<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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 Classification Code Number) Identification No.)
organization) 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
294 WASHINGTON STREET 599 LEXINGTON AVENUE
BOSTON, MASSACHUSETTS 02108 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>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.01 par value $51,750,000 $14,387
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
--------------------------
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>
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
SHARES
[LOGO]
COMMON STOCK
This is an initial public offering of shares of common stock of HealthGate
Data Corp. There is currently no public market for these shares. HealthGate
expects that the public offering price will be between $ and $ per
share.
We have applied for admission for trading and quotation of our common stock
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 7.
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 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
NATIONSBANC MONTGOMERY SECURITIES LLC
VOLPE BROWN WHELAN & COMPANY
, 1999
<PAGE>
[The inside cover contains pictures of our own Web sites, a co-branded CHOICE
Web site and other pages and arrows describing our content, technology and
advertising and sponsorship opportunities.]
We have registered the trademarks "HealthGate," "HealthGate Data," "MedGate"
and "ReADER" in the United States and have filed trademark registration
applications for "CHOICE," "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."
UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT: (1) ALL
OUTSTANDING SHARES OF OUR PREFERRED STOCK ARE CONVERTED INTO SHARES OF
COMMON STOCK ON THE DAY THAT THIS OFFERING IS COMPLETED; (2) WE WILL DECLARE A
-FOR-1 STOCK SPLIT BEFORE THIS OFFERING; AND (3) THE UNDERWRITERS DO NOT
EXERCISE THE OVER-ALLOTMENT OPTION.
THE COMPANY
HealthGate is a leading 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 over 190 sources representing 27 independent content
providers.
Given the depth and breadth of our content, we provide healthcare
information to a wide range of online users. 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 a proprietary series of award winning
consumer health Webzines and have developed Wellness Centers, which are
compilations of information we produce for consumers on 100 of the most
prevalent illnesses, diseases and medical conditions.
We adapt and integrate this diverse content through our internally developed
technology platform, which includes our proprietary ReADER-Registered Trademark-
natural language searching tool, in order to facilitate the search and retrieval
of relevant information. In addition, our activePress-TM- service uses our
technology platform to provide text conversion and Web site hosting services for
traditional print publishers.
We distribute our value-added 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 in the United States
and www.healthgate.co.uk in the United Kingdom; (2) customized, co-branded
CHOICE-TM- Web sites developed for hospitals and other enterprises; and (3)
other third party Web sites to which we syndicate content.
Subject specific Web sites dedicated to healthcare are one of the fastest
growing segments of the Internet. According to Cyber Dialogue, Inc., an industry
research firm, during the 12-month period ended July 1998, approximately 17
million adults in the United States searched online for health and medical
information, a number which Cyber Dialogue estimates will grow to approximately
30 million in 2000. We believe that with our extensive content libraries and
broad distribution network we are uniquely positioned to capture a leading share
of the online health audience.
Key elements of our strategy to become the leading destination for
healthcare information include:
- providing comprehensive healthcare content and technology by continually
expanding our health and medical content libraries and integrating this
content with technology in order to enhance the online user experience;
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<PAGE>
- expanding the HealthGate Network by increasing the number of co-branded
CHOICE Web sites through expanded marketing efforts and continuing to
syndicate our content libraries to other health related Web sites;
- continuing to build the HealthGate brand by establishing co-branded CHOICE
Web sites, offering free access to portions of our content libraries on
our own Web sites, continuing to provide syndicated healthcare content to
other high traffic healthcare Web sites and pursuing other promotional
activities and marketing initiatives;
- broadening the range of offered products and services to better serve
existing users, attract new users and keep users on the HealthGate Network
for longer periods of time, as well as to more fully leverage multiple
revenue opportunities provided by the HealthGate Network;
- pursuing an acquisition and affiliation strategy focusing on proprietary
content and complementary technologies and services; and
- continuing to grow internationally by establishing additional HealthGate
country-specific Web sites and by syndicating portions of our content
libraries to online providers in foreign markets.
We generate revenue from the following activities: (1) developing co-branded
CHOICE Web sites for enterprise clients and distributing content through these
CHOICE Web sites; (2) providing online advertising and sponsorship opportunities
to pharmaceutical companies and other businesses and organizations; (3)
participating in e-commerce opportunities; (4) providing our activePress Web
publishing services to traditional print publishers; and (5) syndicating content
to third party Web sites.
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.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock we are offering...................... shares
Common stock to be outstanding after this
offering.......................................... shares
Underwriters' over-allotment option............... shares
Use of proceeds................................... To fund operating losses and to expand
our sales and marketing efforts, to
repay outstanding indebtedness and for
general corporate purposes, including
content development and licensing,
advertising and brand promotion, working
capital and acquisitions or investments.
See "Use of Proceeds."
Proposed 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 March 31, 1999.
This number does not take into account 484,130 shares of our common stock
subject to options outstanding under our stock option plans or other option
agreements at March 31, 1999. This number also does not take into account
outstanding warrants to purchase 120,410 shares of our common stock.
SUMMARY CONSOLIDATED FINANCIAL 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>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue................................................................... $ 408 1,285 2,434
Total costs and expenses........................................................ 3,120 3,820 4,975
Loss from operations............................................................ (2,712) (2,535) (2,541)
Net loss........................................................................ (2,726) (2,541) (2,878)
Preferred stock dividends and accretion of preferred stock to redemption
value......................................................................... 264 540 594
Net loss attributable to common stockholders.................................... (2,990) (3,081) (3,472)
Basic and diluted net loss per share attributable to common stockholders........ $ (2.61) $ (2.69) $ (3.03)
Shares used in computing basic and diluted net loss per share attributable to
common stockholders........................................................... 1,146 1,146 1,147
Unaudited pro forma basic and diluted net loss per share........................ -- -- $ (1.24)
Shares used in computing unaudited pro forma basic and diluted net loss per
share......................................................................... -- -- 2,325
</TABLE>
5
<PAGE>
The following table contains a summary of our balance sheet:
- on an actual basis at December 31, 1997 and 1998;
- on a pro forma as adjusted basis at December 31, 1998 to reflect (a) the
sale of shares of common offered hereby at an assumed initial
public offering price per share of $ , and (b) the repayment of a
long-term note payable of $2,000,000 with proceeds from the offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
UNAUDITED
DECEMBER 31, PRO FORMA
1997 ACTUAL AS ADJUSTED
------------ --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................................ $ 29 $ 961 $ --
Working capital (deficit)................................................ (867) --
Total assets............................................................. 781 2,371
Long-term debt and capital lease obligations............................. 17 3,655
Redeemable convertible preferred stock................................... 6,295 6,889
Common stock and other stockholders' equity (deficit).................... (6,821) (9,735)
</TABLE>
6
<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 NOT THE ONLY ONES POTENTIALLY AFFECTING
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.
IF ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
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
We have been in business since February 1994, but we did not generate
revenue until January 1996. Our historical financial information is of limited
value in evaluating our future operating results because of our limited
operating history. 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 AND WE EXPECT THAT LOSSES WILL CONTINUE
We have lost money in every period since we started our business, and as of
December 31, 1998, we had an accumulated deficit of approximately $10.5 million.
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 and to expand internationally. As a result, we expect
to continue to lose money through 2000. We can not assure you that we will ever
achieve or sustain profitability or that our operating losses will not increase
in the future.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
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 our capital expenditures and other costs of
expanding our operations;
- the introduction of new products or services by us or our competitors;
- addition of new content providers or changes in our relationships with our
most important content providers;
- the level of usage of the HealthGate Network and the Internet generally;
- changes in the demand for and pricing of online healthcare information and
Internet advertising;
- seasonality of spending by the advertising industry, which is generally
lower in the first and third calendar quarters;
7
<PAGE>
- technical difficulties or systems downtime affecting the Internet
generally or our ability to deliver products and services online; and
- our ability to successfully 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."
OUR ABILITY TO BUILD AWARENESS OF THE HEALTHGATE BRAND IS IMPORTANT TO OUR
SUCCESS
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 increasing the number of CHOICE Web sites and
promoting our own Web sites. However, we can not assure you that our efforts to
build brand awareness will be successful.
WE FACE INTENSE COMPETITION
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. We compete, directly and
indirectly, for subscribers, consumers, content and service providers,
advertisers, sponsors and acquisition candidates with 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 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 portal companies, 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.
8
<PAGE>
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 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."
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH
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 54 full-time employees as of March 31, 1999, and we expect to
add a significant number of additional personnel in the near future. We also
expect to increase our spending on technology to continue to expand and upgrade
our existing systems. Future growth may place 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 systems and train
and manage our employees. We believe the successful integration of our senior
management will be critical to our ability to effectively address these needs.
Several members of our senior management joined us during 1998 or early 1999,
including Mary B. Miller, our Chief Financial Officer, and Hamid Tabatabaie, our
Vice President of Sales and Marketing. 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 MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY
We expect to make acquisitions of, or significant investments in,
complementary companies, products or technologies to increase our content
libraries, technological capabilities and customer base. 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. Acquisitions could
divert our attention from then-existing business operations and expose us to
unforeseen liabilities or risks generally associated with making acquisitions.
We may also lose key employees while integrating any new companies.
Integrating newly acquired organizations and technologies into our company
could be expensive, time consuming and may strain our resources. Consequently,
we may not be successful in integrating any acquired businesses or technologies
and may not achieve anticipated revenue and cost benefits. In addition, both the
healthcare and Internet industries are consolidating, and we expect that we will
face intensified competition for acquisitions, especially from larger
organizations.
We may pay for acquisitions with cash, including the proceeds of this
offering. We may also incur debt to pay for acquisitions. Acquisition financing
may not be available on favorable terms or at all. We may also issue additional
stock to buy companies or technologies in the future, and this could dilute the
ownership interests of our stockholders. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would materially harm our results of
operations.
WE NEED TO ATTRACT AND RETAIN KEY PERSONNEL
Our performance depends on the continued services and performance of our
executive officers and key employees, particularly William S. Reece, our
President, Chief Executive Officer and Chairman of the Board. We maintain key
person life insurance payable to us on Mr. Reece in the amount of
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<PAGE>
$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.
WE ARE RELYING ON OUR ABILITY TO SELL ADVERTISING ON THE HEALTHGATE NETWORK
We currently derive a substantial portion of our revenue from the sale of
advertising and sponsorship of discrete topic areas on the HealthGate Network,
and our future success depends on our ability to generate revenue from
advertising and sponsorship. Our ability to continue to generate and increase
advertising and sponsorship revenue 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 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
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.
WE MAY 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 systems. We have suffered service interruptions in the past and can not
guarantee that we will not experience them again. We are also dependent upon Web
browsers, Internet service providers and online service providers to provide
Internet users access to our Web sites. Each of them has experienced significant
outages in the past and could experience outages, delays and other difficulties
in the future due to system failures. 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 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.
10
<PAGE>
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 providers;
- any failure of our third party 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 MAY NOT BE ABLE TO PROTECT AGAINST SYSTEM SECURITY BREACHES
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 MAY NEED TO OBTAIN ADDITIONAL CAPITAL IN THE FUTURE
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 twelve months. However, 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. 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.
WE MAY NOT BE ABLE TO KEEP UP WITH CHANGES IN TECHNOLOGY
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 proprietary technology obsolete and
unmarketable or require us to make significant unanticipated investments in
research and development. To be successful, we must continue to license or
develop leading technology, enhance our existing
11
<PAGE>
products and services and respond to emerging industry standards and practices
on a timely and cost-effective basis.
WE MAY FACE RISKS RELATED TO YEAR 2000 PROBLEMS
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.
We have made preliminary 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. We plan to have completed our assessments and
remediation plans and expect to complete any necessary changes to our internal
systems and proprietary software by the end of June 1999. Many of our vendors of
material software, hardware and services have indicated that the products we use
are currently Year 2000 compliant. We are not currently aware of any internal
Year 2000 compliance problems that we expect to have a material adverse effect
on our business, without taking into account our efforts to avoid or fix these
problems. 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 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 agreement with Blackwell Science that our
applications and services are Year 2000 compliant. If our applications and
services fail to be Year 2000 compliant, this agreement 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 COULD BE LIABLE FOR INFORMATION RETRIEVED FROM OUR WEB SITES
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.
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<PAGE>
WE DEPEND ON OUR CONTENT PROVIDERS
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.
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. If our network of 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.
THE MAJORITY OF OUR REVENUE HAS HISTORICALLY BEEN DERIVED FROM A FEW CUSTOMERS
Historically, we have generated a substantial portion of our revenue from a
few customers. For the year ended December 31, 1998, two customers accounted for
62% 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
either could adversely affect our business.
WE DEPEND ON OUR INTELLECTUAL PROPERTY RIGHTS
We regard our trademarks, service marks, copyrights, trade dress, 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," "MedGate" and "ReADER"
trademarks in the U.S. and we have pending U.S. applications for our HealthGate
logo, "CHOICE" 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.
13
<PAGE>
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.
We also rely on a variety of technologies that are licensed from third
parties, including our database 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
WE ARE RELYING 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.
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.
WE ARE RELYING 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. It is
difficult to predict which, if any, will emerge as the industry standard. This
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<PAGE>
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 the commercial
viability of Internet-based advertising.
GOVERNMENTAL REGULATION OF THE INTERNET IS UNCERTAIN
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 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.
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.
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
15
<PAGE>
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.
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 comprises 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.
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 Web and for new laws to be
adopted. Any new laws or regulations relating to the Web, or the application or
interpretation of existing laws, could slow the growth in the use of the Web,
decrease demand for our Web sites or otherwise materially adversely affect our
business.
RISKS RELATED TO THIS OFFERING
OUR COMMON STOCK PRICE MAY BE VOLATILE
We cannot predict the extent to which investor interest in our company will
lead to the development of an active trading market or how liquid that market
might become. 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;
- customer relationship developments; and
- conditions affecting the Internet or healthcare industries.
The trading price of our common stock may be volatile. The stock market in
general, and the market for technology and Internet related companies in
particular, has experienced extreme price and volume fluctuations. These broad
market and industry fluctuations may adversely affect the trading price of our
common stock, regardless of our actual operating performance.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. If this were to happen to HealthGate, litigation would be expensive
and would divert management's attention.
WE WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS OF THIS OFFERING
We estimate that the net proceeds from the sale of common stock offered by
us will be approximately $ million. We intend to use approximately $2 million
of the net proceeds to repay outstanding indebtedness under a subordinated term
loan. We intend to use the remainder of the net proceeds to fund operating
losses and the expansion of our sales and marketing efforts and for general
corporate purposes, including content development and licensing, advertising and
brand promotion and
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<PAGE>
working capital. 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. 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. 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, our officers and directors will own approximately
% of our outstanding common stock. In addition, entities with which our
outside directors are affiliated will own approximately % 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 INCLUDES ANTI-TAKEOVER PROVISIONS
Some provisions of our certificate of incorporation and provisions of
Delaware law may deter or prevent a takeover attempt, including an attempt that
might result in a premium over the market price for our common stock. 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. These staggered
terms may limit the ability of holders of common stock to complete a change of
control.
STOCKHOLDER PROPOSALS. Our stockholders must follow an advance notification
procedure 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.
PREFERRED STOCK. Our certificate of incorporation authorizes our board of
directors to issue up to 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.
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 law may have the effect of inhibiting a
non-negotiated merger or other business combination.
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<PAGE>
FUTURE SALES OF OUR COMMON STOCK 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 make it more difficult for us to sell equity or equity related
securities in the future. The number of shares of common stock available for
sale in the public market is limited by restrictions under federal securities
law and 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 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>
Date of this prospectus (includes the shares sold in
this offering)
180 days after the date of this prospectus
At various times thereafter through .
</TABLE>
Any shares that may be purchased in this offering by our affiliates, as
defined in Rule 144 of the Securities Act, will be subject to the volume and
other selling limitations under Rule 144 of the Securities Act. All but
of the shares eligible for sale on the 180(th) day after the date of
this prospectus or afterward will be subject initially to volume and other
limitations under Rule 144.
