after the Initial Registration Date. Payments of
the Year One AT Fee shall be non-refundable except as provided
in SECTION 10.6. For the Anchor Tenant positions on the Health
Channel during Year Two, the Company will make four payments
to Snap, each in the amount of $1,875,000, the first payment
being due on the first day of the tenth month of Year One, the
second payment due on the first day of Year Two, the third
payment due on the first day of the fourth month of Year Two,
and the fourth payment due on the first day of the seventh
month of Year Two. For the Anchor Tenant positions on the
Health Channel during Year Three, the Company will make four
payments to Snap, each in the amount of $1,875,000, the first
payment being due on the first day of the tenth month of Year
Two, the second payment due on the first day of Year Three,
the third payment due on the first day of the fourth month of
Year Three, and the fourth payment due on the first day of the
seventh month of Year Three.
9.3. MEDIA FEES. The Company will also pay Snap a $7,500,000 fee
for all Impressions Snap delivers during Year One pursuant to
SECTION 3.3 (the "Year One Media Fees"). $2,500,000 of the
Year One Media Fees shall be payable in Common Stock of the
Company as further provided in SECTION 9.8. The balance of the
Year One Media Fees shall be payable in cash on the day which
is thirty days after the Initial Registration Date. Payments
of the Year One Media Fees shall be non-refundable except as
provided in SECTION 10.6. For Impressions delivered during
Year Two, the Company will pay Snap a total fee of $7,500,000,
to be paid monthly in twelve equal monthly installments of
$625,000 payable on the first day of each month beginning on
the first day of the tenth month of Year One. For Impressions
delivered during Year Three, the Company will pay Snap a total
fee of $7,500,000, to be paid monthly in twelve equal monthly
installments of $625,000 payable on the first day of each
month beginning on the first day of the tenth month of Year
Two.
9.4. PURCHASER IDENTIFICATION FEES. If a User whose User Profile
Data is contained in the Company Database receives an email
from Xoom pursuant to SECTION 8.4 and purchases products
offered in such email through Xoom or an affiliated Web site,
then Xoom shall pay to the Company a $5 fee for the
identification of such purchasing User within thirty days
after the end of the calendar month in which Xoom receives
from the Company an invoice for such fee; provided, however,
that no more than one such $5 fee shall be billed or paid for
each unique User pursuant to this SECTION 9.4.
9.5. PERFORMANCE FEE. The Company shall pay Snap $0.50 per Click
Thru for each Click Thru delivered during Year One in excess
of 8,333,000 Click Thrus, up to a maximum payment of
$5,000,000. The Company shall pay Snap $0.55 per Click Thru
for each Click Thru delivered during Year Two in excess of
9,375,000 Click Thrus up to a maximum payment of $10,000,000.
The Company shall pay Snap $0.60 per Click Thru for each Click
Thru delivered during Year Three in excess of 10,714,000 Click
Thrus up
13
<PAGE>
to a maximum payment of $15,000,000. Such payments shall be
made by the Company within thirty days after receipt by Snap
of the monthly report described in SECTION 11.2.
9.6. PAYMENT. All payments required to be made hereunder by Snap or
Xoom will be made to the Company by wire transfer of
immediately available funds. Except as otherwise provided
herein, all payments required to be made hereunder by the
Company will be made to Snap by wire transfer of immediately
available funds, and to Xoom by wire transfer or check for
immediately available funds. If the Company should fail to
make any payment due under this Agreement by the date such
payment is due, the overdue payment will bear interest at the
rate of one and one-half percent simple interest per month or
the maximum interest permitted by law, whichever is less. Any
payment (including the issuance of stock pursuant to SECTION
9.8) which is due on a day which is not a Business Day shall
be payable on the next succeeding day that is a Business Day.
9.7. INVOICE PROCEDURE. Snap shall send the Company all invoices
hereunder to the attention of Mary B. Miller, whose title is
Chief Financial Officer, and who has the authority to
authorize the payment of such invoices.
9.8. EQUITY. As provided in SECTION 9.2 and SECTION 9.3, $2,500,000
of the Year One AT Fee and $2,500,000 of the Year One Media
Fees shall all be payable to Snap in shares of the Company's
Common Stock (the "Shares"), valued at $10.00 per Share, on
November 3, 1999, or such later date as Snap and the Company
shall mutually agree (the "Equity Closing Date"). On or prior
to the Equity Closing Date, the Company and Snap shall
negotiate in good faith and execute a Stock Transfer Agreement
governing the transfer of the Shares, which agreement shall
contain standard representations, warranties, covenants and
other terms and conditions reasonably satisfactory to both
Snap and the Company. On the Equity Closing Date, the Company
agrees to execute and deliver to Snap a registration rights
agreement reasonably acceptable to Snap that provides Snap
with piggyback registration rights that are subject to the
limitations on priority of registration permitted under the
Company's existing registration agreements. At Snap's
direction, the Shares shall be issued to an escrow agent (the
"Escrow Agent") pursuant to an Escrow Agreement to be executed
by the Company, Snap and the Escrow Agent named therein (the
"Escrow Agreement") and, 45 days following the Effective Date,
released to Snap.
10. TERM; TERMINATION.
10.1. TERM. The term of this Agreement will begin on the Effective
Date and end on the last day of the thirty-seventh month after
the Effective Date, unless otherwise terminated or extended as
set forth in this Agreement (the "Term").
10.2. TERMINATION FOR CAUSE. Either Snap or the Company may
terminate this Agreement at any time by giving written notice
of termination to the other parties if any other party commits
a material breach of its obligations hereunder that is not
cured within thirty days after notice thereof from a
non-breaching party; provided, however, that if the Company
fails to make a payment as required hereunder, Snap or Xoom,
as the case may be, may terminate this Agreement fifteen days
following the date of notice of such non-payment if any such
payment is not made within fifteen days after the Company's
receipt of such notice. Snap or Xoom may terminate this
Agreement immediately, and shall have no further obligation
under this Agreement, if the Company becomes insolvent; makes
an assignment for the benefit of creditors; makes or sends
notice of a bulk transfer; calls a meeting of its creditors
with respect to its inability to pay its obligations owed to
such
14
<PAGE>
creditors on customary terms; defaults under any agreement,
document or instrument relating to the Company's indebtedness
for borrowed money; ceases to do business as a going concern;
a petition is filed by or against the Company under any
bankruptcy or insolvency laws; or the Company experiences a
change in its ownership, such that a person, corporation or
other legal entity with a direct competitive interest (i.e.,
owns or operates a search and aggregation portal site on the
Web) holds an equity interest in the Company, without Snap's
prior, written consent to such ownership.
10.3. TERMINATION REGARDING COMPANY CONTENT. Snap may terminate this
Agreement at any time by giving written notice of termination
to the Company if the Company fails to timely deliver,
pursuant to SECTION 3.2, any material part of the Company
Content, including updates, and such failure is not cured
within ten days after the Company's receipt of notice thereof
from Snap.
10.4. TERMINATION REGARDING INITIAL REGISTRATION DATE. In the event
that the Initial Registration Date has occurred on or before
February 28, 2000, Snap may, in its sole discretion, terminate
this Agreement. If Snap elects to terminate this Agreement
under this SECTION 10.4, then the Company shall be required to
enter into an agreement within five days of such termination
to purchase Impressions from Snap having a value of $450,000
calculated at a 30% discount from the rates set forth in the
applicable Snap's standard rate card attached hereto as
EXHIBIT B and otherwise on Snap's standard terms and
conditions. The parties acknowledge and agree that the amount
of liquidated damages described above is a reasonable estimate
of the actual damages that Snap would suffer and incur as a
result of the failure of the Initial Registration Date to
occur by such date.