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 offering, the holders of approximately shares of
our common stock will have the right to require us to register their shares for
sale to the public. 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
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.
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares of
common stock in this offering will be approximately $ million ($
if the underwriters' over-allotment is exercised in full), assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and offering expenses payable by us. The
primary purposes of 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 $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 to fund
operating losses, to expand our sales and marketing efforts and for general
corporate purposes, including content development and licensing, advertising and
brand promotion and working capital. We may also use a portion of the proceeds
for the acquisition of or investment in companies, technologies or assets that
complement our business. We have not determined the amounts we plan to spend on
any of these areas or the timing of these expenditures. 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.
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of HealthGate as of
December 31, 1998 (1) on an actual basis at December 31, 1998 and (2) on a pro
forma as adjusted basis at December 31, 1998 to reflect (a) the sale of
shares of common stock offered hereby at an assumed initial public offering
price per share of $ , and (b) 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>
DECEMBER 31, 1998
---------------------------
UNAUDITED
PRO FORMA
ACTUAL AS ADJUSTED
-------------- -----------
<S> <C> <C>
Long-term portion of capital lease obligations....................................... $ 226,401
Note payable to related party........................................................ 2,000,000
Long-term note payable............................................................... 1,429,087
-------------- -----------
Total notes payable and long-term capital lease obligations...................... 3,655,488
-------------- -----------
Redeemable convertible preferred stock, $.01 par value:
Series A--1,000 shares authorized, issued and outstanding actual; none issued or
outstanding pro forma as adjusted.............................................. 665,099
Series B--1,000 shares authorized, issued and outstanding actual; none issued or
outstanding pro forma as adjusted.............................................. 2,055,150
Series C--1,000 shares authorized, issued and outstanding actual; none issued or
outstanding pro forma as adjusted.............................................. 1,230,296
Series D--1,667 shares authorized, issued and outstanding actual; none issued or
outstanding pro forma as adjusted.............................................. 2,938,886
-------------- -----------
Total redeemable convertible preferred stock................................... 6,889,431
-------------- -----------
Common stock and other stockholders' equity (deficit):
Common stock, $.01 par value: 20,000,000 shares authorized actual, and
shares authorized pro forma as adjusted; 1,146,875 shares issued and
outstanding actual, and shares issued and outstanding pro forma as
adjusted....................................................................... 11,469
Additional paid-in capital........................................................... 714,741
Accumulated deficit.................................................................. (10,461,504)
-------------- -----------
Total common stock and other stockholders' equity (deficit).................... (9,735,294)
-------------- -----------
Total capitalization........................................................... $ 809,625 $
-------------- -----------
-------------- -----------
</TABLE>
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DILUTION
The pro forma net tangible book value of HealthGate as of December 31, 1998
was $ million, or $ 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 conversion of all outstanding preferred stock into 1,898,763 shares of
common stock upon the closing of the offering.
After giving effect to the sale of shares of common stock we are
offering at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and offering
expenses, HealthGate's pro forma net tangible book value as of December 31, 1998
would have been approximately $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $ 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................................................. $
Pro forma net tangible book value per share at December 31, 1998.............................. $
Increase attributable to the offering.........................................................
---------
Pro forma net tangible book value per share after the offering..................................
---------
Net tangible book value dilution per share to new investors in the offering..................... $
---------
---------
</TABLE>
The following table summarizes, as of December 31, 1998, 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 $ per share.
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED AVERAGE
---------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.......................................... % $ % $
New Investors.................................................. % %
--------- ----- --------- -----
Totals................................................... 100.0% $ 100.0%
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>
This discussion and table assumes no exercise of options outstanding under
HealthGate's stock option plans. As of December 31, 1998, there were options
outstanding to purchase a total of 432,150 shares of common stock at a weighted
average exercise price of $3.87 per share. To the extent that any of these
options are exercised, there will be further dilution to new investors.
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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 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.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 8,
1994)
THROUGH
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1994 1995 1996 1997 1998
----------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue...................................... $ -- $ 1 $ 408 $ 1,285 $ 2,434
Cost and expenses:
Cost of revenue.................................. -- 15 492 912 1,181
Research and development......................... 12 447 980 891 1,450
Sales and marketing.............................. -- 98 1,080 1,496 1,414
General and administrative....................... 27 252 568 521 930
------ --------- --------- --------- ---------
Total costs and expenses....................... 39 812 3,120 3,820 4,975
Loss from operations............................... (39) (811) (2,712) (2,535) (2,541)
Net loss........................................... (39) (815) (2,726) (2,541) (2,878)
Preferred stock dividends and accretion of
preferred stock to redemption value.............. -- 65 264 540 594
Net loss attributable to common stockholders....... (39) (880) (2,990) (3,081) (3,472)
Basic and diluted net loss per share attributable
to common stockholders........................... $ (0.04) $ (0.81) $ (2.61) $ (2.69) $ (3.03)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders.... 1,011 1,084 1,146 1,146 1,147
Unaudited pro forma basic and diluted net loss per
share............................................ $ (1.24)
Shares used in computing unaudited pro forma basic
and diluted net loss per share................... 2,325
</TABLE>
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The following table contains a summary of our balance sheet:
- on an actual basis at December 31, 1994, 1995, 1996, 1997 and 1998;
- on a pro forma as adjusted basis at December 31, 1998 to reflect (a) the
sale of shares of common stock offered hereby at an assumed initial
public offering price per share of $ , and (b) the repayment of a
long-term note payable of $2,000,000 with proceeds from this offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
DECEMBER 31, UNAUDITED
------------------------------------------ PRO FORMA
1994 1995 1996 1997 ACTUAL AS ADJUSTED
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 4 $ 105 $ 1,156 $ 29 $ 961 $ --
Working capital (deficit)....................... (2) (216) 585 (867) --
Total assets.................................... 4 612 1,791 781 2,371
Long-term debt and capital lease obligations.... -- 172 79 17 3,655
Redeemable convertible preferred stock.......... -- 845 4,763 6,295 6,889
Common stock and other stockholders' equity
(deficit)..................................... (2) (757) (3,740) (6,821) (9,735)
</TABLE>
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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 a leading 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 over 190 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 technology
platform, which includes our proprietary ReADER-Registered Trademark- natural
language searching tool, in order to facilitate search and retrieval of relevant
information. In addition, we use our technology platform to provide text
conversion and Web site hosting services for traditional print publishers to
bolster the online healthcare resources accessible through our content
libraries.
We distribute this value-added 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 in the United States
and www.healthgate.co.uk in the United Kingdom; (2) customized, co-branded
CHOICE Web sites developed for hospitals and other enterprises; and (3) other
third party Web sites to which we syndicate content. With our extensive online
content libraries and broad distribution network, we believe we are a leading
source for healthcare information on the Internet.
We derive revenue primarily from (1) services and (2) online advertising,
sponsorship and e-commerce.
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. Beginning
in 1999, we expect to derive increased services revenue through the introduction
of CHOICE Web site development, implementation and hosting.
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. 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
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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. 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.
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. We expect that transactional fees associated
with our providing full-text journal articles from our activePress clients will
result in increased e-commerce revenue. 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 $10,462,000 as of
December 31, 1998. 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 through 2000, 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 "Risk
Factors--We have a history of losses and we expect that losses will continue."
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 healthgate.com Web site and the
establishment of the business, operations and financing of our company. In 1997
and 1998, 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.
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. Sponsorship and
advertising 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. We anticipate that
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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,
due primarily to decreased transaction based fees. In 1998, two customers
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%). To date, substantially all of our revenue has been denominated in
U.S. dollars.
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 Internet 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
We incurred significant losses for all periods from inception through
December 31, 1998. We have recorded a valuation allowance for the full amount of
our deferred tax assets as the future realization of the tax benefit is not
sufficiently assured.
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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 $5,427,000 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. As of December 31, 1998,
we had approximately $961,000 of cash and cash equivalents.
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
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preferred stock, we paid a $250,000 fee to a placement agent, and issued to the
placement agent warrants to purchase 5,460 shares of our common stock at an
exercise price of $11.45 per share. The placement fee and warrant value will be
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. 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 $11.45. 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 will be recognized as a return to the
preferred stockholders. This amount, equal to the proceeds from the Series E
offering, will be reported as accretion of preferred stock to redemption value
in the consolidated statement of operations in the period the Series E preferred
stock was issued, and represents a non-cash charge in the determination of net
loss attributable to common stockholders.
Cash used in operations was $2,484,000 in 1998, $1,757,000 in 1997, and
$2,284,000 in 1996. Cash used during these periods was primarily attributable to
the net losses incurred during these periods of $2,878,000, $2,541,000, and
$2,726,000 respectively, offset in part by depreciation and amortization,
increases in accounts receivable, increases in prepaid expenses and other
current assets, and increases in accounts payable and accrued expenses.
Increases in operating assets and liabilities were primarily the result of the
growth of business and operations during these periods.
Cash used for investing activities consisted of property and equipment
purchases of $278,000 in 1998, $125,000 in 1997 and $153,000 in 1996. We also
entered into capital leases for computer equipment totaling $577,000 in 1998,
$71,000 in 1997 and $87,000 in 1996.
At December 31, 1998, we had outstanding commitments under capital leases of
$501,000 and under operating leases for equipment and office space of $655,000.
Additionally, in February 1999, in connection with a new office lease
arrangement, we purchased office furniture for $115,000. Further, future minimum
payments under content license agreements totaled $446,000 at December 31, 1998.
We expect that as we expand our content libraries our commitments under content
licensing agreements will increase significantly.
We currently anticipate that the net proceeds from the offering, together
with our available cash resources, will be sufficient to meet our presently
anticipated working capital, capital expenditure and business expansion
requirements for at least the next twelve months. 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. Our future capital needs will depend upon numerous
factors, including the success of our existing and new product and service
offerings and competing technological and market developments. We may be
required to raise additional funds through public or private financing,
strategic relationships or other arrangements. We can not guarantee that
additional funding, if needed, will be available on terms acceptable to us, or
at all.
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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 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 do not presently anticipate that future expenditures will be material. 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 made preliminary 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. 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. We plan to have completed our
assessments and remediation plans and to have made any necessary changes to our
internal systems and proprietary software by the end of June 1999. Many of our
vendors of material software, hardware and services have indicated that the
products used by us are currently Year 2000 compliant. We are not currently
aware of any internal Year 2000 compliance problems that could reasonably be
expected to have a material adverse effect on our business, results of
operations and financial condition, without taking into account our efforts to
avoid or fix such problems. 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 agreement with Blackwell Science that our
applications and services are Year 2000 compliant. If our applications and
services fail to be Year 2000 compliant, this agreement 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
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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 preliminary contingency plans. The results of our analyses and the
responses received from third party vendors and service providers will be taken
into account to revise our contingency plans as necessary. It is our goal to
finalize our contingency plans by the end of the second calendar quarter of
1999.
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, 1999. HealthGate does
not expect SFAS No. 133 to have a material effect on its financial position or
results of operations.
In February 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SoP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SoP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. SoP 98-1 will be effective
for HealthGate beginning in fiscal 1999, and HealthGate does not expect adoption
of this SoP to have a material effect on its financial position or results of
operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of
Start-Up Activities." Start-up activities are defined broadly as those one-time
activities related to the opening of a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, commencing some new operation or organizing a new entity.
SoP 98-5 requires that the cost of start-up activities be expensed as incurred.
SoP 98-5 is effective for HealthGate beginning in fiscal 1999, and HealthGate
does not expect adoption of this SoP to have a material effect on its financial
position or results of operations.
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BUSINESS
OVERVIEW
HealthGate is a leading 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 over 190 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 technology
platform, which includes our proprietary ReADER-Registered Trademark- natural
language searching tool, in order to make it easy for users to search for and to
retrieve relevant information.
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. 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 a proprietary series of award
winning consumer health Webzines and have developed Wellness Centers, which are
compilations of information we produce for consumers on 100 of the most
prevalent illnesses, diseases and medical conditions. In addition, we use our
technology platform to provide text conversion and Web site hosting services for
traditional print publishers to bolster the 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 this value-added 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 in the United States
and www.healthgate.co.uk in the United Kingdom; (2) customized, co-branded
CHOICE-TM- Web sites developed for hospitals and other enterprises; and (3)
other third party Web sites to which we syndicate content. With our extensive
online content libraries and broad distribution network, we believe we are a
leading source for healthcare information on the Internet. In January 1999, our
users viewed approximately 3.5 million content pages on our own Web sites.
We generate revenue from the following activities:
(1) developing co-branded CHOICE Web sites for enterprise clients and
distributing content through these CHOICE Web sites;
(2) providing advertising and sponsorship opportunities to pharmaceutical
companies and other businesses and organizations;
(3) participating in e-commerce opportunities;
(4) providing our activePress-TM- Web publishing services to traditional
print publishers; and
(5) syndicating content to third party Web sites.
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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 International Data Corporation, an industry
research firm, the number of Internet users worldwide is expected to grow from
approximately 100 million in 1998 to approximately 320 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. Internet portals such as America Online and
Yahoo! developed in response to Internet users' need for a simple means of
navigating among these Web sites. As the number of Internet users has increased,
discrete user groups have developed, which in turn have created a demand for
more focused subject specific Web sites. These subject specific Web sites are
becoming one of the fastest growing segments of the Internet. Among the most
popular topics of these types of Web sites is healthcare. According to Cyber
Dialogue, Inc., an industry research firm, during the 12-month period ended July
1998, approximately 17 million adults in the United States searched online for
health and medical information, a number which Cyber Dialogue estimates will
grow to approximately 30 million in 2000. Further, Cyber Dialogue research
indicates that 70% of adults who seek health and medical information online
believe that the availability of this information on the Internet enables them
to make better informed healthcare choices.
This demand for online healthcare content is creating many opportunities for
businesses to reach new consumers and expand their relationships with existing
customers. Because of their favorable demographics, people using the Internet to
retrieve online medical information are an attractive audience to businesses.
According to Cyber Dialogue, 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 at a lower incremental marketing
cost. 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 with relatively low overhead costs.
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.
BUSINESS STRATEGY
Our objective is to become the leading destination for reliable, objective,
comprehensive and up-to-date healthcare information on the Internet. We plan to
achieve this objective by delivering a broad array of healthcare content and
related 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 leading 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,
geriatrics and continuing education. In addition to continually expanding our
content, we intend to remain a leader in 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
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capabilities and personalization and content customization for the individual
users. We believe professionals, patients and consumers have limited ability 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 and www.healthgate.co.uk; (2) clients'
co-branded CHOICE Web sites; and (3) other third party Web sites carrying our
syndicated content, including Inteli-Health and WebMD. 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. 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 partners. We plan to allocate significant resources to continue to
build brand recognition by expanding the reach of the HealthGate Network. By
continuing to increase the number of co-branded CHOICE Web sites, we plan to
cost-effectively attract new users and build additional online communities 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 and www.healthgate.co.uk Web sites by
offering users free access to a portion of our content libraries. Moreover, we
will continue to provide co-branded content on a syndicated basis, enabling
users to reach our www.healthgate.com Web site from the licensees' sites by
clicking on a HealthGate link. In addition, we plan to build recognition of the
HealthGate brand through online and traditional media advertising, other
promotional activities and marketing initiatives, and through additional
strategic affiliations.
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 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 plan 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 and services, such as Web site design and development
firms,
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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 over 190 sources. 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 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 in order to explore the most recent and
authoritative scientific studies of that condition, illness or disease.
Generally, certain licensed content, including MEDLINE, CANCERLIT and
AIDSLINE, is free to users throughout the HealthGate Network. Other licensed
content, including PsycINFO, Well Connected and the EMBASE Cardiology
Consultant, is accessible for a fee on a transaction specific basis. In order to
meet the needs of their communities of users, CHOICE Web site clients and
licensees of our syndicated content are able to specify which of our libraries
will be available to their users.
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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>
<CAPTION>
CONTENT PROVIDER DESCRIPTION REPRESENTATIVE SOURCES DISTRIBUTION CHANNELS
<S> <C> <C> <C>
Independent Well known, - MEDLINE (National - healthgate.com
Licensors authoritative content Library of Medicine) - CHOICE Web sites
sources licensed from - Adult Health Advisor - Syndicated third
government agencies, (Clinical Reference party Web sites
professional Systems) - healthgate.co.uk
associations, not-for- - Continuing Medical
profit organizations, Education
medical centers, (Professional
publishers and other Postgraduate
third parties. Services, a division
of Physicians World
Communications Group)
- Reuters Medical News
(Reuters Health)
- EMBASE Cardiology
Consultant (Elsevier
Science B.V.)
HealthGate Nine different award - Healthy Athlete - healthgate.com
winning magazines - Healthy Eating - CHOICE Web sites
developed by HealthGate - Healthy Man - Syndicated third
specifically for - Healthy Mind party Web sites
Web-based distribution. - Healthy Parenting - healthgate.co.uk
Updated weekly with new - Healthy Sexuality
articles, written or - Healthy Traveler
purchased by - Healthy Woman
HealthGate. - RxAlert
activePress Full-text journals and - NEW ENGLAND JOURNAL - nejm.org
Clients similar content from OF MEDICINE - blackwell-synergy.com
traditional print (Massachusetts - healthgate.com
publishers, converted Medical Society) - CHOICE Web sites
for Web access and - Blackwell Science - Syndicated third
hosted by HealthGate's journals party Web sites
activePress unit for a (Blackwell Science) - healthgate.co.uk
fee.
</TABLE>
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
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is recognized by healthcare professionals and academia for its high quality.
Content in this category includes the following:
- 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 produced by the Boston University
School of Medicine and 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 objective criteria prior to being
added to our content libraries. The criteria used to evaluate the content
include the prominence and reputation of the provider of the content, the
integrity of the content provider's own review process, comparison with
comparable sources and the frequency of updates.
HEALTHGATE PROPRIETARY CONTENT
This category currently includes nine 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 and prescription and
over-the-counter drugs. Articles for these publications are written by medical
writers, physicians and other healthcare professionals 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 experienced
medical editors and by our Editorial Board. Several Healthy Living Webzines have
been recommended or otherwise recognized for their editorial quality by the
American Medical Writers Association, Tufts University School of Nutrition,
Lycos and the Disney Go Network.
ACTIVEPRESS CONTENT
This category currently includes all medical, scientific and technical
journals published by the worldwide publishing units of Blackwell Science and
the Massachusetts Medical Society, publisher of the NEW ENGLAND JOURNAL OF
MEDICINE. Through our activePress service, we convert these journals into a
Web-enabled delivery format and provide access to the converted journals over
the Internet by 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 and to distribute
the NEW ENGLAND JOURNAL through our CHOICE Web sites.
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STRATEGIC AFFILIATIONS
We believe that strategic affiliations enable us to acquire content more
rapidly, develop and distribute our products and services, generate 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 for healthcare content, related products and services, marketing
and online distribution with the following companies:
ACTIVEPRESS CONTENT AFFILIATIONS
BLACKWELL SCIENCE, LTD. Through our activePress service, we are the
exclusive developer and host 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 66 different peer reviewed journal
titles from Blackwell Science's worldwide publishing units, and we have
contracted to convert the remaining 134 Blackwell Science titles as the
publisher makes them available to us. 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. 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 allocate revenue from syndication with
Blackwell Science. The initial term of our activePress agreement with Blackwell
Science runs through February 2000. Until September 30, 1999, Blackwell Science
has the right to extend the term of the agreement to February 28, 2001. If this
right is exercised, Blackwell Science may renew the agreement annually for an
additional three years.
NEW ENGLAND JOURNAL OF MEDICINE. We recently entered into a strategic
affiliation 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 activePress Web site, the JOURNAL will offer electronic
subscriptions, individual article delivery and links to the MEDLINE
bibliographic database, thereby improving reader access to this important
resource. As part of this relationship, 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.
OTHER CONTENT AFFILIATION
CONSUMER VERSION OF THE NEW ENGLAND JOURNAL OF MEDICINE. We have signed a
term sheet with the Massachusetts Medical Society to create a Web-based consumer
version of the NEW ENGLAND JOURNAL OF MEDICINE. After negotiation and execution
of a definitive agreement, we will be the exclusive distributor of this unique
version of the JOURNAL. We will pay an annual fee 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 intend to make the
publication available through subscription. We plan to provide both targeted
advertising and sponsorship opportunities on these pages. We expect to release
the consumer version of the NEW ENGLAND JOURNAL OF MEDICINE during 1999.
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PRODUCT AND SERVICE AFFILIATIONS
PHYSICIANS WORLD COMMUNICATIONS GROUP. We have formed an exclusive
relationship with Physicians World Communications Group, the largest independent
medical education company in the United States, to develop Continuing Medical
Education (CME) programs for distribution over the Web. Professional
Postgraduate Services, a division of Physicians World, is accredited by the
Accreditation Council for Continuing Medical Education to offer Category 1 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 are implementing a strategic plan with
Physicians World to increase sponsorship funding for the development of new
courses to be provided through this relationship.
BOSTON UNIVERSITY SCHOOL OF MEDICINE. We have a strategic affiliation 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 23 different CME programs
from Boston University in content libraries selected by our CHOICE Web sites. We
plan to develop additional programs with Boston University through this
relationship.
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. 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 AFFILIATION
DATA GENERAL CORPORATION. We have formed a strategic marketing affiliation
with Data General Corporation, an information technology products and services
company. Data General has a current installed customer base of approximately
1,200 hospitals and healthcare institutions and a sales and marketing group
dedicated to healthcare. Data General's healthcare customer base is a key target
market for our CHOICE Web sites. Data General is reselling our co-branded CHOICE
product to complement the suite of products and services that it currently
offers to its customers, which includes electronic medical records services,
imaging and archival software and Web-authoring tools. Data General has agreed
it will not market any other products or services that are similar to ours
during the term of the agreement. Until June 30, 1999, or for an additional six
month period if Data General has sold at least 25 CHOICE accounts to its
customers, we are not permitted to market directly to Data General's current
customer base. The initial term of our agreement with Data General runs through
June 2001 and is renewable for one additional year by mutual agreement.
DISTRIBUTION AFFILIATIONS
We have formed strategic distribution affiliations with several
high-traffic, health-related Web sites to distribute portions of our content
libraries. Presently, these syndication affiliations include WebMD,
Inteli-health, America's Health Network, the American Medical Association and
MedCast. In addition to generating licensing fees, these syndication
arrangements, in most cases, provide for sharing advertising and sponsorship
revenue generated through these third party Web sites. By syndicating our
content, we are able to leverage the depth, breadth and quality of our content
and our technology platform to drive additional traffic to the HealthGate
Network in order to further increase awareness of the HealthGate brand and
develop additional advertising and sponsorship and e-commerce revenue
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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.
<TABLE>
<CAPTION>
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
- America's Health Network - Advertising and sponsorship
- American Medical fees
Association - E-commerce
- MedCast
activePress service Publishers - Services
- Blackwell Science - Annual hosting fees
- Massachusetts Medical - Development fees
Society - E-commerce
</TABLE>
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 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
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information is accessible through www.healthgate.com and www.bewell.com, our
companion consumer Web site. We plan to combine our bewell.com Web site with our
www.healthgate.com 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
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.
CO-BRANDED CHOICE WEB SITES FOR ENTERPRISE CLIENTS
Our CHOICE Web sites are customized, co-branded Web sites that provide
enterprises the ability to offer online healthcare information to their
communities of users as part of the HealthGate Network. We market CHOICE Web
sites to the following types of enterprises:
- HEALTHCARE INSTITUTIONS--Healthcare Institutions are enterprises, such as
hospitals, managed care organizations and physician groups, that 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 which 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 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 create a customized Web site to provide healthcare information from our
content libraries which is tailored to the needs of the specific enterprise's
users. We have developed a number of templates for CHOICE Web site design from
which each enterprise client may select a customized combination of health
information and related services from the range of content libraries and
services we provide. 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.
We have designed our CHOICE offerings with separate modules so that
enterprise clients can choose to have all or individual segments of our content
libraries available through their own CHOICE Web site. The three basic modules
divide our content libraries into: (1) a professional series, which offers
clinically oriented content such as MEDLINE; (2) a patient series, which
includes 3,000 different condition-specific informational brochures; and (3) a
consumer series, featuring general introductory magazine articles from our
Healthy Living Webzines.
We are continually developing additional product and 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.
- 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.
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In addition, CHOICE clients can choose to participate in advertising and
sponsorship opportunities for their Web sites. The revenue from these
opportunities is allocated between the CHOICE client and us.
As of March 31, 1999, we have established 12 co-branded CHOICE Web sites
providing health information to 37 local hospitals, including Swedish Medical
Center (Seattle, Washington), St. Joseph's Hospital, a unit of Carondelet Health
Systems (Kansas City, Missouri) and Hallmark Health (Malden, Massachusetts). The
following is an example of Web pages from a CHOICE Web site we developed and
host for Hallmark Health.
[Screen shots of co-branded CHOICE Web site, with the following captions:
Co-branded CHOICE site designed for Hallmark Health, Malden,
Massachusetts.
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 diseases, illnesses and conditions.
Health-conscious consumers can access Wellness Centers, reference
materials for lay persons and our award-winning Healthy Living Webzines to
help them lead a healthier lifestyle.]
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CONTENT SYNDICATION
We selectively syndicate portions of our content libraries to other
high-traffic, health-related Web sites pursuant to licensing agreements. By
syndicating our content, we are able to leverage the depth, breadth and quality
of our content and technology platform 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 licensing fees,
these syndication arrangements may provide for sharing advertising and
sponsorship revenue generated through these Web sites. Presently, we have
syndication affiliations with WebMD, Inteli-health, America's Health Network,
the American Medical Association and MedCast.
ACTIVEPRESS SERVICE FOR PUBLISHERS
Our activePress service, which was launched in 1998, provides a turnkey
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 we 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 support and maintenance. Additionally,
transactional revenue is derived from fees associated with users' access to the
publisher's content. These fees 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."
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 all 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.
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Advertisers on the HealthGate Network 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 (Zithromax and Zyrtec),
Schering Plough (Claritin) and Biogen (Avonex);
- Consumer health goods, including HealthShop.com (vitamins and supplements)
and SelfCare (health aids);
- Providers of health information, including McGraw-Hill (books), MD Consult
(their Web site) and W.B. Saunders (books); and
- Others, including CondeNet, Entrepreneur Magazine, the U.S. Air Force, the
U.S. Navy and the WALL STREET JOURNAL.
We offer sponsorship opportunities, including exclusive arrangements, 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.
The following screen illustrates opportunities for advertising and
sponsorship on a Wellness Center 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, Well Connected, 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 from 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 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 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 and assign direct sales
representatives to each region. The outside sales group is responsible for
delivering focused and targeted marketing for CHOICE Web sites, advertising and
sponsorship, content syndication 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
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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.
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 on their installed base of approximately 1,200
hospitals. See "--Strategic Affiliations."
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. In addition, we also
use Web-based banner advertising and sponsorship on our 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.
We are considering adding radio and television advertising to our marketing
efforts.
We expect to use portions 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. We intend to add additional staff in order to extend customer service
coverage into evening hours and weekends.
TECHNOLOGY PLATFORM
Our technology platform 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; (3) building online
communities; and (4) 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,
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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, community building 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 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,
through institutional Internet Protocol access, or through advertiser supported
free 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 natural language
searching tool, provides 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
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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
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. 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 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 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 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 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;
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- Web portal companies, 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.
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.
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.
Several of the companies listed above offer competitive products addressing
certain of our target markets. We expect that competition from these sources
will increase. However, we believe that we are the only provider among our
competitors to serve all of our target markets. We believe 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.
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 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.
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 we could comply with this
directive without adversely affecting the activities of our company 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. 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. 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.
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A feature of our 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.
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 transmissions of content on our own
Web sites and throughout the rest of the HealthGate Network. Any such new
legislation, regulation or application or interpretation of existing laws would
likely increase our cost of doing business.
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 comprises 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.
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.
INTELLECTUAL PROPERTY
We regard our trademarks, service marks, copyrights, trade dress, 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," "MedGate" and "ReADER"
trademarks in the U.S. and we have pending U.S. applications for our HealthGate
logo, "CHOICE" and "activePress" trademarks. 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 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.
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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 right 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 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.
EMPLOYEES
As of March 31, 1999, we had a total of 54 full-time employees. Of these
employees, 31 serve in research and development, 5 serve in administration and
18 serve in sales and marketing. None of our employees is represented by a labor
union. We consider our relations with employees to be good.
FACILITIES
Our principal executive offices are located in Burlington, Massachusetts, in
approximately 20,600 square feet of space occupied under a lease which expires
on June 30, 2000. We have an option to lease the space for an additional five
year term. In addition to the Burlington space, our central computer facility is
located at an Exodus Communications, Inc. Internet Data Center in Waltham,
Massachusetts. We believe that current space is adequate and that additional
space is available for expansion if needed.
LEGAL PROCEEDINGS
We are not currently a party to or aware of any material legal proceedings
involving us.
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MANAGEMENT
The following table sets forth certain information regarding our executive
officers, key employees and directors as of March 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------ --- ---------------------------------------------------
<S> <C> <C>
William S. Reece...................................... 33 Chairman of the Board of Directors, President and
Chief Executive Officer
Mary B. Miller........................................ 41 Chief Financial Officer and Treasurer
Mark A. Israel........................................ 30 Chief Technology Officer
Hamid Tabatabaie...................................... 37 Vice President of Sales and Marketing
Rick Lawson........................................... 39 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)................................ 60 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.
HAMID TABATABAIE has served as our Vice President of Sales and Marketing
since April 1998. From January 1998 to April 1998, Mr. Tabatabaie served as the
Chief Executive Officer of System Architects Inc., a patient educational
interaction and entertainment company he founded. From 1993 to 1997, Mr.
Tabatabaie was Chief Executive Officer of System Concepts Associates, a health
care information systems consulting and integration company that later merged
with Multimedia Medical Systems. From 1990 to 1993, Mr. Tabatabaie served as
national health care sales director for Data General Corporation.
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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
February 1995. Since 1997, Mr. de Castro has been a self-employed business
consultant. From 1992 to 1997, Mr. de Castro was Chairman of Xenometrics Corp.,
a biotech 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 March
1995. 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
preferred stock, and (4) one designee of the holders of Series B preferred
stock. Mr. Reece and
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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 Equity Capital 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 upon 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 7,500 shares of our
common stock under our 1994 Stock Option Plan. These options have an exercise
price of $4.62 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
2,500 shares of our common stock under our 1994 Stock Option Plan. These options
have an exercise price of $3.50 per share, vest in three equal annual
installments in January 1998, 1999, and 2000, based on continuing service as a
director through each applicable period and expire in January 2004.
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In addition, Mr. de Castro was granted options to purchase an additional
2,500 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 has an exercise price of $1.94 per share, fully vested during 1998 and
expires in November 2002.
Our directors do not receive cash remuneration for their services as
directors. We currently reimburse our 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 $100,000 for services rendered to
HealthGate in all capacities during 1998. No executive officer who would
otherwise have been included in such table on the basis of salary and bonus
earned for fiscal year 1998 has resigned or otherwise been terminated as of the
date of this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- -------------------------------------------- --------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
William S. Reece............................ 1998 138,583 66,500(1) 65,000(2) --
President and Chief
Executive Officer
Mark A. Israel.............................. 1998 126,000 32,000(1) 30,000 --
Chief Technology Officer
Hamid Tabatabaie(3)......................... 1998 151,846 -- 41,000 --
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 10,000
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.
53
<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
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE
--------------------------------------------
NUMBER OF PERCENT OF TOTAL APPRECIATION FOR
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............ 75,000(3) 36.0 7.462 1/23/03
Mark A. Israel.............. 30,000 14.4 7.462 1/23/03
Hamid Tabatabaie............ 41,000 19.7 3.000 5/22/03
</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 208,500
shares of common stock.