10.5. TERMINATION REGARDING PAYMENT OF EQUITY. Snap shall have a
right to terminate this Agreement, in its sole discretion, in
the event that the Company defaults in the performance of its
obligations pursuant to SECTION 9.8 or its obligations
pursuant to any agreement entered into between the Company and
Snap pursuant to SECTION 9.8. If Snap elects to terminate this
Agreement under this SECTION 10.5, then the Company shall be
required to enter into an agreement within five days of such
termination to purchase Impressions from Snap having a value
of $450,000 calculated at a 30% discount from the rates set
forth in the applicable Snap's standard rate card attached
hereto as EXHIBIT B and otherwise on Snap's standard terms and
conditions.
10.6. TERMINATION REGARDING FAILURE OF THE NBCI CLOSING. In the
event that the NBCi Closing does not occur on or before March
31, 2000, the Company shall have the option to terminate this
Agreement by giving written notice of termination to each of
Snap and Xoom. Upon the Company's exercise of this right of
termination, Snap shall return to the Company, within five
days of such termination, all consideration received by Snap
from the Company under this Agreement, and the parties hereto
shall have no further obligations or liabilities hereunder
except for such obligations and liabilities which are
expressly intended to survive the termination of this
Agreement.
10.7. CONSEQUENCES OF TERMINATION. Termination by Snap shall not
affect the rights and obligations of Xoom under this
Agreement, and termination by Xoom shall not affect the rights
and obligations of Snap under this Agreement. Upon the
termination or expiration of this Agreement, all licenses
granted hereunder shall immediately terminate; each party
shall return or destroy, all Confidential Information of the
other party in its possession. In addition, in the event this
Agreement is terminated pursuant to SECTION 10.2 and/or 10.3,
then all monies paid by the Company to Snap hereunder prior to
the termination
15
<PAGE>
shall be deemed non-refundable except as expressly stated
otherwise in this Agreement. Finally, in the event this
Agreement is terminated by Snap only pursuant to SECTION 10.2
and/or SECTION 10.3 (excluding termination for Company's
failure to maintain the Company Site, Company Content or the
Co-Branded Site as Best of Breed pursuant to SECTION 3.5),
then the Company shall continue to pay 55% of all fees payable
by the Company to Snap during the remainder of the Term as
liquidated damages. Such payments shall be due and payable on
the dates they would have been due and payable if the
termination had not occurred. The parties acknowledge and
agree that it would be impractical to estimate the amount of
any damages that could arise out of any material breach of
this Agreement or termination pursuant to SECTION 10.2 and/or
SECTION 10.3, and agree that the amount of liquidated damages
described above is a reasonable estimate of the actual damages
that Snap would suffer and incur as a result of such breach or
termination of this Agreement. No party shall be liable to the
others for damages of any sort resulting solely from
terminating this Agreement in accordance with its terms.
11. REPORTS, RECORDS, AND ACCOUNTS.
11.1. SNAP AND XOOM REPORTS. Within 15 days after the end of each
month during the Term, Snap and Xoom will provide to the
Company their standard advertising reports for User traffic
generated from the Promotions for such month.
11.2. COMPANY REPORTS. Within 15 days after the end of each month
during the Term, the Company will provide to Snap a complete
and detailed report that includes, at a minimum, for such
month: (i) the total page views on the Co-Branded Site, (ii)
the total number of Click Thrus delivered for such month and
the aggregate number of Click Thrus delivered since the
beginning of the Contract Year containing such month, (iii)
the total payment due Snap from the Company, if any, pursuant
to SECTION 9.5, (iv) the number of unique Users to the
Co-Branded Site from the Health Channel, (v) the number of
Users and User Profile Data for Users who click through from
the Snap Sites to the Company Site and/or the Co-Branded Site,
(vi) the number of Users and User Profile Data for Users who
click through from the Snap Sites to the Company Site and/or
the Co-Branded Site and order Company Products and (vii) the
aggregate statistical and demographic characteristics of Users
in (iv), (v) and (vi). Snap will tag each User of the
Co-Branded Site originating from the Snap Sites using a cookie
or other similar technology to assist the Company in obtaining
the foregoing data.
11.3. RECORDS AND ACCOUNTS. The Company agrees to keep, on a
continuing basis, full and accurate records and accounts,
including, without limitation all logs and reports, sufficient
to permit Snap and Xoom to verify the accuracy of all reports
submitted by the Company as hereinabove required. Snap and
Xoom shall have the right, at their sole expense, to examine
such books and records, whether in electronic format or
otherwise, to the extent that such examination is necessary
and pertinent to the foregoing verification, during reasonable
business hours, using its employees or principals, or through
outside, authorized representatives. In the event such an
examination reveals that any of the reports submitted or
payments made by the Company to Snap, as hereinabove required,
understated the monies owed by five percent (5%) or more, then
the Company shall, in addition to the payment of the
additional monies owed fees determined by such examination,
promptly pay to Snap the reasonable cost of such examination.
16
<PAGE>
12. Licenses.
12.1. COMPANY MARKS AND CONTENT. The Company hereby grants to Snap
and Xoom a non-exclusive, non-transferable, royalty-free
license, effective throughout the Term, to use, display and
publish the Company Marks and Company Content solely as
permitted hereunder; provided, however, that this license
shall not apply to any Company Mark that is licensed by the
Company from any third party to the extent that the grant of
this license to Snap and Xoom is prohibited by a contractual
obligation to such third party which is disclosed in writing
to Snap prior to the Effective Date. In the event the Enhanced
Sites and/or the International Editions are deemed included
within this Agreement pursuant to SECTION 6.2, the Company
hereby further grants to Snap and Xoom a non-exclusive,
non-transferable, royalty-free license, effective throughout
the Term, to modify and create derivative works of the Company
Content solely as permitted hereunder. In the event the
International Editions are deemed included within this
Agreement pursuant to SECTION 6.2, the Company shall in good
faith modify the Company Marks to incorporate changes
reasonably suggested by Snap for the relevant target audience
(e.g., complying with local laws or avoiding the use of
offensive terms in the local language). Any use of the Company
Marks or the Company Content by Snap or Xoom must comply with
any reasonable usage guidelines communicated by the Company to
Snap and Xoom from time to time. Nothing contained in this
Agreement will give Snap or Xoom any right, title or interest
in or to the Company Content, the Company Marks or the
goodwill associated therewith, except for the limited usage
rights expressly provided above. Snap and Xoom acknowledge and
agree that, as between the Company and Snap and Xoom, the
Company is the sole owner of all rights in and to the Company
Marks and the Company Content.
12.2. SNAP MARKS. Snap hereby grants to the Company a non-exclusive,
non-transferable, royalty free license, effective throughout
the Term, to use, display and publish the Snap Marks solely
within the Co-Branded Site as permitted hereunder. Any use of
the Snap Marks by the Company must comply with any reasonable
usage guidelines communicated to the Company by Snap from time
to time. Nothing contained in this Agreement will give the
Company any right, title or interest in or to the Snap Marks
or the goodwill associated therewith, except for the limited
usage rights expressly provided above. The Company
acknowledges and agrees that, as between the Company and Snap,
Snap is the sole owner of all rights in and to the Snap Marks.
12.3. XOOM MARKS. Xoom hereby grants to the Company a non-exclusive,
non-transferable, royalty free license, effective throughout
the Term, to use, display and publish the Xoom Marks solely
within the Co-Branded Site as permitted hereunder. Any use of
the Xoom Marks by the Company must comply with any reasonable
usage guidelines communicated to the Company by Xoom from time
to time. Nothing contained in this Agreement will give the
Company any right, title or interest in or to the Xoom Marks
or the goodwill associated therewith, except for the limited
usage rights expressly provided above. The Company
acknowledges and agrees that, as between the Company and Xoom,
Xoom is the sole owner of all rights in and to the Xoom Marks.
13. RESPONSIBILITY FOR THE SITES AND PRODUCTS. The Company acknowledges and
agrees that, as between the Company and Snap and Xoom, the Company will
be solely responsible for any claims or other losses associated with or
resulting from the marketing or operation of the Company Site or the
Co-Branded Site or the offer or sale of any Company Products by the
Company or through the Company Site or the Co-Branded Site, or through
emails delivered by
17
<PAGE>
Xoom. Snap and Xoom are not authorized to make, and agree not to make,
any representations or warranties concerning the Company Products,
except to the extent (if any) contained within Promotions delivered to
Snap or Xoom by the Company.