(3) Includes a non-qualified option for 10,000 shares fully vested upon grant
and an incentive stock option for 65,000 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.......................................... 10,000 65,000
Mark A. Israel............................................ 10,400 50,850
Hamid Tabatabaie.......................................... 0 41,000
</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 $ 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.
54
<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 650,000 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 March 31, 1999, options for a total of 428,530 shares of common stock
are outstanding under the 1994 Stock Option Plan. In addition, 1,345 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 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.
55
<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.
56
<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 5,600 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 300,000 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 through February 28, 2000, 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 $1,050,000 for the
development and hosting of the Web site. Total fees payable to us for continued
hosting and management of the Blackwell Science Web site during the initial term
of the agreement are expected to be approximately $350,000. During 1998 and
1997, our revenue from Blackwell Science represented 44% and 18% of our total
revenue for those respective years. 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 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.
57
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of April 21, 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>
GE Capital Equity Investments, Inc............................................. 546,028 17.9% %
120 Long Ridge Road
Stamford, CT 06927
William S. Reece (2)........................................................... 526,650 17.1
Blackwell Science, Ltd. (3).................................................... 518,159 17.0
Oxney Mead, Oxford
OX2 0EL, United Kingdom
Jonathan J. G. Conibear (4).................................................... 518,159 17.0
Chris H. Horgen (5)............................................................ 470,059 15.4
Nichols Research Corporation................................................... 461,726 15.2
4040 Memorial Parkway, S.
Huntsville, AL 35802
Barry M. Manuel, M.D. (6)...................................................... 305,600 10.0
65 Wellesley Road
Belmont, MA 02478
Rick Lawson (7)................................................................ 210,000 6.9
David Friend (8)............................................................... 108,264 3.5
Tina M. H. Blair, M.D. (8)..................................................... 87,102 2.9
Edson D. de Castro (9)......................................................... 32,883 1.1
Mark A. Israel (10)............................................................ 20,400 *
Hamid Tabatabaie............................................................... -- *
Executive officers and directors as a group (8 persons) (11)................... 1,763,517 55.9% %
</TABLE>
- ------------------------
* Less than one percent of outstanding shares.
(1) Percentage ownership is based on 3,045,658 shares outstanding as of April
21, 1999. Shares of common stock subject to options currently exercisable or
exercisable within 60 days of April 21, 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 31,650 shares of common stock issuable upon the exercise of stock
options.
(3) Includes 8,333 shares of common stock issuable upon the exercise of stock
options and 67,140 shares owned by Blackwell Wissenschafts-Verlag GmbH, a
wholly-owned subsidiary of Blackwell Science.
(4) Includes 8,333 shares of common stock issuable to Blackwell Science upon the
exercise of stock options, 442,686 shares of common stock owned by Blackwell
Science and 67,140 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.
58
<PAGE>
(5) Includes 8,333 shares of common stock issuable to Mr. Horgen, individually,
upon exercise of stock options and 461,726 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.
(6) Includes 225,000 shares owned by Dr. Manuel, 75,000 shares held in trusts
for which Dr. Manuel serves as trustee for the benefit of his children and
grandchildren and 5,600 shares issuable to Dr. Manuel upon the exercise of
stock options. Dr. Manuel disclaims beneficial ownership of the 75,000
shares held in trust for the benefit of his children and grandchildren.
(7) Includes 10,000 shares of common stock issuable upon exercise of stock
options.
(8) Includes 8,333 shares of common stock issuable upon exercise of stock
options.
(9) Includes 24,333 shares of common stock issuable upon exercise of stock
options.
(10) Includes 20,400 shares of common stock issuable upon exercise of stock
options.
(11) Includes 111,382 shares of common stock issuable upon exercise of stock
options.
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of HealthGate currently 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. The Series A Stock, the Series B
Stock, the Series C Stock, the Series D Stock and the Series E Stock are
collectively referred to as the "Series Stock". As of April 21, 1999, there were
outstanding 1,146,895 shares of common stock, held by 16 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 outstanding shares of Series A
Stock will convert into shares of common stock, the outstanding shares of
Series B Stock will convert into shares of common stock, the outstanding
shares of Series C Stock will convert into shares of common stock,
the outstanding shares of Series D Stock will convert into shares of
common stock, and the outstanding shares of Series E Stock will convert into
shares of common stock.
Immediately after the closing of this offering, we will have shares of
common stock outstanding, assuming no exercise of options to acquire
additional shares of common stock or warrants to purchase
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 shares of common stock, $.01 par value per share, and
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.
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,
the board can establish the number of shares to be included in each series, fix
the powers, designations, preferences and relative participating, optional
60
<PAGE>
or other special rights, and the qualifications, limitations or restrictions
thereof, of the shares of each such series and to increase (but not above the
total number of authorized shares of preferred stock) or decrease (but not below
the number of shares of such series then outstanding) the number of shares of
any series without further vote or action by the stockholders. 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. Although we have no current plans to issue such shares,
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 120,410 shares of
common stock, subject to certain antidilution adjustments. Warrants to purchase
114,950 shares have an exercise price of $0.0002 per share and expire in March
2008. Warrants to purchase 5,460 shares have an exercise price of $ 11.45 per
share and expire in . All warrants are fully vested and can be
exercised at any time. Holders of warrants to purchase 114,950 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."
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 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 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 notice to the corporation 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.
61
<PAGE>
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. 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 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.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common
stock outstanding (including shares of common stock issuable upon
conversion of the Series Stock and assuming no exercise of options or warrants
to purchase common stock outstanding as of the date of this prospectus). Of
these shares, shares offered hereby will be freely tradable in the public
market without restriction or further registration under the Securities Act of
1933, as amended (the "Securities Act"), except that 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 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 the expiration of the lock-up agreements entered into by us, our
officers and directors and most of our stockholders in connection with this
offering, of the restricted securities may be sold pursuant to Rules
144 or 701, subject in some cases to certain volume restrictions imposed
thereby. The remaining 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 (or persons
whose shares are aggregated with those of others), including any affiliate of
HealthGate who has beneficially owned shares for at least one year (including
the holding period of certain prior owners) will be entitled to sell in
"brokers' transactions" or directly to market makers within any three-month
period commencing 90 days after we become subject to the reporting requirements
of Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), a number of restricted securities that does not exceed the greater of (1)
1% of the class of such shares then outstanding (approximately 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.
These sales are subject, generally, to filing a Form 144 and certain other
limitations and restrictions. In addition, a person (or persons whose shares are
aggregated with those of others), 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 shares of
common stock have the right to require registration of their shares under
certain circumstances. However, these stockholders have entered into lock-up
agreements with respect to all shares owned by them, 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 , 1999, options to purchase an aggregate of
shares of common stock were fully vested. Of the total shares issuable pursuant
to these vested options, are subject to 180-day lock-up agreements.
As of , 1999, options to purchase an additional shares
of common stock were outstanding but subject to future vesting, and an
additional
63
<PAGE>
shares of common stock were available for future grants under our
1994 Stock Option Plan. See "Management--Employee Benefit Plans."
In general, under Rule 701 of the Securities Act as currently in effect,
absent contractual restrictions on transfer, 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 such registration statements are
expected to become effective upon filing. Shares covered by these registration
statements will thereupon be eligible for sale in the public markets.
LOCK-UP AGREEMENTS
HealthGate, all of our executive officers and directors and existing
stockholders who, upon the closing of this offering, will beneficially own an
aggregate of shares of common stock, options to purchase
shares of common stock and warrants to purchase 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 (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 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.
REGISTRATION RIGHTS
We have granted registration rights to most of our existing stockholders
covering (1) shares of common stock issuable upon conversion of the
Series Stock and (2) 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 shares of common
stock issuable upon conversion of the Series E Stock (the "GE-Blackwell
Securities").
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, provided that the aggregate offering value of the
Registrable Securities requested to be registered is equal to at least $1
million for public resale 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
64
<PAGE>
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,
provided that the aggregate offering value of the Registrable Securities
requested to be registered is equal to at least $1 million, 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 (1) 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 (2) 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 registration. 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: (1) to the registration priority arrangement reached
among HealthGate and the holders of the Registrable Securities or GE-Blackwell
Securities; and (2) 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.
65
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
, 1999, the underwriters named below, through their representatives
SG Cowen Securities Corporation, NationsBanc Montgomery Securities LLC and Volpe
Brown Whelan & Company, LLC, have severally agreed to purchase from us the
number of shares of common stock set forth opposite their names at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
SG Cowen Securities Corporation....................................................
NationsBanc Montgomery Securities LLC..............................................
Volpe Brown Whelan & Company, LLC..................................................
-----------
Total..........................................................................
-----------
-----------
</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 and may also be terminated upon
the occurrence of the events specified in the underwriting agreement. The
underwriters are severally committed to purchase all of the common stock being
offered by HealthGate if any of such shares are purchased (other than those
covered by the over-allotment option described below).
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 certain dealers at that price less a
concession not in excess of $ per share. Dealers may reallow a concession not
in excess of $ per share to certain 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, exercisable for up to 30 days
after the date of this prospectus, to purchase up to additional shares of
common stock at the public offering price set forth on the cover of this
prospectus to cover over-allotments, if any. If the underwriters exercise their
over-allotment option, the underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares of common stock to be purchased by each of them, as shown
in the foregoing table, bears to the common stock offered hereby.
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 thereof.
HealthGate, our directors and officers and existing stockholders who hold an
aggregate of shares, together with the holders of options to
purchase shares of common stock and holders of warrants to purchase
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: (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 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
66
<PAGE>
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 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 (the
"Exchange Act"). 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 will be
approximately $ .
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. 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 of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
67
<PAGE>
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.
68
<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................................................ F-3
Consolidated Statement of Operations for the years ended December 31, 1996, 1997 and 1998.................. F-4
Consolidated Statement of Changes in Common Stock and Other Stockholders' Deficit for the years ended
December 31, 1996, 1997 and 1998......................................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1997 and 1998.................. 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.
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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 23, 1999
F-2
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1998
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 29,045 $ 960,831
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, respectively.................................... 291,828 362,189
Unbilled accounts receivable...................................................... -- 12,386
Prepaid expenses and other current assets......................................... 101,966 225,482
------------ --------------
Total current assets............................................................ 422,839 1,560,888
Fixed assets, net................................................................... 324,689 806,793
Other assets........................................................................ 33,015 3,298
------------ --------------
Total assets.................................................................... $ 780,543 $ 2,370,979
------------ --------------
------------ --------------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND COMMON STOCK AND OTHER
STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of capital lease obligation....................................... $ 85,541 $ 213,713
Accounts payable.................................................................. 610,495 572,687
Accrued payroll................................................................... 50,107 201,254
Other accrued expenses............................................................ 81,349 228,880
Deferred revenue.................................................................. 462,029 344,820
------------ --------------
Total current liabilities....................................................... 1,289,521 1,561,354
Long-term portion of capital lease obligation....................................... 16,927 226,401
Note payable to related party....................................................... -- 2,000,000
Long-term note payable.............................................................. -- 1,429,087
------------ --------------
Total liabilities............................................................... 1,306,448 5,216,842
------------ --------------
Redeemable convertible preferred stock (Note 4)..................................... 6,294,602 6,889,431
------------ --------------
Common stock and other stockholders' deficit:
Common stock, $.01 par value;
Authorized: 20,000,000 shares
Issued and outstanding: 1,145,600 and 1,146,875 shares at December 31, 1997 and
1998, respectively............................................................ 11,456 11,469
Additional paid-in capital.......................................................... 157,183 714,741
Accumulated deficit................................................................. (6,989,146) (10,461,504)
------------ --------------
Total common stock and other stockholders' deficit.............................. (6,820,507) (9,735,294)
------------ --------------
Commitments and contingencies (Note 9).............................................. -- --
------------ --------------
Total liabilities, redeemable convertible preferred stock and common stock and
other stockholders' deficit................................................... $ 780,543 $ 2,370,979
------------ --------------
------------ --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
HEALTHGATE DATA CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------
Revenue, including revenue from related parties of $0, $240,400, and
$1,070,500, in 1996, 1997 and 1998, respectively................... $ 408,244 $ 1,284,636 $ 2,434,124
------------- ------------- -------------
Cost and expenses:
Cost of revenue.................................................... 491,550 911,765 1,181,012
Research and development........................................... 980,373 890,577 1,450,106
Sales and marketing................................................ 1,080,187 1,496,356 1,414,179
General and administrative......................................... 567,822 521,323 929,479
------------- ------------- -------------
Total costs and expenses......................................... 3,119,932 3,820,021 4,974,776
------------- ------------- -------------
Loss from operations............................................... (2,711,688) (2,535,385) (2,540,652)
Interest expense, net................................................ (14,497) (5,773) (327,100)
Other expense........................................................ -- -- (9,777)
------------- ------------- -------------
Net loss......................................................... (2,726,185) (2,541,158) (2,877,529)
Preferred stock dividends and accretion of preferred stock to
redemption value................................................... 263,641 539,644 594,829
------------- ------------- -------------
Net loss attributable to common stockholders..................... $ (2,989,826) $ (3,080,802) $ (3,472,358)
------------- ------------- -------------
------------- ------------- -------------
Basic and diluted net loss per share attributable to common
stockholders....................................................... $ (2.61) $ (2.69) $ (3.03)
Shares used in computing basic and diluted net loss per share
attributable to common stockholders................................ 1,145,588 1,145,600 1,146,637
Unaudited pro forma basic and diluted net loss per share............. $ (1.24)
Shares used in computing unaudited pro forma basic and diluted net
loss per share..................................................... 2,324,643
</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.......... 1,145,550 $ 11,455 $ 157,032 $ (918,518) $ (6,524) $ (756,555)
Compensation relating to grants of
stock options................... 6,524 6,524
Exercise of common stock
options......................... 50 1 151 152
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.......... 1,145,600 11,456 157,183 (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.......... 1,145,600 11,456 157,183 (6,989,146) -- (6,820,507)
Exercise of common stock
options......................... 1,275 13 3,558 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.......... 1,146,875 $ 11,469 $ 714,741 $ (10,461,504) $ -- $ (9,735,294)
---------- ----------- ---------- -------------- ------------- -----------------
---------- ----------- ---------- -------------- ------------- -----------------
</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>
YEAR ENDED DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------
Cash flows from operating activities:
Net loss........................................................... $ (2,726,185) $ (2,541,158) $ (2,877,529)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................... 197,900 356,791 416,897
Loss on disposal of fixed assets................................. -- -- 9,777
Compensation expense related to stock options.................... 6,524 -- --
Changes in assets and liabilities:
Accounts receivable............................................ (63,144) (228,010) (70,361)
Unbilled accounts receivable................................... -- -- (12,386)
Prepaid expenses and other current assets...................... (24,684) (47,349) (123,516)
Other assets................................................... 1,870 (1,357) 29,717
Accounts payable............................................... 321,066 186,801 (37,808)
Accrued payroll................................................ (12,895) 35,091 151,147
Other accrued expenses......................................... (1,433) 36,722 147,531
Deferred revenue............................................... 16,603 445,426 (117,209)
------------- ------------- -------------
Net cash used in operating activities........................ (2,284,378) (1,757,043) (2,483,740)
------------- ------------- -------------
Cash flows from investing activities:
Purchases of fixed assets.......................................... (152,824) (124,801) (277,538)
------------- ------------- -------------
Cash flows from financing activities:
Payments of capital lease obligations.............................. (165,793) (237,190) (239,785)
Proceeds from issuance of preferred and common stock, net of
issuance costs................................................... 3,653,901 992,353 3,571
Proceeds from notes payable and warrants (Note 3).................. -- -- 3,929,278
------------- ------------- -------------
Net cash provided by financing activities.................... 3,488,108 755,163 3,693,064
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................. 1,050,906 (1,126,681) 931,786
Cash and cash equivalents, beginning of year......................... 104,820 1,155,726 29,045
------------- ------------- -------------
Cash and cash equivalents, end of year............................... $ 1,155,726 $ 29,045 $ 960,831
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended December 31, 1996, 1997 and 1998, HealthGate paid
approximately $24,000, $28,000 and $242,000, respectively, for interest.