14. LIMITATION OF DAMAGES. NO PARTY WILL BE LIABLE FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATED
TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. EXCEPT IN THE EVENT OF A CLAIM UNDER
SECTION 16 OR SECTION 17.5, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY IN AN AMOUNT GREATER THAN THE AMOUNTS PAYABLE TO SNAP
BY THE COMPANY HEREUNDER.
15. NO WARRANTIES. THE IMPRESSIONS, HEALTH CHANNEL, HEALTH CONTENT PORTALS
AND COMPANY CONTENT ARE PROVIDED "AS IS" AND THE INFORMATION CONTAINED
THEREIN IS NOT WARRANTED TO BE FREE FROM ERROR. SNAP, XOOM AND THE
COMPANY DISCLAIM ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE IMPRESSIONS, HEALTH
CHANNEL, HEALTH CONTENT PORTALS AND COMPANY CONTENT.
16. MUTUAL INDEMNIFICATION.
16.1. INDEMNIFICATION BY SNAP. Snap shall indemnify, defend and hold
the Company harmless from and against any costs, losses,
liabilities and expenses, including all court costs,
reasonable expenses and reasonable attorney's fees
(collectively, "Losses") that the Company may suffer, incur or
be subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether commenced
or threatened, arising out of or as a result of the operation
of the Snap Sites (except in cases where the Company is
required to indemnify Snap under SECTION 16.3).
16.2. INDEMNIFICATION BY XOOM. Xoom shall indemnify, defend and hold
the Company harmless from and against any Losses that the
Company may suffer, incur or be subjected to by reason of any
legal action, proceeding, arbitration or other claim by a
third party, whether commenced or threatened, arising out of
or as a result of the emails sent by Xoom or a third party
pursuant to SECTION 8.4 and the use of the unauthorized or
illegal use of the Company Database (except in cases where the
Company is required to indemnify Xoom under SECTION 16.3).
16.3. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
defend and hold each of Snap and Xoom harmless from and
against any Losses that Snap or Xoom may suffer, incur or be
subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether commenced
or threatened, arising out of or as a result of (i) the use of
Company Content by Snap in accordance with this Agreement;
(ii) the operation of the Company Site or the Co-Branded Site;
(iii) the use of any word as a Keyword to trigger a Keyword
Promotion; (iv) the offer or sale of Company Products by the
Company on or through the Company Site, or the Co-Branded Site
or any emails sent by Xoom or a third party pursuant to
SECTION 8.4, or (v) the authorized and legal use of the
Company Database.
18
<PAGE>
16.4. INDEMNIFICATION PROCEDURES. If any party entitled to
indemnification under this Section (an "Indemnified Party")
makes an indemnification request to the other, the Indemnified
Party shall permit the other party (the "Indemnifying Party")
to control the defense, disposition or settlement of the
matter at its own expense; provided that the Indemnifying
Party shall not, without the consent of the Indemnified Party
enter into any settlement or agree to any disposition that
imposes an obligation on the Indemnified Party that is not
wholly discharged or dischargeable by the Indemnifying Party,
or imposes any conditions or obligations on the Indemnified
Party other than the payment of monies that are readily
measurable for purposes of determining the monetary
indemnification or reimbursement obligations of Indemnifying
Party. The Indemnified Party shall notify the Indemnifying
Party promptly of any claim for which Indemnifying Party is
responsible and shall cooperate with the Indemnifying Party in
every commercially reasonable way to facilitate defense of any
such claim; provided that the Indemnified Party's failure to
notify Indemnifying Party shall not diminish Indemnifying
Party's obligations under this Section except to the extent
that Indemnifying Party is materially prejudiced as a result
of such failure. An Indemnified Party shall at all times have
the option to participate in any matter or litigation through
counsel of its own selection and at its own expense.
17. MISCELLANEOUS.
17.1. PROMOTION OF SNAP SITES. The Company may accept advertising
from other portals or search engines. If the Company accepts
advertising from other portals or search engines, and the
Company promotes such portals or search engines within a
"partner" area of the Company Site, then the Company shall
display the Snap Marks on such area of the Company Site at
least as prominently as such portal or search engine entity.
The Company shall ensure that the Snap Marks on the Company
Site link to the Co-Branded Site or the Health Channel.
17.2. ASSIGNMENT. Snap shall have the right to assign all of its
rights and liabilities hereunder to an affiliate or to any
person or entity that (i) acquires all or substantially all of
Snap's operating assets (whether by asset sale, stock sale,
merger or otherwise) or (ii) results from a merger or
reorganization of Snap pursuant to any plan of merger or
reorganization. Xoom shall have the right to assign all of its
rights and liabilities hereunder to an affiliate or to any
person or entity that (i) acquires all or substantially all of
Xoom's operating assets (whether by asset sale, stock sale,
merger or otherwise) or (ii) results from a merger or
reorganization of Xoom pursuant to any plan of merger or
reorganization. Without limiting the generality of the
foregoing, the Company expressly acknowledges that Snap and
Xoom will each have the right to freely assign this Agreement
or the operative rights and obligations hereof to any entity
resulting from the merger or other similar combination of Snap
and Xoom. The Company may assign all of its rights and
liabilities to another person, if such person or entity
accepts in writing all of the Company's rights, obligations
and liabilities hereunder, such person or entity is not a
Competitor, and the Company provides prior written notice to
Snap of such assignment.
17.3. RELATIONSHIP OF PARTIES. This Agreement will not be construed
to create a joint venture, partnership or the relationship of
principal and agent between the parties hereto, nor to impose
upon either party any obligations for any losses, debts or
other obligations incurred by the other party except as
expressly set forth herein. In no event will Snap or Xoom be
liable for the actions, omissions, duties or obligations of
the other under this Agreement.
19
<PAGE>
17.4. APPLICABLE LAW. This Agreement will be construed in accordance
with and governed by the laws of the State of California,
without regard to principles of conflicts of law. Litigation
of disputes under this Agreement shall be conducted in courts
located in the City of San Francisco, California. The parties
hereto consent to the jurisdiction of any local, state or
federal court in which an action is commenced and located in
accordance with the terms of this Section and that is located
in San Francisco, California. The parties further agree not to
disturb such choice of forum, and if not resident in such
state, waive the personal service of any and all process upon
them, and consent that such service of process may be made by
certified or registered mail, return receipt requested,
addressed to the parties as set forth herein.
17.5. CONFIDENTIALITY. In connection with the activities
contemplated by this Agreement, each party may have access to
confidential or proprietary technical or business information
of any other party, including without limitation (i)
proposals, ideas or research related to possible new products
or services; (ii) financial statements and other financial
information; (iii) any reporting information in SECTION 11;
and (iv) the material terms of this Agreement and the
relationship between the parties; provided, however, that such
information will be considered confidential only if it is
conspicuously designated as "Confidential," or if provided
orally, identified at the time of disclosure as confidential
(collectively, "Confidential Information"). Each party will
take reasonable precautions to protect the confidentiality of
the other party's Confidential Information, which precautions
will be at least equivalent to those taken by such party to
protect its own Confidential Information. Except as required
by law or as necessary to perform under this Agreement, no
party will knowingly disclose the Confidential Information of
any other party or use such Confidential Information for its
own benefit or for the benefit of any third party. Each
party's obligations in this Section with respect to any
portion of the other party's Confidential Information shall
terminate when the party seeking to avoid its obligation under
such Section can document that: (i) it was in the public
domain at or subsequent to the time it was communicated to the
receiving party ("Recipient") by the disclosing party
("Discloser") through no fault of Recipient; (ii) it was
rightfully in Recipient's possession free of any obligation of
confidence at or subsequent to the time it was communicated to
Recipient by Discloser; (iii) it was developed by employees or
agents of Recipient independently of and without reference to
any information communicated to Recipient by Discloser; (iv)
it was communicated by the Discloser to an unaffiliated third
party free of any obligation of confidence; or (v) the
communication was in response to a valid order by a court or
other governmental body, was otherwise required by law or was
necessary to establish the rights of either party under this
Agreement.