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
During the years ended December 31, 1996, 1997 and 1998, HealthGate entered into
capital leases totaling approximately $87,000, $71,000 and $577,000,
respectively, for certain computer equipment.
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.
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 AND CASH EQUIVALENTS
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 and U.S. Treasury securities 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.
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, which generally range from one to two years.
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,
F-7
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
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. 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.
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
when material to HealthGate's financial position or results of operations. Costs
eligible for capitalization have been insignificant to date.
F-8
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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 and $456,000 in the years ended December
31, 1996, 1997 and 1998, respectively, of which approximately $115,000, $617,000
and $418,000, 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.
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, 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
F-9
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income and other comprehensive income. During the years ended December 31, 1996,
1997 and 1998, HealthGate had no items qualifying as other comprehensive income;
accordingly, the adoption of SFAS No. 130 had no impact on HealthGate's
financial statements.
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 is 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 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, 1999. HealthGate does
not expect SFAS No. 133 to have a material effect on its financial position or
results of operations.
In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SoP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SoP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. SoP 98-1 will be effective
for HealthGate beginning in fiscal 1999, and HealthGate does not expect adoption
of this SoP to have a material effect on its financial position or results of
operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of
Start-Up Activities." Start-up activities are defined broadly as those one-time
activities related to the opening of a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer, commencing some new operation or organizing a new entity.
SoP 98-5 requires that the cost of start-up activities be expensed as incurred.
SoP 98-5 is effective for HealthGate beginning in fiscal 1999, and HealthGate
does not expect adoption of this SoP to have a material effect on its financial
position or results of operations.
F-10
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 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.
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 86,000
shares of its common stock at an exercise price per share of $0.0002. Further,
on December 31, 1998, HealthGate issued warrants to purchase an additional
28,950 shares at the same exercise price, 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 45,000 shares, 46,450 shares and 47,950 shares at the same exercise
price 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 $554,000 to the warrants, which
amount was recorded as 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
F-11
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. NOTES PAYABLE (CONTINUED)
(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.
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK
A summary of redeemable convertible preferred stock activity for the years
ended December 31, 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
----------------- ------------------- ------------------- ------------------- TOTAL
CARRYING CARRYING CARRYING CARRYING CARRYING
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE VALUE
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995......... 1,000 $454,310 250 $ 390,905 -- $ -- -- $ -- $ 845,215
Issuance of Series B............. 750 1,200,000 1,200,000
Issuance of Series C, net of
issuance costs of $22,009...... 1,000 977,991 977,991
Issuance of Series D, net of
issuance costs of $24,242...... 1,000 1,475,758 1,475,758
Accrual of cumulative dividends
and accretion to redemption
value.......................... 70,265 136,971 43,501 12,904 263,641
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
Balance, December 31, 1996......... 1,000 524,575 1,000 1,727,876 1,000 1,021,492 1,000 1,488,662 4,762,605
Issuance of Series D, net of
issuance costs of $8,147....... 667 992,353 992,353
Accrual of cumulative dividends
and accretion to redemption
value.......................... 70,262 163,637 104,402 201,343 539,644
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
Balance, December 31, 1997......... 1,000 594,837 1,000 1,891,513 1,000 1,125,894 1,667 2,682,358 6,294,602
Accrual of cumulative dividends
and accretion to redemption
value.......................... 70,262 163,637 104,402 256,528 594,829
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
Balance, December 31, 1998......... 1,000 $665,099 1,000 $2,055,150 1,000 $1,230,296 1,667 $2,938,886 $6,889,431
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
------ -------- ------ ---------- ------ ---------- ------ ---------- ----------
</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 304.88 for 1, 399.36 for 1, 138.65 for 1 and 201.02 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 1,178,006 common shares. The conversion rates are to be adjusted for
certain dilutive and anti-dilutive events. HealthGate has reserved 304,900,
399,400, 138,650 and 335,100 shares of common stock for the conversion of Series
A, B, C and D preferred stock, respectively.
F-12
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
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.
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 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.
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
------------
$ 5,600,500
------------
------------
</TABLE>
SUBSEQUENT ISSUANCE OF PREFERRED STOCK (UNAUDITED)
In April 1999, HealthGate 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, HealthGate will
pay a $250,000 fee to a placement agent, and will issue the placement agent
warrants to purchase 5,460 shares of HealthGate common stock at an exercise
price of $11.45 per share. The placement fee and warrant value will be reflected
as a reduction of the proceeds from the Series E preferred stock issuance. An
additional 174,729 shares of Series E preferred stock
F-13
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
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 (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 $11.45. 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 will be recognized as a return to the
preferred stockholders. This amount, equal to the proceeds from the Series E
offering, will be reported as accretion of preferred stock to redemption value
in the consolidated statement of operations in the period the Series E preferred
stock was issued, 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 650,000 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, 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 7,500 and 2,500 shares of common
stock, respectively, to a member of its Board of Directors for consulting
services rendered. The options
F-14
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT (CONTINUED)
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 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.......................................... $ (2.61) $ (2.69) $ (3.03)
Pro forma............................................ (2.63) (2.72) (3.05)
</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 years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
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>
F-15
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK AND OTHER STOCKHOLDERS' DEFICIT (CONTINUED)
A summary of the status of HealthGate's options as of December 31, 1996,
1997 and 1998 and changes during the years then ended are presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1996 1997 1998
---------------------- ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 149,600 $ 0.92 232,350 $ 2.29 330,450 $ 1.79
Granted............................. 132,500 4.59 154,250 1.88 208,500 5.81
Exercised........................... (50) 2.80 -- -- (1,275) 2.80
Canceled............................ (49,700) 4.30 (56,150) 4.08 (105,525) 1.22
--------- ----------- --------- ----- --------- -----
Outstanding at end of year.......... 232,350 $ 2.29 330,450 $ 1.79 432,150 $ 3.87
--------- ----------- --------- ----- --------- -----
--------- ----------- --------- ----- --------- -----
Options available for grant at end
of year........................... 123,200 68,550 22,125
--------- --------- ---------
--------- --------- ---------
Weighted-average fair value of
options granted during the year... $ 0.91 $ 0.39 $ 0.18
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ---------------------------------- ----------- ------------------- ------------------- ----------- -------------------
under $1.00....................... 56,600 3.58 $ .09 55,975 $ .09
$1.01--$2.00...................... 132,000 4.01 1.89 81,674 1.88
$2.01--$3.00...................... 68,100 4.10 2.96 23,656 2.89
$3.01--$4.00...................... -- -- -- -- --
$4.01--$5.00...................... 41,500 3.99 4.62 39,246 4.62
$7.46............................. 135,000 4.06 7.46 41,250 7.46
----------- -----------
433,200 241,801
----------- -----------
----------- -----------
</TABLE>
F-16
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1998
------------ ------------
Deferred tax assets:
Net operating loss carryforwards.................................................... $ 2,303,707 $ 3,506,205
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>
DECEMBER 31,
---------------------------------------
<S> <C> <C> <C>
1996 1997 1998
----------- ----------- -------------
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 2019.
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.
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.
F-17
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. RELATED PARTY TRANSACTIONS
Through December 1998, a stockholder of HealthGate was a partial owner of
the building in which HealthGate leases 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 for
total consideration of $70,000.
9. COMMITMENTS
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>
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 December 31, 1998 totaled approximately $445,617.
F-18
<PAGE>
HEALTHGATE DATA CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
1996 1997 1998
---------- ------------ ------------
<S> <C> <C> <C>
United States......................................... $ 408,244 $ 1,259,886 $ 1,665,717
Europe................................................ -- 24,750 768,406
---------- ------------ ------------
Total................................................. $ 408,244 $ 1,284,636 $ 2,434,123
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
Substantially all of HealthGate's long-lived assets were located in the
United States for all periods presented.
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 7
Use of Proceeds...................................... 19
Dividend Policy...................................... 19
Capitalization....................................... 20
Dilution............................................. 21
Selected Consolidated Financial Data................. 22
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 24
Business............................................. 31
Management........................................... 50
Certain Transactions................................. 57
Principal Stockholders............................... 58
Description of Capital Stock......................... 60
Shares Eligible for Future Sale...................... 63
Underwriting......................................... 66
Legal Matters........................................ 67
Experts.............................................. 67
Where You Can Find More Information.................. 68
Consolidated Financial Statements.................... F-1
</TABLE>
---------------------
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.
SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
SG COWEN
NATIONSBANC
MONTGOMERY SECURITIES LLC
VOLPE BROWN
WHELAN & COMPANY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses 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.................................................... $14,387.00
NASD filing fee......................................................... 5,675.00
Nasdaq listing fee...................................................... *
Blue Sky fee and expenses............................................... *
Printing and engraving expenses......................................... *
Legal fees and expenses................................................. *
Auditors' accounting fees and expenses.................................. *
Transfer Agent and Registrar fees....................................... *
Miscellaneous expenses.................................................. *
---------
Total............................................................... $ *
</TABLE>
- ------------------------
* To be filed by amendment
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
II-1
<PAGE>
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 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
II-2
<PAGE>
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 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 reasonably 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.
II-3
<PAGE>
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 June 14, 1996, we issued and sold 250 shares of our Series B Convertible
Preferred Stock to Nichols Research Corporation for an aggregate consideration
of $400,000 in cash.
Between August 21, 1996 and September 3, 1996, we issued and sold an
aggregate of 1,000 shares of our Series C Convertible Preferred Stock to 5
existing stockholders and 17 new investors for an aggregate consideration of
$1,000,000 in cash.
On October 4, 1996, we issued and sold 50 shares of our common stock for an
aggregate consideration of $140 in cash to a former employee who exercised an
outstanding stock option.
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.
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 114,950 shares of our
common stock to Petra Capital, LLC as additional consideration for Petra's
$2,000,000 loan to us.
On July 14, 1998, we issued and sold 50 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 1,225 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 20 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 5,460 shares of our common stock for
$11.45 per share.
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.
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.
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
(excluding Schedules).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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 (excluding Exhibit B).
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
(excluding Schedules).
10.7 Sub-Lease Agreement dated March 1, 1999 by and between Synopsys, Inc. and the Registrant (excluding
Exhibits).
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., without exhibits or schedules.
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.
10.24 Standard Distribution Agreement dated June 3, 1998 by and between the Registrant and Greenberg News
Networks, Inc.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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.
21.1 List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2* Consent of Rich, May, Bilodeau & Flaherty, P.C. (see Exhibit 5.1)
24.1 Power of Attorney (see page II-8).
27.1 Financial Data Schedule.
99.1 Schedule II--Valuation and Qualifying Accounts.
</TABLE>
- ------------------------
* To be filed by amendment
(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 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-7
<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 23rd day of April, 1999.
HEALTHGATE DATA CORP.
By: /s/ WILLIAM S. REECE
-----------------------------------------
William S. Reece
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY AND SIGNATURES
Each person whose signature appears below hereby constitutes and appoints
William S. Reece and Mary B. Miller, and each of them, as his or her
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, (1) to sign any and all amendments (including post-effective
amendments) to this Registration Statement; (2) to sign any registration
statement to be filed pursuant to Rule 462(b) under the Securities Act of 1933
for the purpose of registering additional shares of common stock for the same
offering covered by this Registration Statement; and (3) to file any of the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
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.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board of
/s/ WILLIAM S. REECE Directors, Chief
- ------------------------------ Executive Officer and April 23, 1999
William S. Reece President (Principal
executive officer)
Chief Financial Officer and
/s/ MARY B. MILLER Treasurer (Principal
- ------------------------------ financial and accounting April 23, 1999
Mary B. Miller officer)
/s/ TINA M. H. BLAIR Director
- ------------------------------ April 23, 1999
Tina M. H. Blair, M.D.
/s/ JONATHAN J. G. CONIBEAR Director
- ------------------------------ April 23,1999
Jonathan J. G. Conibear
/s/ EDSON D. DE CASTRO Director
- ------------------------------ April 23, 1999
Edson D. de Castro
/s/ DAVID FRIEND Director
- ------------------------------ April 23, 1999
David Friend
/s/ CHRIS H. HORGEN Director
- ------------------------------ April 23, 1999
Chris H. Horgen
II-8
<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.
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.
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
(excluding Schedules).
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 (excluding Exhibit B).
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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
(excluding Schedules).
10.7 Sub-Lease Agreement dated March 1, 1999 by and between Synopsys, Inc. and the Registrant (excluding
Exhibits).
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., without exhibits or schedules.
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.
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.
21.1 List of Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2* Consent of Rich, May, Bilodeau & Flaherty, P.C. (see Exhibit 5.1)
24.1 Power of Attorney (see page II-8).
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27.1 Financial Data Schedule.
99.1 Schedule II--Valuation and Qualifying Accounts.
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* To be filed by amendment
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDICAL DATA INTERFACE DESIGN, INC.
Pursuant to Section 245
of the General Corporation Law of the
State of Delaware
---------------------------
MEDICAL DATA INTERFACE DESIGN, INC. (hereinafter called the
"Corporation"), originally incorporated by a Certificate of Incorporation filed
in the office of the Secretary of State of the State of Delaware on February 8,
1994, and currently organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify that the Board of
Directors of the Corporation has duly adopted a resolution, pursuant to Sections
141 and 242 of the General Corporation Law of the State of Delaware, setting
forth an amended and restated Certificate of Incorporation of the Corporation
and declaring said amendment and restatement to be advisable. The stockholders
of the Corporation have duly approved said amendment and restatement by the
required vote of such stockholders, adopted by the consent of all stockholders
in accordance with Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware. This Amended and Restated Certificate of Incorporation
thus has been duly adopted in accordance with the provisions of Section 245 of
the General Corporation Law of the State of Delaware. The Certificate of
<PAGE>
Incorporation of the Corporation, as amended and restated, is as follows:
FIRST. The name of the Corporation is Medical Data Interface Design,
Inc.
SECOND. The address, including street, number, city and county, of
the registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington. Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.
THIRD. The nature of the Corporation's business or purposes to be
conducted or promoted are to conduct or engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH. The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is 101,000 shares,
consisting of 100,000 shares of Common Stock, $.0l par value per share, and
1,000 shares of preferred Stock, $.01 par value per share, amounting in the
aggregate to $1,010.00.
The following is a statement of the designations and powers, preferences
and rights, and the relative participating, optional or other special rights,
and the qualifications, limitations and restrictions granted to or imposed upon
the respective classes of shares of capital stock of the Corporation or the
holders thereof:
A. Common Stock
The voting and dividend rights, and the rights in the event of the
liquidation of the Corporation, of the holders of the Common Stock are subject
to and qualified by such rights of the holders of the preferred Stock of any
series as the Board of Directors may designate upon the issuance of the
Preferred Stock of any Series.
The holders of the Common Stock are entitled to one `vote for each
share held at all meetings of stockholders. There shall be no cumulative voting.
The holders of the Common Stock will have the right, voting as a separate class
and to the exclusion of all classes or series of the Corporation's stock, to
elect all members of the Board of Directors of the Corporation whose election is
not reserved to the holders of the Shares (as defined below) pursuant to
paragraph 5 of Part C of this Article FOURTH.
2
<PAGE>
Dividends may be declared and paid on the Common Stock from funds
lawfully available therefor as and when determined by the Board of Directors and
subject to any preferential dividend rights of any then outstanding Preferred
Stock.
Upon the dissolution or liquidation of the Corporation, whether
voluntary or involuntary, holders of Common Stock will be entitled to receive
pro rata all net assets of the Corporation available for distribution after
payment of creditors and of any preferential liquidation rights of any then
outstanding Preferred Stock.