17.6. PRESS RELEASE. No party will make any public statement or
other announcement (including without limitation, issuing a
press release or pre-briefing any member of the press or other
third party) relating to the terms or existence of this
Agreement without the prior written approval of the other
parties. Notwithstanding the foregoing and SECTION 17.5, the
parties may issue an initial joint press release, the timing
and wording of which will be subject to each party's
reasonable approval, regarding the relationship between the
parties.
17.7. INJUNCTIVE RELIEF. Each party agrees that in the event of a
breach or alleged breach of SECTIONS 17.5 or 17.6 that the
other parties shall not have an adequate remedy at law,
including monetary damages, and that the other parties shall
consequently be entitled to seek a temporary restraining
order, injunction, or other form of equitable relief against
20
<PAGE>
the continuance of such breach, in addition to any and all
remedies to which any other party shall be entitled.
17.8. CAPTIONS AND SECTION HEADINGS. Captions and section headings
used in this Agreement are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
Except as otherwise specifically provided, any reference in
this Agreement to a section or exhibit shall be deemed to be a
reference to such section or exhibit of this Agreement.
17.9. SURVIVAL. Termination or expiration of this Agreement for any
reason shall not release any party from any liabilities or
obligations set forth in this Agreement which (i) the parties
have expressly agreed shall survive any such termination or
expiration, or (ii) remain to be performed or by their nature
would be intended to be applicable following any such
termination or expiration.
17.10. TAXES. For all fees or charges payable hereunder by the
Company to Snap, the Company will pay or reimburse Snap for
50% of any taxes or fees (including all federal, state, or
local taxes) associated with Snap's provision of the services
hereunder to Company, except that Company will have no
liability for any taxes based on Snap's net assets or net
income, or for which Company has an appropriate resale or
other exemption.
17.11. FORCE MAJEURE. If any party shall be delayed in its
performance of any obligation hereunder or be prevented
entirely from performing any such obligation due to causes or
events beyond its reasonable control, including without
limitation any act of God, fire, strike or other labor
problem, such delay or non-performance shall be excused and
the time for performance shall be extended to include the
period of such delay or non-performance.
17.12. DISPUTE RESOLUTION. In the event that any dispute arises
hereunder, the parties agree that prior to commencing
litigation, arbitration, or any other legal proceeding, each
party shall send an officer of such party to negotiate a
resolution of the dispute in good faith at a time and place as
may be mutually agreed. Each officer shall have the power to
bind its respective party in all material respects related to
the dispute. If the parties cannot agree on a time or place,
upon written notice from either party to the other, the
negotiations shall be held at the principal executive offices
of Snap 21 days following such notice (or on the next
succeeding Business Day, if the 21st day is not a Business
Day).
17.13. NOTICES. All notices or other communications that shall or may
be given pursuant to this Agreement, shall be in writing, in
English, shall be sent by certified or registered air mail
with postage prepaid, return receipt requested, by facsimile,
overnight express mail, or by hand delivery. Such
communications shall be deemed given and received upon
confirmation of receipt, if sent by facsimile; the day after
delivery if by overnight express mail; or upon delivery if
hand delivered; or upon receipt of mailing, if sent by
certified or registered mail; and shall be addressed to the
parties as set forth above on the first page of this Agreement
and to the attention of Rick Lawson, if to the Company, to the
attention of Mark Markunas, Contracts Administrator, if to
Snap, and to the attention of Janine Popick, if to Xoom; or to
such other addresses or persons as the parties may designate
in writing from time to time.
21
<PAGE>
17.14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate
original and all of which, when taken together, shall
constitute one and the same document.
17.15. ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement between the parties with respect to the
subject matter hereof and supersedes any prior oral or written
agreements. This Agreement may not be amended except in
writing signed by both parties. Each party acknowledges and
agrees that the other has not made any representations,
warranties or agreements of any kind, except as expressly set
forth herein. All exhibits attached to this Agreement are
incorporated hereby and shall be treated as if set forth
herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the dates indicated below.
SNAP! LLC HEALTHGATE DATA CORP.
By: /s/ Edmond Sanctis By: /s/ William S. Reece
------------------------------ ----------------------------
(Signature) (Signature)
Name: Edmond Sanctis Name: William S. Reece
---------------------------- --------------------------
(Please print) (Please print)
Title: Chief Operating Officer Title: Chief Executive Officer
--------------------------- --------------------------
Date: 11/2/99 Date: 10/29/99
---------------------------- ---------------------------
XOOM.COM, INC.
By: /s/ Chris Kitze
-----------------------------
(Signature)
Name: Chris Kitze
---------------------------
(Please print)
Title: Chairman
--------------------------
Date: 11/2/99
---------------------------
22
<PAGE>
Exhibit A
Keyword Promotions
1. Keywords. Subject to availability in Snap's inventory, the Company shall
provide Snap with no more than 300 health-related keywords. For any
keywords protected by trademark or servicemark rights, Snap shall have the
right to accept or reject such term regardless of availability. In the
event Snap accepts such a keyword protected by trademark or service mark
rights, (i) the Company shall indemnify, hold harmless, and defend Snap as
set forth in Section 16 of the Agreement to which this Exhibit is attached
and (ii) Snap shall have the right, in its sole discretion, to terminate
immediately its acceptance in the event Snap becomes aware of third party
claims regarding such keyword (e.g., demand letter, complaint, etc.).
2. 50% Exclusivity. At least one half of all keyword search results for only
such keywords will result in a Company Keyword Promotion. This Section 2
of this Exhibit A will not apply to keyword searches containing the
selected keywords and also containing additional words. For example, if
"health" is a selected keyword, a search on "health care" means this
Section 2 of this Exhibit A shall not apply to this search. If all of the
Impressions required to be delivered pursuant to Section 3.3 of the
Agreement have been delivered during any of Year One, Year Two, Year Three
or Year Four, then this Section 2 of this Exhibit A shall no longer apply
to keyword searches conducted during the remainder of such year.
23
<PAGE>
Exhibit B
Snap Rate Card
(Please see attached.)
24
<PAGE>
SNAP.com
Rate Sheet
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
BANNERS AD WINDOWS BUTTONS High Speed
------- ---------- ------- -----------------------------
<S> <C> <C> <C>
Keyword - Exclusive 72.00 Keyword - Exclusive NA Keyword 35.00 B-box 50.00
Keyword - Non-exclusive 54.00 Keyword - Non-exclusive NA Keyword Content 45.00 B-banner 50.00
ROS 20.00 ROS 15.00 Targeted 10.00
Front Door NA Front Door 15.00 ROS 8.00 -----------------------------
Chat 30.00 Chat 20.00 Arts & Humanities 10.00
Submit URLs 60.00 Submit URLs NA Autos 15.00 SNAP Wire
Software Download NA Softward Download 37.00 Business & Money 10.00 -----------------------------
Arts & Humanities 25.00 Arts & Humanities 15.00 Computing & Internet 10.00
Autos 60.00 Autos NA Education 12.00 Flat rate per issue $15,000
Business & Money 48.00 Business & Money 35.00 Health 12.00
Computing & Internet 48.00 Computing & Internet 30.00 Kids & Family 12.00 ----------------------------
Education 25.00 Education 15.00 Living 12.00
Entertainment 45.00 Entertainment 30.00 Local 10.00
Health 55.00 Health 33.00 News & Media 10.00
Kids & Family 38.00 Kids & Family 28.00 Oddities 8.00
Living 38.00 Living 25.00 People & Society 8.00
Local 35.00 Local 20.00 Science & Technology 8.00
News & Media 30.00 News & Media 20.00 Shopping 15.00
Oddities 20.00 Oddities 10.00 Sports 10.00
People & Society 20.00 People & Society 10.00 Travel 12.00
Science & Technology 20.00 Science & Technology 10.00
Shopping 58.00 Shopping 38.00
Sports 25.00 Sports 16.00
Travel 45.00 Travel 28.00
My Shopper 50.00
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit C
General Performance Standards
The Company Site, the Co-Branded Site and the Company's related operations must
comply with the following performance standards throughout the Term:
1. The Company Site and Co-Branded Site will be operational and fully
functional in all material respects (i.e. capable of displaying
information and conducting transactions as contemplated in the ordinary
course of business) at least 99% of the time during any 30 day period.