No holder of shares of the Common Stock or of the Preferred Stock
shall be entitled as such, as a matter of right, to subscribe for or purchase
any part of any new or additional issue of stock of any class whatsoever of the
Corporation, or of securities convertible into stock of any class, whether now
or hereafter authorized, or whether issued for cash or other consideration or by
way of dividend.
B. Preferred Stock
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed herein and
in the resolution or resolutions providing for the issuance of such series
adopted by the Corporation. Any shares of Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
provided by law.. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes
unless expressly provided herein or by law.
C. Convertible Preferred Stock
1. Designation. One Thousand (1,000) shares of the authorized
Preferred Stock of the Corporation are hereby designated "Series A Convertible
Preferred Stock" (the "Series A Preferred"). The shares of Series A Preferred
are collectively referred to herein as "Shares."
2. Dividends and Distributions.
2A. Dividends. When and as any dividend or distribution is
declared or paid by the Corporation on the Common Stock at any time prior to the
conversion of all of the outstanding Shares, whether payable in cash, property,
securities or rights to acquire securities, the holders of Shares will be
entitled to participate with the holders of Common Stock in such dividend or
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<PAGE>
distribution as set forth in this paragraph 2A. At the time such dividend or
distribution is payable to the holders of Common Stock, the Corporation will pay
each holder of Shares a portion of such dividend or distribution equal to the
amount of the dividend or distribution per share of Common Stock payable at such
time multiplied by the number of shares of Common Stock obtainable upon
conversion of such holder's Shares. To the extent any dividends or distributions
payable on any Shares are not paid, the amount of such dividends or
distributions will be added to the Liquidation Value of such Shares and will
remain a part thereof until such dividends or distributions are paid. The
provisions of this paragraph 2A shall not apply to dividends or distributions
payable in shares of Common Stock or in Options or Convertible Securities (as
defined in paragraph 6 of this Part C) or any other dividend or distribution, if
the declaration, distribution or payment thereof has resulted or will result in
an adjustment to the Conversion Price of Shares under paragraph & of this Part
C.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then declared with
respect to the Shares, such payment will be distributed ratably among the
holders of the Shares.
3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Shares will be entitled to be paid pro rata,
before any distribution or payment is made upon any shares of Junior Securities,
an amount in cash equal to the aggregate Liquidation Value of all Shares
outstanding, and the holders of the Shares will not be entitled to any further
payment. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the holders of
Shares are insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets to be
distributed will be distributed ratably among such holders based upon the
aggregate Liquidation Value of the Shares held by each such holder. The
Corporation will mail written notice of such liquidation, dissolution or winding
up, not less than 45 days prior to the payment date stated therein, to each
record holder of Shares. The consolidation or merger of the Corporation into or
with any other corporation or corporations, or the sale or transfer by the
Corporation of all or substantially all of its assets, or the reduction of the
capital stock of the Corporation will be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this paragraph 3.
4
<PAGE>
4. Redemptions.
4A. Scheduled Redemption. On each applicable Scheduled
Redemption Date (as defined in this paragraph 4A below), the Corporation will
redeem the then outstanding Shares at a price per share equal to the Redemption
Price (as defined in paragraph 4b below) in accordance with the following
schedule;
(i) One-third (1/3) of the number of Shares outstanding on the fifth
anniversary date of the Closing Date (as defined in paragraph 10 below)
(hereinafter "First SRD");
(ii) One-third (1/3) of the number of Shares outstanding on the
sixth anniversary date of the Closing Date (hereinafter "Second SRD"); and
(iii) One-third (1/3) of the number of Shares outstanding on the
seventh anniversary date of the Closing Date (hereinafter "Third SRD").
For purposes of this paragraph 4, the First SRD, Second SRD and Third SRD
are sometimes hereinafter referred to, where no distinction is required, as the
"Scheduled Redemption Date".
Notwithstanding any provision to the contrary contained in this paragraph 4, a
holder of Shares may elect not to have the eligible Shares redeemed on the First
SRD; provided, that any shares eligible for redemption on the First SRD which
are not then presented for redemption, shall be eligible for redemption on the
Second SRD in accordance with this paragraph 4. Unless the redemption of all of
the eligible Shares on the Second SRD is waived or delayed in accordance with
this paragraph 4, all of the eligible shares which are not presented for
redemption by the holders of Shares on the First SRD shall be presented by such
holders of Series A Preferred for redemption by the Corporation on the Second
SRD.
Notwithstanding any further provision to the contrary contained in this
paragraph 4, a holder of Shares may elect not to have the eligible Shares
redeemed on the Second SRD (including any shares eligible for redemption on the
First SRD which were not presented to the Corporation for redemption and which
then became eligible for redemption on the Second SRD); provided, that any
shares eligible for redemption on the Second SRD which are not then presented
for redemption, shall be eligible for redemption on the Third SRD in accordance
with this paragraph 4. Unless the redemption of all of the eligible Shares on
the Second SRD is waived or delayed in accordance with this paragraph 4, all of
the eligible Shares which are not presented for redemption by the
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<PAGE>
holders of Shares on the Second SRD shall be presented by such holders of Series
A Preferred for redemption by the Corporation on the Third SRD.
If the funds of the Corporation legally available for redemption of the Shares
on any applicable Scheduled Redemption Date are insufficient to redeem the total
number of Shares presented for redemption on such date, those funds which are
legally available will be used to redeem the maximum possible number of Shares
ratably among the Shares presented for redemption. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
Shares, such funds will immediately be used to redeem the balance of the Shares
which were presented for redemption on such date but which were not redeemed.
4B. Redemption Price. For each Share which is to be redeemed,
the Corporation will be obligated on the Redemption Date to pay to the holder
thereof (upon surrender by such holder at the Corporation's principal office of
the certificate representing such Share) an amount in immediately available
funds (the "Redemption Price") equal to (i) the Liquidation Value thereof plus
an accrued dividend of $50 per Series A Preferred Share per annum (or any
portion thereof) from the Closing Date to the actual Redemption Date.
4C. Notice of Redemption. The Corporation will mail written
notice of each applicable redemption of Shares to each record holder thereof not
less than 30 days prior to the date on which such redemption is to be made. In
case fewer than the total number of Shares represented by any certificate are
redeemed, a new certificate representing the number of unredeemed Shares will be
issued to the holder thereof without cost to such holder within ten business
days after surrender of the certificate representing the redeemed Shares.
4D. Determination of the Number of Each Holder's Shares to be
Redeemed. Except as otherwise provided herein, the number of Shares to be
redeemed from each holder thereof on any Redemption Date hereunder will be the
number of Shares determined by multiplying (i) the total number of Shares to be
redeemed on a given Scheduled Redemption Date by (ii) a fraction, the numerator
of which will be the total number of Shares then held by such holder (which are
subject to redemption on such Scheduled Redemption Date) and the denominator of
which will be the total number of Shares then outstanding (which are subject to
redemption on such Scheduled Redemption Date).
6
<PAGE>
4E. Dividends After Redemption Date. No Share is entitled to
any dividends declared after the date on which the Redemption Price of such
Share is paid. On such date all rights of the holder of such Share will cease,
and such Share will not be deemed to be outstanding.
4F. Redeemed or Otherwise Acquired Redemption Shares. Any
Shares which are redeemed or otherwise acquired by the Corporation will be
cancelled and will not be reissued, sold or transferred.
4G. Other Redemptions or Acquisitions. Neither the Corporation
nor any Subsidiary will redeem or otherwise acquire any Shares, except as
otherwise expressly authorized herein or pursuant to a purchase offer made pro
rata to all holders of Shares on the basis of the number of Shares owned by each
such holder.
5. Voting Rights. Each holder of Shares will be entitled to notice
of all stockholders meetings in accordance with the Corporation's bylaws.
Except as otherwise provided herein or as provided by law, the holders of Shares
will be entitled to vote with the holders of Common Stock upon all matters
submitted to stockholders for a vote, with each Share representing the number of
votes equal to the number of shares of Common Stock into which each Share is
convertible at the time of such vote.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Shares may convert all or
any portion of the Shares (including any fraction of a Share) held by such
holder into a number of shares of Common Stock computed by multiplying the
number of Shares to be converted by $500.00 and dividing the result by the
Conversion Price then in effect.
(ii) Each conversion of Shares will be deemed to have
been effected as of the close of business on the date on which the certificate
or certificates representing the Shares to be converted have been surrendered at
the principal office of the Corporation or its transfer agent, if any, provided
that any such surrender must occur by 3:00 p.m. local time. At such time as such
conversion has been effected, the rights of the holder of such Shares as such
holder will cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have
7
<PAGE>
become the holder or holders of record of the shares of Common Stock represented
thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within seven business days in the case of
subparagraph (a) below), the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified;
(b) payment in an amount equal to all declared but
unpaid dividends with respect to each Share converted plus the amount payable
under subparagraph (vi) below with respect to such conversion; and
(c) a certificate representing any Shares which
were represented by the certificate or certificates delivered to the Corporation
in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Shares will be made without charge to the holders of
such Shares for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
shares of Common Stock. Upon conversion of each Share, the Corporation will take
all such actions as are necessary in order to ensure that the Common Stock
issuable with respect to such conversion will be validly issued, fully paid and
nonassessable.
(v) The Corporation will not close its books against the
transfer of Shares or of Common Stock issued or issuable upon conversion of
shares in any manner which interferes with the timely conversion of the Shares,
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this subparagraph (vi), be deliverable
upon any conversion of the Shares, the Corporation, in lieu of delivering the
fractional share therefor, will pay an amount to the holder thereof equal to the
Market Price of such fractional interest as of the date of conversion.
8
<PAGE>
6B. Conversion Price.
(i) The initial Conversion Price of the Series A
Preferred will be $82.00. In order to prevent dilution of the conversion rights
granted hereunder, the Conversion Price will be subject to adjustment from time
to time pursuant to this paragraph 6; provided, however, that notwithstanding
the foregoing, no adjustment to the Conversion Price will be made or considered
under this paragraph 6 with respect to the issuance or grant of up to 1,500
shares of Common Stock, including options or warrants to acquire Common Stock,
in connection with any employee stock option or stock ownership plan, any
consulting agreement or arrangement or any restricted stock agreement providing
for the issuance of Common Stock at a price equal to the fair market value as
determined by the Board of Directors in good faith; provided that the Board of
Directors shall not issue or grant shares of Common Stock, including options or
warrants to acquire shares of Common Stock, to any person who holds or has the
right to acquire more than 3,000 shares of Common Stock (as presently
constituted), or any affiliate or relative of such person, without the approval
and consent of the member(s) of the Board of Directors designated by the holders
of Shares.
(ii) If and whenever after the Closing Date, the
Corporation issues or sells, or in accordance with paragraph 6C of this Part C
is deemed to have issued or sold, any share of Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to such
time, except as provided in paragraph 6B(i) of this Part C, then forthwith upon
such issue or sale the Conversion Price will be reduced to the Conversion Price
determined by dividing (a) the sum of (1) the product derived by multiplying the
Conversion Price in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the consideration, if any, received by the Corporation
upon such issue or sale, by (b) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes
of determining the adjusted Conversion Price under paragraph 6B of this Part C,
the following will be applicable:
(i) Issuance of Rights or Options. If the Corporation in
any manner grants any right or option to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock, including all Shares outstanding at the time (such rights or
options being herein called "Options" and such convertible or exchangeable stock
or
9
<PAGE>
securities being herein called "Convertible Securities") and the price per share
for which Common Stock is issuable upon the exercise of any such Options or upon
conversion or exchange of any such Convertible Securities is less than the
Conversion Price in effect immediately prior to the time of the granting of such
Option, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Option or upon conversion or exchange of the total maximum
amount of such Convertible Security issuable upon the exercise of such Option
will be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share. For purposes of this subparagraph 6C(i),
the "price per share for which Common Stock is issuable" will be determined by
dividing (A) the total amount, if any, received Or receivable by the Corporation
as consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of
such Options, plus in the case of such Options which are related to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price will
be made upon the actual issuance of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. Until such time
after the Closing Date that the Corporation has issued shares of Convertible
Securities for which the Corporation has received consideration of One Million
Dollars in the aggregate for all such issued shares, then if the Corporation
shall, during such time after the Closing Date but prior to the receipt of One
Million Dollars in the aggregate for such shares of the Corporation, issue
shares of Convertible Securities (including additional shares of Common Stock
issued pursuant to subparagraph (i) of this paragraph 6C but excluding shares
issued as a dividend Or distribution or upon a stock split or combination) for a
price per share for which Common Stock is issuable upon conversion or exchange
thereof less than the applicable Conversion Price in effect on the date of and
immediately prior to such issue, then and in such event, such Conversion Price
shall be reduced, concurrently with such issue, to the price per share received
by the Corporation for the issuance of shares of Convertible Securities of the
Corporation. Upon such date after the Closing Date that the Corporation has
received One Million Dollars in the aggregate in
10
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consideration for the Corporation's issuance of Convertible Securities, if the
Corporation in any manner issues or sells any Convertible securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities will be
deemed to be outstanding and to have been issued and sold by the Corporation for
such price per share. For purposes of this subparagraph 6C(ii), the "price per
share for which Common Stock is issuable" will be determined by dividing (A) the
total amount received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of the Conversion Price will be made upon the
actual issuance of Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments of the Conversion Price
had been or are to be made pursuant to other provisions of this paragraph 6, no
further adjustment of the Conversion Price will be made by reason of such
issuance or sale.
(iii) Change in Common Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration (if
any) payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion price then in effect hereunder will
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued.
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(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount received by the Corporation therefor. In case any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value (as defined infra) of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Corporation will be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible Security is
issued in connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities will be determined in good faith jointly by the Corporation
and the holders of a majority of the outstanding Shares. If such parties are
unable to reach agreement within a reasonable period of time, the fair value of
such consideration will be determined by an independent appraiser jointly
selected by the Corporation and the holders of a majority of the outstanding
shares.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration to be determined pursuant
to the procedures set forth in subparagraph 6C(v) of this Part C.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued Or
sold upon the declaration of such dividend or upon the
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making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be; provided that if such dividend,
distribution or subscription is not ultimately consummated, no adjustment will
be made to the Conversion Price hereunder or, if so made, such adjustment will
be rescinded.
6D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
6E. Reorganization. Reclassification, Consolidation, Merger or
Sale. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Corporation's assets to another Person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Shares then outstanding) to ensure that each
of the holders of Shares will thereafter have the right to acquire and receive,
in lieu of or in addition to the shares of Common Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Shares, such
shares of stock, securities or assets as such holder would have received in
connection with such Organic Change it such holder had converted his or her
Shares immediately prior to such Organic Change. In any such case, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Shares then outstanding) to ensure that the
provisions of this paragraph 6 and paragraph 7 of this Part C will thereafter be
applicable to the Shares (including, in the case of any such consolidation,
merger or sale in which the successor corporation or purchasing corporation is
other than the Corporation, an immediate adjustment of the Conversion Price to
the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and a corresponding immediate adjustment in the number of shares
of Common Stock acquirable and receivable upon conversion of Shares, if the
value so reflected is
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less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Shares then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 6 but not expressly provided
for by such provisions, then the Corporation's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the holders of Shares; provided that no such adjustment will increase the
Conversion Price as otherwise determined pursuant to this paragraph 6 or
decrease the number of shares of Common Stock issuable upon conversion of each
Share.
6G. Notices.
(i) Within ten business days of any adjustment of the
Conversion Price, the Corporation will give written notice thereof to all
holders of Shares.
(ii) The Corporation will give written notice to all
holders of Shares at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation will also give written notice to
the holders of Shares at least 20 days prior to the date on which any Organic
Change will take place.
6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Shares if the Corporation is at
such time effecting a firm commitment underwritten Public Offering of shares of
its Common Stock in which (i) the aggregate price paid by the public for the
shares will be at least $l0,000,000 and (ii) the price per share paid by the
public for such shares will be at least 300% of the Conversion
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Price of the Series A preferred in effect immediately prior to the closing of
the sale of such shares pursuant to the Public Offering. Any such mandatory
conversion shall only be effected at the time of and subject to the closing of
the sale of such shares pursuant to such Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Shares prior to such
closing.
7. Purchase Rights. If at any time the Corporation grants. issues or
sells any Options. Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"). then each holder of Shares will be
entitled to acquire at the time of conversion of Shares by such holder (based on
the number of shares of Common Stock issued upon such conversion,) upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which
such holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon conversion of such holder's Shares immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights; provided, however, that holders of Shares shall not be
entitled to any Purchase Rights under this Section 7 if such holders have
received their pro rata share of such Purchase Rights as a dividend or
distribution under paragraph 2A of this Part C or have received an adjustment in
the Conversion Price of the Shares under paragraph 6 of this Part C with respect
to the issuance of such Purchase Rights.
8. Registration of Transfer. The Corporation will keep at its
principal office a register for the registration of Shares. Upon the surrender
of any certificate representing Shares at such place, the Corporation will, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of Shares as is requested by the holder of
the surrendered certificate and will be substantially identical in form to the
surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Shares, and in the case of any such loss, theft or destruction, upon
receipt of
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indemnity satisfactory to the Corporation (provided that if the holder is an
institutional investor its own agreement will be satisfactory) or, in the case
of any such mutilation upon surrender of such mutilated certificate, the
Corporation will (at the holder's expense) execute and deliver in lieu of such
certificate a new certificate of identical tenor representing the number of
Shares represented by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated certificate.
10. Definitions. As used in Part C of this Article FOURTH, the
following terms shall have the following meanings;
"Closing Date" means March ___, 1995.
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of Shares into Common
Stock, includes any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraph
6C.
"Junior Securities" means any of the Corporation's equity securities
other than the Shares.
"Liquidation Value" of any Share as of any particular date will be
equal to the sum of $500.00 plus any declared and unpaid dividends on such Share
pursuant to paragraph 2A and not paid.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation
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Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day. If at any time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
will be the fair value thereof determined in good faith jointly by the
Corporation and the holders of a majority of the Shares. If such parties are
unable to reach agreement within a reasonable period of time, such fair value
will be determined by an appraiser jointly selected by the Corporation and the
holders of a majority of the Shares.
"Person" means an individual, a partnership, a corporation, 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.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that for purposes of
paragraph 6H, a Public Offering will not include an offering made in connection
with a business acquisition or an employee benefit plan.
"Redemption Dates" as to any Share means the date specified herein
in the case of each redemption; provided that no such date will be a Redemption
Date unless the applicable Redemption Price is actually paid in full on such
date, and if not so paid in full, the Redemption Date will be the date on which
such Redemption Price is fully paid.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
11. Amendment and Waiver. No amendment, modification, or waiver will
be binding or effective with respect to any provision of this Article FOURTH of
this Amended and Restated Certificate of Incorporation without the prior written
consent of the holders of a majority of the Shares outstanding at the time such
action is taken; provided that no change in the terms hereof may be accomplished
by merger or consolidation of the Corporation with another corporation unless
the Corporation has obtained the prior
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written consent of the holders of a majority of the Shares then outstanding.
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated
in writing by any such holder).
FIFTH. [Omitted].
SIXTH. [Omitted].
SEVENTH. In furtherance and not in limitation of powers conferred by
statute, it is further provided:
(a) Election of directors need not be by written ballot.
(b) The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation.
EIGHTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class or them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, said
compromise or arrangement and said reorganization shall, if sanctioned by the
court to which application has been made, be binding on all the creditors or
class of creditors, and/or on all
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the stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
NINTH. [Reserved].
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ELEVENTH. Except to the extent that the General Corporation Law of
the State of Delaware prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty, no director of the Corporation shall
be liable for any breach of fiduciary duty. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment.
TWELFTH. Certain individuals associated with the Corporation shall
be indemnified for personal liability incurred in their roles as officers and
directors as follows:
A. Actions, Suits or Proceedings Other Than by or in the Right of the
Corporation.
The Corporation shall indemnify any person who was or is a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that such person is or was or
has agreed to become a director or officer of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as a director,
officer, employee or trustee of another Corporation, partnership, joint venture,
trust or other enterprise (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
in such capacity, against costs, charges, expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person or on such person's behalf in connection with such action, suit
or proceeding and any appeal therefrom, if such person acted in good faith and
in a manner such person reasonably believed to be, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action,
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suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that such person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was unlawful. Notwithstanding anything to the
contrary in this Article, except as set forth in paragraph E of this Article
TWELFTH, the Corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation.
B. Actions or Suits By or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that such person is or was or has agreed to become a
director or officer of the Corporation or by reason of any action alleged to
have been taken or omitted in such capacity, against costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by such person or
on such person's behalf in connection with the defense or settlement of such
action or suit and any appeal therefrom, if such person acted in good faith and
in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such costs, charges and expenses
which the Court of Chancery or such other court shall deem proper.
C. Indemnification For Costs, Charges and Expenses of Successful Party.
Notwithstanding the other provision of this Article TWELFTH, to the
extent that an Indemnitee has been successful, on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, in
defense of any action, suit or proceeding referred to in paragraph A and B of
this Article TWELFTH, or in defense of any claim, issue or matter therein, or on
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appeal from any such action, suit or proceeding, such Indemnitee shall be
indemnified against all costs, charges and expense (including attorneys' fees)
actually and reasonably incurred by such Indemnitee or on such person's behalf
in connection therewith.
D. Notification and Defense of Claim.
As a condition precedent to his right to be indemnified, the
Indemnitee must give to the Corporation notice in writing as soon as practicable
of any action, suit, proceeding or investigation involving such Indemnitee for
which indemnity will or could be sought. With respect to an action, suit,
proceeding or investigation of which the Corporation is so notified, the
Corporation will be entitled to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to such Indemnitee. After notice from the Corporation to the
Indemnitee of its election so to assume such defense, the Corporation shall not
be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as provided
below in this paragraph. The Indemnitee shall have the right to engage the
Indemnitee's own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the engagement of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct or the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article TWELFTH. The Corporation shall
not be entitled to assume the defense of any claim brought by or on behalf of
the Corporation or as to which counsel for the Indemnitee shall have reasonably
made the conclusion provided for in clause (ii) of the preceding sentence.
E. Advances of Costs, Charges and Expenses.
In the event that the Corporation does not assume the defense
pursuant to paragraph D of this Article TWELFTH of any action, suit, proceeding
or investigation of which the Corporation receives notice under this Article,
any costs, charges and expenses (including attorneys' fees) incurred by an
Indemnitee in defending a civil or criminal action, suit, proceeding or
investigation or
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any appeal therefrom shall be paid by the Corporation in advance of the final
disposition of such matter; provided, however, that the payment of such costs,
charges and expenses incurred by an Indemnitee in advance of the final
disposition of such flatter shall be made only upon receipt of an undertaking by
or on behalf of the Indemnitee to repay all amounts so advanced in the event
that it shall ultimately be determined that such Indemnitee is not entitled to
be indemnified by the Corporation as authorized in this Article.
F. Procedure For Indemnification.
Any indemnification or advancement of expenses pursuant to paragraph
A, B, C or E of this Article TWELFTH shall be made promptly, and in any event
within 60 days after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under paragraph A or B, a
determination is made within such 60-day period by the Board of Directors of the
Corporation by a majority vote of a quorum of disinterested directors that such
Indemnitee did not meet the applicable standard of conduct set forth in
paragraph A or paragraph B. as the case may be. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
direct that independent legal counsel shall determine, based on facts known to
such counsel at such time, whether such Indemnitee met the applicable standard
of conduct set forth in such paragraphs; and, in such event, indemnification
shall be made to the Indemnitee unless within 60 days after receipt by the
Corporation of the request by such Indemnitee for indemnification, such
independent legal counsel in a written opinion determines that the Indemnitee
has not met the applicable standard of conduct. The right to indemnification or
advances as granted by this Article shall be enforceable by the Indemnitee in
any court of competent jurisdiction if the Corporation denies such request, in
whole or in part, or if no disposition thereof is made within the 60-day period
referred to above. Such Indemnitee's costs and expenses incurred in connection
with successfully establishing the Indemnitee's right to indemnification, in
whole or in part, in any Such proceeding shall also be indemnified by the
Corporation.
G. Subsequent Amendment.
No amendment, termination or repeal of this Article TWELFTH or of
relevant provisions of the General Corporation Law of the State of Delaware or
any other applicable laws shall affect or diminish in any way the rights of any
Indemnitee to indemnification under the provisions hereof with respect to any
action, suit, proceeding or investigation arising out of, or relating to any
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actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
H. Other Rights.
The indemnification provided by this Article TWELFTH shall not be
deemed exclusive of any other rights to which an Indemnitee seeking
indemnification may be entitled under any law (common or statutory), agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in the Indemnitee's official capacity and as to action in any other capacity
while holding office for the Corporation, and shall continue as to a person who
has ceased to be a director or officer, and shall inure to the benefit of the
estate, heirs, executors and administrators of such person. Nothing contained in
this Article TWELFTH shall be deemed to prohibit, and the Corporation is
specifically authorized to enter into, agreements with officers and directors
providing indemnification rights and procedures different from those set forth
herein. In addition, the Corporation, acting through its Board of Directors, may
grant indemnification rights to other employees or agents of the Corporation and
such rights may be equivalent to or greater or less than those set forth in this
Article TWELFTH.
I. Partial Indemnification.
If an Indemnitee is entitled under any provision of this Article
TWELFTH to indemnification by the Corporation for some or a portion of the
costs, charges, expenses, judgments or fines actually and reasonably incurred by
the Indemnitee in the investigation, defense or appeal of any proceeding but
not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify the Indemnitee for the portion of such costs, charges, expenses,
judgments or fines to which such Indemnitee is entitled.
J. Insurance.
The Corporation may purchase and maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss incurred by any such person in
their capacities as such, or arising out of their status as such, whether or not
the Corporation would have the power to indemnify such persons against such
expense, liability or loss under the General Corporation Law of the State of
Delaware.
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K. Merger, Consolidation. Etc.
If the Corporation is merged into or consolidated with another
corporation and the Corporation is not the surviving Corporation, or if
substantially all of the assets or stock of the Corporation are acquired by any
other corporation, or in the event of any other similar reorganization involving
the Corporation, the Board of Directors of the Corporation or the Board of
Directors of any corporation assuming the obligations of the Corporation shall
assume the obligations of the Corporation under this Article TWELFTH, with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the date of
such merger, consolidation, acquisition or reorganization.
L. Savings Clause.
If this Article TWELFTH or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Indemnitee as to any costs, charges, expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article TWELFTH that shall not have been invalidated and to the full extent
permitted by applicable law.
M. Definitions.
Terms used herein and defined in Section 145(h) and Section 145(i)
of the General Corporation Law of the State of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
N. Subsequent Legislation.
If the General Corporation Law of the State of Delaware is amended
after adoption of this Article TWELFTH to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President and attested by its Assistant Secretary this 14 day of
March, 1995.
MEDICAL DATA INTERFACE DESIGN, INC.
By: /s/ William S. Reece
----------------------------------
William S. Reece
President
ATTEST:
/s/ [ILLEGIBLE]
- ------------------------
Assistant Secretary
(Corporate Seal)
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDICAL DATA INTERFACE DESIGN, INC.
MEDICAL DATA INTERFACE DESIGN, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a Board of Directors meeting on April 10, 1995, the Board
of Directors of said corporation, adopted resolutions proposing and declaring
advisable the following amendment to the Amended and Restated Certificate of
Incorporation of said corporation, and directed that said proposed amendment be
considered by the stockholders of said corporation entitled to vote in respect
thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That the Amended and Restated Certificate of Incorporation of
this Corporation be amended, by amending Article FIRST, so
that, as amended, Article FIRST shall be and read in its
entirety as follows:
"FIRST. The name of the Corporation is HealthGate Data Corp."
SECOND: That by an Action by Stockholders by Unanimous Written Consent in
lieu of an Annual Meeting, dated April 11, 1995, all holders of issued and
outstanding shares of capital stock of said corporation, as required by the
provisions of Section 228 of the General Corporation Law of the State of
Delaware, voted in favor of the amendment set forth in "FIRST" above.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 228 and 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said MEDICAL DATA INTERFACE DESIGN, INC. has caused
this certificate to be signed by William S. Reece, its President, and attested
by Stephen M. Kane, its Assistant Secretary, as of this 23rd day of May, 1995.
MEDICAL DATA INTERFACE DESIGN, INC.
[Corporate Seal] By: /s/ William S. Reece
--------------------
William S. Reece, President
Attest:
/s/ Stephen M. Kane
- -------------------
Stephen M. Kane, Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the consent of
all stockholders in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware. Prompt written notice of the adoption
of the amendment herein certified has been given to those stockholders who have
not consented in writing thereto, as provided in Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended by striking out Article FOURTH thereof and by
substituting in lieu of said Article the following new Article:
"FOURTH. The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is 102,000 shares,
consisting of 100,000 shares of Common Stock, $.01 par value per share, and
2,000 shares of Preferred Stock, $.01 par value per share, amounting in the
aggregate to $1,020.00.
The following is a statement of the designations and powers, preferences
and rights, and the relative participating, optional or other special rights,
and the qualifications, limitations and restrictions granted to or imposed upon
the respective classes of shares of capital stock of the Corporation or the
holders thereof:
A. Common Stock
The voting and dividend rights, and the rights in the event of the
liquidation of the Corporation, of the holders of the Common Stock are subject
to and qualified by such rights of the holders of the Preferred Stock of any
series as the Board of Directors may designate upon the issuance of the
Preferred Stock of any series.
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The holders of the Common Stock are entitled to one vote for each share
held at all meetings of stockholders. There shall be no cumulative voting. The
holders of the Common Stock will have the right, voting as a separate class and
to the exclusion of all classes or series of the Corporation's stock, to elect
all members of the Board of Directors of the Corporation whose election is not
reserved to the holders of the Shares (as defined below) pursuant to paragraph 5
of Part C and paragraph 5 of Part D of this Article FOURTH.
Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors and subject
to any preferential dividend rights of any then outstanding Preferred Stock.
Upon the dissolution or liquidation of the Corporation, whether voluntary
or involuntary, holders of Common Stock will be entitled to receive pro rata all
net assets of the Corporation available for distribution after payment of
creditors and of any preferential liquidation rights of any then outstanding
Preferred Stock.
No holder of shares of the Common Stock or of the Preferred Stock shall be
entitled as such, as a matter of right, to subscribe for or purchase any part of
any new or additional issue of stock of any class whatsoever of the Corporation,
or of securities convertible into stock of any class, whether now or hereafter
authorized, or whether issued for cash or other consideration or by way of
dividend.
B. Preferred Stock
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed herein and
in the resolution or resolutions providing for the issuance of such series
adopted by the Corporation. Any shares of Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued except as otherwise
provided by law. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes
unless expressly provided herein or by law.
C. Convertible Preferred Stock - Series A
1. Designation. One Thousand (1,000) shares of the authorized
Preferred Stock of the Corporation are hereby designated "Series A Convertible
Preferred Stock" (the "Series A Preferred"). The shares of Series A Preferred
are collectively referred to herein as "Series A Shares."
2. Dividends and Distributions.
2A. Dividends. When and as any dividend or distribution is
declared or paid by the Corporation on the Common Stock at any time prior to the
conversion of all of the outstanding Series A Shares, whether payable in cash,
property, securities or rights to acquire
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securities, the holders of Series A Shares will be entitled to participate with
the holders of Common Stock in such dividend or distribution as set forth in
this paragraph 2A. At the time such dividends or distribution is payable to the
holders of Common Stock, the Corporation will pay each holder of Series A Shares
a portion of such dividend or distribution equal to the amount of the dividend
or distribution per share of Common Stock payable at such time multiplied by the
number of shares of Common Stock obtainable upon conversion of such holder's
Series A Shares. To the extent any dividends or distributions payable on any
Series A Shares are not paid, the amount of such dividends or distributions will
be added to the Liquidation Value of such Series A Shares and will remain a part
thereof until such dividends or distributions are paid. The provisions of this
paragraph 2A shall not apply to dividends or distributions payable in shares of
Common Stock or in Options or Convertible Securities (as defined in paragraph 6
of this Part C) or any other dividend or distribution, if the declaration,
distribution or payment thereof has resulted or will result in an adjustment to
the Conversion Price of Series A Shares under paragraph 6 of this Part C.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then declared with
respect to the Series A Shares, such payment will be distributed ratably among
the holders of the Series A Shares.