2. The average time required to start displaying the HTML on a page of the
Company Site or Co-Branded Site after a link from the Snap Sites shall not
exceed a daily average of five seconds, and the average time required to
deliver an entire page of the Company Site or Co-Branded Site over the
open Internet shall not exceed a daily average of six seconds. For
measurements required in this Section, the Company may assume standard T1
connectivity to the Internet.
3. Without limiting the effect of Sections 1 and 2, the Company shall provide
to Users coming to the Company Site or the Co-Branded Site from the
Promotions at least the same level of service as is offered to Users
coming directly to the Company Site.
4. The Company Site and Co-Branded Site will offer personal health and
medical products and services as well as links to various personal health
and medical resources and shall not: (i) contain defamatory or libelous
material or material which discloses private or personal matters
concerning any person, without such person's consent; (ii) permit to
appear or be uploaded any messages, data, images or programs which are
illegal, contain nudity or sexually explicit content or are, by law,
obscene, profane or pornographic; or (iii) permit to appear or be uploaded
any messages, data, images or programs that would knowingly or
intentionally (which includes imputed intent) violate the property rights
of others, including unauthorized copyrighted text, images or programs,
trade secrets or other confidential proprietary information, or trademarks
or service marks used in an infringing fashion.
5. If any of the performance standards set forth above are not met by the
Company, Snap may immediately remove any or all links to the Company Site
or Co-Branded Site, as applicable, at Snap's sole discretion. If the
Company Site or the Co-Branded Site fails to operate fully and
functionally in any material respect for any period of four or more
consecutive hours, even if otherwise in compliance with the performance
standards, Snap may immediately remove any or all links to the Company
Site or Co-Branded Site, as applicable, at Snap's sole discretion until
such time as the Company notifies Snap that such Company Site or
Co-Branded Site has resumed acceptable operation. These remedies are for
Snap's editorial purposes and in no way limit Snap's ability to terminate
this contract or pursue any other remedies hereunder in the event the
performance standards set forth herein are not met.
25
<PAGE>
Exhibit D
Technical Specifications:
Html Harvest/Partner Segment
Standard HTML Harvest:
Introduction
A partner segment is an html chunk that is "harvested" from your site and
published within an existing template on the Snap Website. The Snap Harvester
works by accessing a "Harvest URL" located on your servers and retrieving any
html and images that reside there. This information is then processed and
published to the Snap live site, replacing the previous content.
Timeline
o Read these specifications and contact the designated Snap Technical
Contact for questions.
o Set up a single test page and send the url to the Snap Technical Contact
for testing.
o Once approved, begin updating your content regularly.
Harvest File/URL
Each partner segment (html chunk) that you would like us to harvest should have
a unique harvest url. This harvest url is essential to our harvester and must be
static. Snap's harvester will pick up this file on a schedule that's mutually
agreed upon, process it, and replace the former content on our live site. If you
are providing multiple partner segments, each segment should have a unique and
static url.
Sample Harvest File (View the source)
http://destinations.previewtravel.com/DestGuidesSnap/0,1778,SNP_14,00.html
(includes optional meta tags)
Sample File on the Snap Site
http://www.snap.com/main/page/pcp/0,3,-1624,00.html
Technical Requirements
Snap expects all page content to be complete and self-contained. Snap will not
change harvested content. Snap can refuse to publish content if the content does
not meet the specifications.
In order for the Harvest to function correctly, your content must meet the
following guidelines exactly:
o Because the html for your content is inserted into a snap page template,
your html must not contain any body attributes. No body bgcolor, vlink
etc. This will cause harvesting to fail.
o You may not put any information in the head section of your file besides
meta tags. No Javascript.
o The total content harvested must be 32K or less in cumulative data size.
For page loading purposes, we suggest limiting your content (text and
images) to 20K if possible. If this is not feasible please notify Snap.
o Your content should be designed to be scalable for width. If fixed width,
design for less than=640 pixels or width specified by a Snap Product
Manager.
o Links must be valid indefinitely, as your content will stay live on Snap
until you update it.
o All links to your site must use full (absolute) URLs.
Scheduling
26
<PAGE>
We request updates as often as is appropriate for the topic. News, for instance,
should update more often than Living. Snap can harvest content as often as every
20 minutes. Tell us your preferred schedule and we'll work to accommodate it.
Partner Logo Note
We require you to include your brand name, either using a logo (suggested) or
text branding -- or both. Placement of the provider logo which links to the
partner site will be at the bottom of the PCP unless otherwise authorized by
Snap. Because PCPs at Snap function as resource centers for our users, excessive
advertising notices and branding is not allowed.
Images
o Images can reside anywhere on the partner site, not necessarily in the
harvest directory. They must be accessible via HTTP.
o Assign height and width values, in pixels, to image tags. No scaled
images.
o No image file names reused for different images to avoid caching problems
for users.
Fonts
We ask that you use the Snap fonts for the content you provide to Snap. Although
our only requirement is that you use the font face Arial, Helvetica (-1) for
body text, we also recommend the following for page consistency:
Captions, etc., are in Arial -2.
Headlines are in Arial regular bold.
Titles are in Verdana +1 Bold
Other type is Verdana -2
For your information, our default [BODY] settings are:
Text color is 333333
Link color is default blue 0000FF
Vlink color is 666666
NOTE: Some highlight links will be red: FF0000
Colors
We require that all partner content pages that you provide be designed for a
white background. We ask that you work within the Websafe 216 Palette.
Multimedia Files
If you are linking to pages which require plug-ins or controls, the link to such
page must notify the user of the requirement: for example, a graphic or text
note next to a link to a QuickTime video clip.
Advertisements
Unless specified by the contract or your Snap Contact, you may not include
advertisement banners within your content. Remember, your html is being inserted
into an existing page that already contains a page header and an advertisement.
This will cause harvesting to fail.
Additional limits
Your HTML content must not contain: Javascript, Java applets, ActiveX objects,
server-side includes, server-side executables, frames, CGI programs, files which
require plug-ins or controls, anything which creates a separate window
(including links, programs, etc.), BASE HREF tags, embedded files (that is,
files which use the [OBJECT] tag). Your page may also not include frames or
pop-up windows.
27
<PAGE>
Suggestions
Please close your tags!
Limit use of nested tables to avoid slowing the page load.
Form submissions may not link to Snap's servers without prior notification.
Technical Contacts
Enrique Alvarez, Program Manager, Content Integration ([email protected],
415.875.7977)
Michael Merit, Associate Program Manager, Content Integration
([email protected], 415.875.7982)
Tarik Koivisto, Associate Program Manager, Content Integration ([email protected],
415.875.8024)
28
<PAGE>
EXHIBIT 10.40
- --------------------------------------------------------------------------------
HEALTHGATE DATA CORP.
----------------------------------
COMMON STOCK PURCHASE AGREEMENT
----------------------------------
DATED AS OF NOVEMBER 3, 1999
<PAGE>
HEALTHGATE DATA CORP.
COMMON STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made this 3rd day of
November, 1999 by and among HealthGate Data Corp., a Delaware corporation (the
"Company"), and Snap! LLC, a Delaware limited liability company (the
"Investor").
THE PARTIES HERETO AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1. AUTHORIZATION OF SHARES. The Company has authorized the issue and
sale of 126,072 shares of Common Stock, $.01 par value (the "Common Stock"), of
the Company to be issued under this Agreement (which following the Company's
proposed 3.966 for 1 stock split will be automatically adjusted to 500,000
post-split shares).
1.2. PURCHASE AND SALE OF THE COMMON STOCK. Pursuant to the Snap
Strategic Alliance Agreement dated October 29, 1999 between the Investor, the
Company, and Xoom.com, Inc., and subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to issue and sell to the Investor and the Investor
agrees to purchase from the Company 126,072 shares of Common Stock (the
"Shares") at a purchase price of $39.66 for each share of Common Stock (which
following the Company's proposed 3.966 for 1 stock split will be adjusted to
$10.00 per post-split share).
1.3. THE CLOSING. Subject to the other terms and conditions of this
Agreement, the purchase and sale of the Shares (the "Closing") will take place
on November 3, 1999, at 2:00 p.m. Boston time, at the offices of Ropes & Gray,
or at such other time or such other place as the parties shall mutually agree.
At the Closing, the Company will deliver to the Investor a certificate or
certificates, registered in the Investor's name, representing the Shares to be
acquired by the Investor at such Closing against payment of the purchase price
thereof in lawful money of the United States of America by wire transfer payable
to the Company.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY REGARDING THE COMPANY AND THE
SHARES.
In order to induce the Investor to enter into this Agreement and to
acquire the Shares hereunder, the Company hereby represents and warrants to the
Investor that:
2.1. ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and has
full corporate power, right and authority to own or lease its property or
assets, to carry on its business as presently
- 1 -
<PAGE>
conducted and to enter into and carry out the transactions contemplated by this
Agreement. The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each of the other jurisdictions in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification. The Company does not own or hold any equity
securities, or the right to acquire any equity securities, of any corporation or
other entity except HealthGate Acquisition Corp., a Delaware corporation, and
HealthGate Europe Limited, a corporation organized under the laws of the United
Kingdom.
2.2. AUTHORIZATION. The Company has full legal right, power, capacity
and authority to execute and deliver this Agreement and each of the other
agreements contemplated hereby, to consummate the transactions contemplated
hereby and thereby and to comply with the terms, conditions and provisions
hereof and thereof. This Agreement and each of the other agreements contemplated
hereby have been duly authorized, executed and delivered by the Company and are
the legal, valid and, assuming due execution and delivery by the other parties
thereto, binding obligations of the Company, enforceable in accordance with
their terms. The execution, delivery and performance of this Agreement and each
of the other agreements contemplated hereby have been duly authorized and
approved by all necessary corporate action of the Company and does not require
any further authorization or consent of the Company or any other Person.
2.3. VALIDITY OF SHARES. The Shares, when issued and the consideration
therefor received by the Company, will be validly issued, fully paid and
non-assessable. The Company has the full corporate power, right and authority,
to issue and sell to the Investor at the Closing, the Shares, as contemplated
herein, and upon consummation of the transactions contemplated by this Agreement
the Investor will have acquired good and marketable title to the Shares free and
clear of any claims, liens, restrictions on transfer or voting or encumbrances
other than those arising under the federal and state securities laws of the
United States of America.
2.4. CAPITALIZATION. (a) The authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock, (ii) 1,000 shares of Series A
Convertible Preferred Stock, (iii) 1,000 shares of Series B Convertible
Preferred Stock, (iv) 1,000 shares of Series C Convertible Preferred Stock, (v)
1,667 shares of Series D Convertible Preferred Stock and (vi) 829,962 shares of
Series E Convertible Preferred Stock.
(b) Outstanding Stock. The Company's issued and outstanding
stock consists of 1,176,228 shares of Common Stock (which 1,176,228 shares will
be automatically converted into 4,664,916 shares of Common Stock effective with
the Company's proposed 3.966 for 1 stock split) and 725,424 shares of preferred
stock convertible into 1,898,764 shares of Common Stock (which 1,898,764 shares
of Common Stock will be automatically converted into 7,350,556 shares of Common
Stock effective with the Company's proposed 3.966 for 1 stock split).
Additionally, the Company has issued options and warrants for the purchase of
871,978 shares of Common Stock (which 871,978 shares will be automatically
- 2 -
<PAGE>
converted into 3,458,261 shares of Common Stock effective with the Company's
proposed 3.966 for 1 stock split). Additionally, the Company plans to issue CIS
Holdings, Inc., a Nevada corporation, a warrant for 489,419 shares of Common
Stock of the Company (which 489,419 shares will be automatically converted into
1,941,035 shares of Common Stock effective with the Company's proposed 3.966 for
1 stock split).
2.5. FINANCIAL STATEMENTS. Schedule 2.5 sets forth: (i) an unaudited
balance sheet of the Company as of June 30, 1999 and the related unaudited
statements of income and cash flows for the six months then ended, and (ii) an
audited balance sheet of the Company as of December 31, 1998 and the related
audited statements of income and cash flows for the twelve months then ended, in
each case audited by PriceWaterhouseCoopers, LLP independent certified public
accountants, (the balance sheet of the Company as at December 31, 1998 is
hereinafter referred to as the "Balance Sheet" and the balance sheet of the
Company as at June 30, 1999 is hereinafter referred to as the "Closing Balance
Sheet"). Such financial statements, except as indicated therein, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the period indicated. The
Balance Sheet and the Closing Balance Sheet fairly present the financial
condition of the Company at the dates thereof and, except as indicated therein,
reflect all claims against and all debts and liabilities of the Company, fixed
or contingent, as at the dates thereof, required to be shown thereon under GAAP,
and the related statements of income and retained earnings fairly present the
results of operations of the Company for the period indicated.
2.6. CHANGES IN CONDITION. Since June 30, 1999 (the "Balance Sheet
Date"), there have occurred no event or events that, individually or in the
aggregate, have caused a Material Adverse Effect. Without limiting the
foregoing, the Company has not (a) declared any dividend or other distribution
on any shares of its capital stock, (b) made any payment (other than
compensation to its directors, officers and employees at rates in effect prior
to the Balance Sheet Date or for bonuses accrued in accordance with normal
practice prior to the Balance Sheet Date) to any of its affiliates, (c)
increased the compensation, including bonuses, payable or to be payable to any
of its directors, officers, employees or affiliates, or (d) entered into any
material contractual obligation, or entered into or performed any other
transaction, not in the ordinary and usual course of business and consistent
with past practice, other than as disclosed in the Disclosure Statement dated
November 3, 1999 delivered to the Investor (the "Disclosure Statement") or
disclosed directly to the Investor.
2.7. CONFORMITY WITH LEGAL REQUIREMENTS. The operations of the Company
as now conducted are not in violation of, nor is the Company in default under,
any legal requirements presently in effect, except for such violations and
defaults as do not and will not, in the aggregate, have a Material Adverse
Effect. The Company (i) has all franchises, licenses, permits or other authority
reasonably necessary for the conduct of its business as now conducted, and (ii)
is not in violation of any such authorizations except, in each case, to the
extent that the failure to have such authorizations or such violations is
reasonably likely to cause a Material Adverse Effect.
- 3 -
<PAGE>
2.8. NO DEFAULTS. The Company is not in default, and the Company's
properties or assets or the business of the Company, as presently conducted or
proposed to be conducted, are not in default (a) under its charter documents or
its By-Laws or any material note, indenture, mortgage, lease, agreement,
contract, purchase order or other instrument, document or agreement to which it
is a party or by which it or any of its property is bound or affected or (b)
with respect to any order, writ, injunction or decree of any court or any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There exists no
condition, event or act which after notice, lapse of time, or both, is
reasonably likely to constitute a default by the Company which would have a
Material Adverse Effect. To the Company's knowledge, no third party is in
default under any agreement, contract or other instrument, document, or
agreement to which the Company or any subsidiary is a party or by which any of
them or any of their property is affected.
2.9. EFFECT OF TRANSACTIONS. The execution, delivery and performance of
this Agreement, and any other agreements, instruments, or documents contemplated
hereby, the issuance, sale and delivery of the Shares and compliance with the
provisions hereof and thereof by the Company, do not and will not, with or
without the passage of time or the giving of notice or both (a) violate any
provision of law, statute, rule or regulation or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body, or (b) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company under its charter or bylaws or under any
note, indenture, mortgage, lease, license agreement, contract, purchase order or
other instrument, document or agreement to which the Company is a party or by
which it or any of its property is bound or affected which would have a Material
Adverse Effect.
2.10. LITIGATION. There is no action, suit, proceeding or investigation
at law or equity or before or by any governmental commission, board or other
administrative agency pending or, to the knowledge of the Company, threatened
against or affecting the Company which questions the validity of this Agreement,
any other agreements, instruments or documents entered into by the Company
pursuant to this Agreement, the right of the Company to enter into them or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, have a Material Adverse Effect,
or any change in the current equity ownership of the Company. There is no
action, suit or proceeding pending against, or to the knowledge of the Company,
threatened against or affecting, the Company or any of its properties before any
court or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay any of
the transactions contemplated hereby. There is no material litigation other than
as described in the Disclosure Statement.
- 4 -
<PAGE>
2.11. TAXES. The Company has filed all federal, state, local and other
tax returns required by law to be filed by it, and all taxes shown to be due and
all additional assessments, fees, governmental charges, interest and penalties
have been paid. The federal income tax liabilities of the Company for the
fiscal year 1998, and for all prior years, have been determined or accepted by
the Internal Revenue Service and paid. No objection to any return or claim for
additional taxes is currently being asserted against the Company and the Company
does not know of any proposed additional tax assessment against the Company. The
Company believes all filed returns were prepared in accordance with applicable
statutes and generally accepted principles applicable to taxation.
2.12. LIMITATIONS. There are no limitations in the Company's By-laws or
in any indenture, deed of trust or other agreement or instrument to which the
Company is a party with respect to the issuance and sale of the Shares, or with
respect to the payment or accumulation of dividends on the Shares, except in
each such case those contained in the Company's Certificate of Incorporation.
2.13. PERFORMANCE. The Company has performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
2.14. DISCLOSURES. Neither this Agreement, the Disclosure Statement,
any other agreement contemplated hereby, any exhibit hereto or thereto, nor any
report, certificate or instrument furnished to the Investor in connection with
the transactions contemplated in this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. The Company knows of no
information or fact that has or would have a Material Adverse Effect that has
not been disclosed to the Investor either in this Agreement, in the Disclosure
Statement or any other agreement contemplated hereby, any exhibit hereto or
thereto, or any report, certificate or instrument furnished to the Investor.
3. REPRESENTATIONS AND WARRANTIES AND OTHER AGREEMENTS OF THE INVESTOR.
3.1. REPRESENTATIONS AND WARRANTIES. The Investor hereby represents and
warrants to the Company that:
(a) AUTHORIZATION. The Investor has full power and authority
to execute, deliver and perform this Agreement and to acquire the
Shares, as contemplated herein; this Agreement constitutes the valid
and legally binding obligation of the Investor, enforceable against the
Investor in accordance with its terms.
(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares to be
received by the Investor as contemplated by this Agreement will be
acquired for investment for the Investor for its own account, not as a
nominee or agent and not with a view to the
- 5 -
<PAGE>
distribution of any part thereof. The Investor has no present
intention of selling, granting any participation in, or otherwise
distributing the same. The Investor does not have any contract,
undertaking, agreement or arrangement with any Person to sell,
transfer, or grant participation to such Person or to any third
Person, with respect to the Shares.
(c) RESTRICTED SECURITIES. The Investor understands that the
Shares may not be sold, transferred, or otherwise disposed of without
registration under the U.S. Securities Act of 1933, as amended (the
"1933 Act"), or an exemption therefrom, and that, in the absence of an
effective registration statement covering the Shares or an available
exemption from registration under the 1933 Act, the Shares must be held
indefinitely. In the absence of an effective registration statement
covering the Shares, the Investor will sell, transfer, or otherwise
dispose of the Shares only in a manner consistent with its
representations and agreements set forth herein.
(d) SUITABILITY. The Investor is an "accredited investor" as
such term is defined in Rule 501(a) promulgated pursuant to the 1933
Act.
(e) FINANCIAL CONDITION. The Investor's financial condition
is such that it is able to bear the risk of holding the Shares for an
indefinite period of time and can bear the loss of its entire
investment in the Shares.
(f) EXPERIENCE. The Investor has such knowledge and
experience in financial and business matters and in making high risk
investments of this type that it is capable of evaluating the merits
and risks of the purchase of the Shares.
(g) RISK AND DUE DILIGENCE. The Investor understands that
the operation of the Company's business is subject to numerous risks
and that the Shares are a speculative investment that involves a high
degree of risk of loss of the entire investment therein. The Investor
is cognizant of and understands such risks, including those set forth
in the Disclosure Statement. The Investor has been allowed, upon
request, to examine any document or agreement listed herein, and has
had the opportunity to obtain any information concerning the Company,
including the opportunity to ask questions of and receive answers from
authorized representatives of the Company concerning this investment.
3.2. LEGENDS. It is understood that the certificates evidencing
the Shares will bear substantially the following legend:
"The shares represented by this certificate have been
acquired for investment, have not been registered under the Securities
Act of 1933, as amended (the "Act") or any applicable state security
laws and may not be offered, sold or otherwise transferred in the
absence of a registration statement in effect with respect to the
securities under
- 6 -
<PAGE>
such Act, or an opinion of counsel satisfactory to the Corporation
that such registration is not required under the Act or any applicable
state securities laws."
4. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions unless
waived by the Investor in accordance with Section 8.5 hereof:
4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true and correct on and as of the
date of the Closing.
4.2 DELIVERY OF SHARES. The Company shall have delivered to Harris
Trust Company of California, as escrow agent named in that certain Escrow
Agreement of even date by and among the Company, the Investor and Harris Trust
Company of California, a certificate representing the Shares, registered in the
name of the Investor.
4.3 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investor and the Investor's counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions unless
waived by the Company in accordance with Section 8.5 hereof:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investor contained in Section 3 shall be true and correct on and as of
the date of the Closing.
5.2. PAYMENT OF PURCHASE PRICE. The Investor shall have delivered
payment of the aggregate purchase price of the Stock to be purchased by it at
the Closing as set forth in Section 1.2.
5.3. STOCKHOLDERS AGREEMENT. The Investor shall become a party to the
Stockholders Agreement attached hereto as Exhibit A.
5.4. REGISTRATION RIGHTS AGREEMENT. The Company and the Investor shall
enter into a Registration Rights Agreement substantially in the form attached
hereto as Exhibit B.
- 7 -
<PAGE>
5.5. LOCK-UP AGREEMENT. SG Cowen Securities Corporation and the
Investor shall enter into a Lock-up Agreement substantially in the form attached
hereto as Exhibit C.
5.6. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company and Company's counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
6. TERMINATION.
6.1. EVENTS OF TERMINATION. This Agreement may be terminated as
follows:
(a) By mutual written consent of Company and the Investor;
(b) By either Company or the Investor if the Closing does
not occur on or before December 1, 1999.
7. MISCELLANEOUS.
7.1. CERTAIN DEFINED TERMs. As used in this Agreement:
"PERSON" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect upon the
business, assets, financial condition, income or prospects of the Company.
7.2. ASSIGNMENT. This Agreement may not be assigned by the Investor
without the prior written consent of the Company. Notwithstanding the foregoing,
the Investor shall have the right to assign, without the consent of the Company,
all of its rights and obligations hereunder to an affiliate or to any person or
entity that (i) acquires all or substantially all of the Investor's operating
assets (whether by asset sale, stock sale, merger or otherwise) or (ii) results
from a merger or reorganization of the Investor pursuant to any plan of merger
or reorganization. Without limiting the generality of the foregoing, the Company
expressly acknowledges that the Investor will have the right to assign this
Agreement or the operative rights and obligations hereof to any entity resulting
from the merger or other similar combination of the Investor with Xoom.com, Inc.
7.3. INCORPORATION BY REFERENCE. All exhibits and schedules appended to
this Agreement are herein incorporated by reference and made a part hereof.
- 8 -
<PAGE>
7.4. PARTIES IN INTEREST. All covenants, agreements, representations,
warranties and undertakings in this Agreement made by and on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
7.5. AMENDMENTS AND WAIVERS. Except as set forth in this Agreement,
changes in or additions to this Agreement may be made, or compliance with any
term, covenant, agreement, condition or provision set forth herein may be
omitted or waived (either generally or in a particular instance and either
retroactively or prospectively), upon the written consent of the Company and the
Investor.
7.6. GOVERNING LAW. This Agreement shall be deemed a contract made
under the laws of The Commonwealth of Massachusetts and, together with the
rights of obligations of the parties hereunder, shall be construed under and
governed by the internal laws of The Commonwealth of Massachusetts.
7.7. NOTICES. All notices, requests, consents and demands shall be in
writing and shall be personally delivered, mailed, postage prepaid, telecopied
or telegraphed, to the Company at:
HealthGate Data Corp.
25 Corporate Drive
Suite 310
Burlington, MA 01803
Attn: Rick Lawson
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: Keith Higgins, Esq.
or to the Investor at:
Snap! LLC
One Beach Street
San Francisco, CA 94133
Attn: Mark Makunas
- 9 -
<PAGE>
with a copy to:
Hughes & Luce, L.L.P.
111 Congress Avenue, Suite 900
Austin, Texas 78701
Attn: J. William Wilson
or such other address as may be furnished in writing to the other party hereto.
All such notices, requests, demands and other communication shall, when mailed
(registered or certified mail, return receipt requested, postage prepaid),
personally delivered, or telegraphed, be effective three business days after
deposit in the mails, when personally delivered, or when delivered to the
telegraph company, respectively, addressed as aforesaid, unless otherwise
provided herein and, when telecopied, shall be effective upon actual receipt.
7.8. EFFECT OF HEADINGS. The section and paragraph headings herein are
for convenience only and shall not affect the construction hereof.
7.9. ENTIRE AGREEMENT. This Agreement, and all other agreements
contemplated herein, constitutes the entire agreement among the Company and the
Investor with respect to the subject matter hereof. This Agreement supersedes
all prior agreements between the parties with respect to the Shares purchased
hereunder and the subject matter hereof.
7.10. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
7.11. COUNTERPARTS. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
7.12. EXPENSES. Each of the parties hereto shall bear and pay its own
expenses incurred in connection with the negotiation, preparation and execution
of, and the consummation of the transactions contemplated by this Agreement.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
HEALTHGATE DATA CORP.
By /s/ William S. Reece
---------------------------------
Title: Chief Executive Officer
SNAP! LLC
By: /s/ Edmond Sanctis
---------------------------------
Name: Edmond Sanctis
Title: Chief Operating Officer
- 11 -
<PAGE>
Schedule 2.5
to
COMMON STOCK PURCHASE AGREEMENT
Financial Statements
--------------------
The financial statements are substantially similar to the financial
statements contained in Amendment No. 6.
<PAGE>
Exhibit A
Stockholders Agreement
[Previously filed in Exhibit 10.40 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit B
Form of Registration Agreement
[Previously filed in Exhibit 4.12 to Form S-1 of the Registrant,
Registration No. 333-76899]
<PAGE>
Exhibit C
Form of Lock-up Agreement
<PAGE>
_____________, 1999
SG Cowen Securities Corporation
Financial Square, 27th Floor
New York, NY 10005
As representative of the
several Underwriters
Re: HealthGate Data Corp.
o Shares of Common Stock
Dear Sirs:
In order to induce SG Cowen Securities Corporation ("SG Cowen"),
Volpe Brown Whelan & Company, LLC and NationsBanc Montgomery Securities LLC
(collectively, the "Underwriters") to enter into a certain underwriting
agreement with HealthGate Data Corp., a Delaware corporation (the "Company")
with respect to the public offering of shares of the Company's Common Stock, par
value $0.01 per share ("Common Stock"), the undersigned hereby agrees that for a
period of 180 days following the date of the final prospectus filed by the
Company with the Securities and Exchange Commission in connection with such
public offering, the undersigned will not, without the prior written consent of
SG Cowen, on behalf of the several Underwriters, (1) directly or indirectly,
offer, sell, assign, transfer, encumber, pledge, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise dispose of, other
than by operation of law, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (including,
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations promulgated under
the Securities Act of 1933, as the same may be amended or supplemented from time
to time (such shares, the "Beneficially Owned Shares")) or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise.
Notwithstanding the foregoing, the undersigned may transfer any
shares of Common Stock without the prior written consent of SG Cowen, to any
entity that controls, is controlled by or is under common control with the
undersigned; provided, however, that prior to such transfer
<PAGE>
each such transferee shall execute an agreement satisfactory to SG Cowen,
agreeing to hold such shares subject to the provisions hereof.
Anything contained herein to the contrary notwithstanding, any
person to whom shares of Common Stock or Beneficially Owned Shares are
transferred from the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof
until the expiration of the 180 day period following the date of the Company's
final Prospectus, any and all rights, if any, to request or demand registration
pursuant to the Securities Act of any shares of Common Stock that are registered
in the name of the undersigned or that are Beneficially Owned Shares.
In order to enable the aforesaid covenants to be enforced, the
undersigned hereby consents to the placing of legends and/or stop-transfer
orders with the transfer agent of the Common Stock with respect to any shares of
Common Stock or Beneficially Owned Shares.
Whether or not the public offering actually occurs depends on a
number of factors, including market conditions. Any public offering will only be
made pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Snap! LLC
By: __________________________
Its: ___________________________
Snap! LLC
One Beach Street
San Francisco, CA 94133
(Address)
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 2, 1999 (except
as to Note 11, which is as of November 9, 1999), relating to the financial
statements of HealthGate Data Corp., which appears in such Prospectus. We
also consent to the application of such report to the Financial Statement
Schedule for the three years ended December 31, 1998 listed under Item 16(b)
of this Registration Statement when such schedule is read in conjunction with
the financial statements referred to in our report. The audits referred to in
such report also included this schedule. We also consent to the references to
us under the heading "Experts" in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
November 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AMENDMENT NO. 7 TO FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 960,831 807,742
<SECURITIES> 0 0
<RECEIVABLES> 394,575 795,488
<ALLOWANCES> (20,000) (44,600)
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,560,888 1,804,900
<PP&E> 1,727,850 2,522,113
<DEPRECIATION> (921,057) (1,186,338)
<TOTAL-ASSETS> 2,370,979 12,093,120
<CURRENT-LIABILITIES> 1,561,354 4,892,491
<BONDS> 0 0
0 0
6,889,431 15,282,692
<COMMON> 45,485 45,684
<OTHER-SE> (9,783,779) (9,983,156)
<TOTAL-LIABILITY-AND-EQUITY> 2,370,979 12,093,120
<SALES> 0 0
<TOTAL-REVENUES> 2,434,124 1,735,925
<CGS> 0 0
<TOTAL-COSTS> 1,181,012 1,445,377
<OTHER-EXPENSES> 3,777,264 10,413,756
<LOSS-PROVISION> 16,500 24,600
<INTEREST-EXPENSE> 327,100 323,162
<INCOME-PRETAX> (2,877,529) (10,465,705)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,877,529) (10,465,705)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (594,829) (8,393,261)
<CHANGES> 0 0
<NET-INCOME> (3,472,358) (18,858,966)
<EPS-BASIC> (0.76) (4.14)
<EPS-DILUTED> (0.76) (4.14)
</TABLE>