3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Series A Shares will be entitled to be paid
pro rata, on a proportionate basis with the Series B Shares, before any
distribution or payment is made upon any shares of Junior Securities, an amount
in cash equal to the aggregate Liquidation Value of all Series A Shares
outstanding, and the holders of the Series A Shares will not be entitled to any
further payment. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the holders of
Series A Shares and Series B Shares are insufficient to permit payment to such
holders of the aggregate amount which they are entitled to be paid, then the
entire assets to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of the Series A Shares and Series B
Shares held by each such holder. The Corporation will mail written notice of
such liquidation, dissolution or winding up, not less than 45 days prior to the
payment date stated therein, to each record holder of Series A Shares and Series
B Shares. The consolidation or merger of the Corporation into or with any other
corporation or corporations, or the sale or transfer by the Corporation of all
or substantially all of its assets, or the reduction of the capital stock of the
Corporation will be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this paragraph 3.
4. Redemptions.
4A. Scheduled Redemption. On each applicable Scheduled
Redemption Date (as defined in this paragraph 4A below), the Corporation will
redeem the then outstanding Series A Shares at a price per share equal to the
Redemption Price (as defined in paragraph 4B below) in accordance with the
following schedule:
(i) One-third (1/3) of the number of Series A Shares
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outstanding on the fifth anniversary date of the Series A Closing Date (as
defined in paragraph 10 below) (hereinafter "First Series A SRD");
(ii) One-third (1/3) of the number of Series A
Shares outstanding on the sixth anniversary date of the Series A Closing Date
(hereinafter "Second Series A SRD"); and
(iii) One-third (1/3) of the number of Series A
Shares outstanding on the seventh anniversary date of the Series A Closing Date
(hereinafter "Third Series A SRD").
For purposes of this paragraph 4, the First Series A SRD, Second Series A
SRD and Third Series A SRD are sometimes hereinafter referred to, where no
distinction is required, as the "Scheduled Redemption Date".
Notwithstanding any provision to the contrary contained in this paragraph
4, a holder of Series A Shares may elect not to have the eligible Series A
Shares redeemed on the First Series A SRD; provided, that any shares eligible
for redemption on the First Series A SRD which are not then presented for
redemption, shall be eligible for redemption on the Second Series A SRD in
accordance with this paragraph 4. Unless the redemption of all of the eligible
Series A Shares on the Second Series A SRD is waived or delayed in accordance
with this paragraph 4, all of the eligible shares which are not presented for
redemption by the holders of Series A Shares on the First Series A SRD shall be
presented by such holders of Series A Preferred for redemption by the
Corporation on the Second Series A SRD.
Notwithstanding any further provision to the contrary contained in this
paragraph 4, a holder of Series A Shares may elect not to have the eligible
Series A Shares redeemed on the Second Series A SRD (including any shares
eligible for redemption on the First Series A SRD which were not presented to
the Corporation for redemption and which then became eligible for redemption on
the Second Series A SRD); provided, that any shares eligible for redemption on
the Second Series A SRD which are not then presented for redemption, shall be
eligible for redemption on the Third Series A SRD in accordance with this
paragraph 4. Unless the redemption of all of the eligible Series A Shares on the
Second Series A SRD is waived or delayed in accordance with this paragraph 4,
all of the eligible shares which are not presented for redemption by the holders
of Series A Shares on the Second Series A SRD shall be presented by such holders
of Series A Preferred for redemption by the Corporation on the Third Series A
SRD.
If the funds of the Corporation legally available for redemption of the
Series A Shares on any applicable Scheduled Redemption Date are insufficient to
redeem the total number of Series A Shares presented for redemption on such
date, those funds which are legally available will be used to redeem the maximum
possible number of Series A Shares ratably among the Series A Shares presented
for redemption. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Series A Shares, such funds will
immediately be used to redeem the balance of the Series A Shares which were
presented for
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redemption on such date but which were not redeemed.
4B. Redemption Price. For each Series A Share which is to be
redeemed, the Corporation will be obligated on the Redemption Date to pay to the
holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Series A Share) an amount in
immediately available funds (the "Redemption Price") equal to (i) the
Liquidation Value thereof plus an accrued dividend of $50 per Series A Preferred
Share per annum (or any portion thereof) from the Series A Closing Date to the
actual Redemption Date.
4C. Notice of Redemption. The Corporation will mail written
notice of each applicable redemption of Series A Shares to each record holder
thereof not less than 30 days prior to the date on which such redemption is to
be made. In case fewer than the total number of Series A Shares represented by
any certificate are redeemed, a new certificate representing the number of
unredeemed Series A Shares will be issued to the holder thereof without cost to
such holder within ten business days after surrender of the certificate
representing the redeemed Series A Shares.
4D. Determination of the Number of Each Holder's Series A
Shares to be Redeemed. Except as otherwise provided herein, the number of Series
A Shares to be redeemed from each holder thereof on any Redemption Date
hereunder will be the number of Series A Shares determined by multiplying (i)
the total number of Series A Shares to be redeemed on a given Scheduled
Redemption Date by (ii) a fraction, the numerator of which will be the total
number of Series A Shares then held by such holder (which are subject to
redemption on such Scheduled Redemption Date) and the denominator of which will
be the total number of Series A Shares then outstanding (which are subject to
redemption on such Scheduled Redemption Date).
4E. Dividends After Redemption Date. No Series A Share is
entitled to any dividends declared after the date on which the Redemption Price
of such Series A Share is paid. On such date all rights of the holder of such
Series A Share will cease, and such Series A Share will not be deemed to be
outstanding.
4F. Redeemed or Otherwise Acquired Redemption Series A Shares.
Any Series A Shares which are redeemed or otherwise acquired by the Corporation
will be cancelled and will not be reissued, sold or transferred.
4G. Other Redemptions or Acquisitions. Neither the Corporation
nor any Subsidiary will redeem or otherwise acquire any Series A Shares, except
as otherwise expressly authorized herein or pursuant to a purchase offer made
pro rata to all holders of Series A Shares on the basis of the number of Series
A Shares owned by each such holder.
5. Voting Rights. Each holder of Series A Shares will be entitled to
notice of all stockholders meetings in accordance with the Corporation's bylaws.
Except as otherwise provided herein or as provided by law, the holders of Series
A Shares will be entitled to vote
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with the holders of Common Stock upon all matters submitted to stockholders for
a vote, with each Series A Share representing the number of votes equal to the
number of shares of Common Stock into which each Series A Share is convertible
at the time of such vote.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Series A Shares may
convert all or any portion of the Series A Shares (including any fraction of a
Series A Share) held by such holder into a number of shares of Common Stock
computed by multiplying the number of Series A Shares to be converted by $500.00
and dividing the result by the Conversion Price then in effect.
(ii) Each conversion of Series A Shares will be
deemed to have been effected as of the close of business on the date on which
the certificate or certificates representing the Series A Shares to be converted
have been surrendered at the principal office of the Corporation or its transfer
agent, if any, provided that any such surrender must occur by 3:00 P.M. local
time. At such time as such conversion has been effected, the rights of the
holder of such Series A Shares as such holder will cease and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be deemed to have become
the holder or holders of record of the shares of Common Stock represented
thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within seven business days in the case of
subparagraph (a) below), the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified;
(b) payment in an amount equal to all declared but
unpaid dividends with respect to each Series A Share converted plus the amount
payable under subparagraph (vi) below with respect to such conversion; and
(c) a certificate representing any Series A Shares
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series A Shares will be made without charge to the
holders of such Series A Shares for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion of each Series A
Share, the Corporation will take all such actions as are necessary in
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order to ensure that the Common Stock issuable with respect to such conversion
will be validly issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the
transfer of Series A Shares or of Common Stock issued or issuable upon
conversion of Series A Shares in any manner which interferes with the timely
conversion of the Series A Shares.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this subparagraph (vi), be deliverable
upon any conversion of the Series A Shares, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
(i) The initial Conversion Price of the Series A
Preferred will be $82.00. In order to prevent dilution of the conversion rights
granted hereunder, the Conversion Price will be subject to adjustment from time
to time pursuant to this paragraph 6; provided, however, that notwithstanding
the foregoing, no adjustment to the Conversion Price will be made or considered
under this paragraph 6 with respect to the issuance or grant of up to 1,500
shares of Common Stock, including options or warrants to acquire Common Stock,
in connection with any employee stock option or stock ownership plan, any
consulting agreement or arrangement or any restricted stock agreement providing
for the issuance of Common Stock at a price equal to the fair market value as
determined by the Board of Directors in good faith; provided that the Board of
Directors shall not issue or grant shares of Common Stock, including options or
warrants to acquire shares of Common Stock, to any person who holds or has the
right to acquire more than 3,000 shares of Common Stock (as presently
constituted), or any affiliate or relative of such person, without the approval
and consent of the member(s) of the Board of Directors designated by the holders
of Series A Shares.
(ii) If and whenever after the Series A Closing
Date, the Corporation issues or sells, or in accordance with paragraph 6C of
this Part C is deemed to have issued or sold, any share of Common Stock for a
consideration per share less than the Conversion Price in effect immediately
prior to such time, except as provided in paragraph 6B(i) of this Part C, then
forthwith upon such issue or sale the Conversion Price will be reduced to the
Conversion Price determined by dividing (a) the sum of (1) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale times the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes
of determining the adjusted Conversion Price under paragraph 6B of this Part C,
the following will be applicable:
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(i) Issuance of Rights or Options. If the Corporation in
any manner grants any right or option to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock, including all Series A Shares outstanding at the time (such rights
or options being herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible Securities") and the price
per share for which Common Stock is issuable upon the exercise of any such
Options or upon conversion or exchange of any such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Option or upon conversion or exchange of the
total maximum amount of such Convertible Security issuable upon the exercise of
such Option will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. For purposes of this subparagraph
6C(i), the "price per share for which Common Stock is issuable" will be
determined by dividing (A) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of such Options, plus in the case of such Options which are
related to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the Conversion Price will be made upon the actual issuance of such Common Stock
or of such Convertible Security upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Security.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then forthwith upon such issue or sale the
Conversion Price will be reduced as set forth in subparagraph 6B(ii) of this
Part C. For purposes of determining the new Conversion Price, the maximum number
of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities will be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. For purposes of this
subparagraph 6C(ii), the "price per share for which Common Stock is issuable"
will be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price will be made upon the actual issuance of Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this paragraph 6, no further adjustment of the Conversion
Price will be made by reason of such issuance or sale.
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(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration (if
any) payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or charged conversion rate, as the case may be, at the
time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder will
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount received by the Corporation therefor. In case any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value (as defined infra) of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Corporation will be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible Security is
issued in connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities will be determined in good faith jointly by the Corporation
and the holders of a majority of the outstanding Series A Shares. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration will be determined by an independent appraiser
jointly selected by the Corporation and the holders of a majority of the
outstanding Series A Shares.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration to be determined pursuant
to the procedures set forth in subparagraph 6C(v) of this Part C.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
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(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be; provided that if such dividend, distribution or
subscription is not ultimately consummated, no adjustment will be made to the
Conversion Price hereunder or, if so made, such adjustment will he rescinded.
6D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
6E. Reorganization. Reclassification, Consolidation, Merger or
Sale. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Corporation's assets to another Person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Series A Shares then outstanding) to ensure
that each of the holders of Series A Shares will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series A Shares, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted his or her Series A Shares immediately prior to such Organic
Change. In any such case, the Corporation will make appropriate provisions (in
form and substance satisfactory to the holders of a majority of the Series A
Shares then outstanding) to ensure that the provisions of this paragraph 6 and
paragraph 7 of this Part C will thereafter be applicable to the Series A Shares
(including, in the case of any such consolidation, merger or sale in which the
successor corporation or purchasing corporation is other than the Corporation,
an immediate adjustment of the Conversion Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series A Shares, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
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consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series A Shares then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 6 but not expressly provided
for by such provisions, then the Corporation's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the holders of Series A Shares; provided that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to this paragraph 6 or
decrease the number of shares of Common Stock issuable upon conversion of each
Series A Share.
6G. Notices.
(i) Within ten business days of any adjustment of the
Conversion Price, the Corporation will give written notice thereof to all
holders of Series A Shares.
(ii) The Corporation will give written notice to all
holders of Series A Shares at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation will also give written notice
to the holders of Series A Shares at least 20 days prior to the date on which
any Organic Change will take place.
6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Series A Shares if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of its Common Stock in which the aggregate price paid by the
public for the shares will be at least $10,000,000. Any such mandatory
conversion shall only be effected at the time of and subject to the closing of
the sale of such shares pursuant to such Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Series A Shares prior
to such closing.
7. Purchase Rights. If at any time the Corporation grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series A Shares will
be entitled to acquire at the time of conversion of Series A Shares by such
holder (based on the number of shares of Common Stock issued upon such
conversion), upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series A Shares immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
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record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights; provided,
however, that holders of Series A Shares shall not be entitled to any Purchase
Rights under this Section 7 if such holders have received their pro rata share
of such Purchase Rights as a dividend or distribution under paragraph 2A of this
Part C or have received an adjustment in the Conversion Price of the Series A
Shares under paragraph 6 of this Part C with respect to the issuance of such
Purchase Rights.
8. Registration of Transfer. The Corporation will keep at its
principal office a register for the registration of Series A Shares. Upon the
surrender of any certificate representing Series A Shares at such place, the
Corporation will, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Series A Shares represented by the surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
Series A Shares as is requested by the holder of the surrendered certificate and
will be substantially identical in form to the surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series A Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity satisfactory to the Corporation (provided
that if the holder is an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
mutilated certificate, the Corporation will (at the holder's expense) execute
and deliver in lieu of such certificate a new certificate of identical tenor
representing the number of Series A Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
10. Definitions. As used in Part C of this Article FOURTH, the
following terms shall have the following meanings:
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of Series A Shares into
Common Stock, includes any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraph
6C.
"Junior Securities" means any of the Corporation's equity securities
other than the Series A Shares or the Series B Shares.
"Liquidation Value" of any Series A Share as of any particular date
will be equal
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to the sum of $500.00 plus any declared and unpaid dividends on such Series A
Share pursuant to paragraph 2A and not paid.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair value thereof
determined in good faith jointly by the Corporation and the holders of a
majority of the Series A Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
appraiser jointly selected by the Corporation and the holders of a majority of
the Series A Shares.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that for purposes of
paragraph 6H, a Public Offering will not include an offering made in connection
with a business acquisition or an employee benefit plan.
"Redemption Date" as to any Series A Share means the date specified
herein in the case of each redemption; provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date, and if not so paid in full, the Redemption Date will be the date
on which such Redemption Price is fully paid.
"Series A Closing Date" means March 16, 1995.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
11. Amendment and Waiver. No amendment, modification or waiver will
be binding or effective with respect to any provision of this Part C of this
Article FOURTH of this
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Amended and Restated Certificate of Incorporation without the prior written
consent of the holders of a majority of the Series A Shares outstanding at the
time such action is taken.
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder).
D. Convertible Preferred Stock - Series B
1. Designation. One Thousand (1,000) shares of the authorized
Preferred Stock of the Corporation are hereby designated "Series B Convertible
Preferred Stock" (the "Series B Preferred"). The shares of Series B Preferred
are collectively referred to herein as "Series B Shares."
2. Dividends and Distributions.
2A. Dividends. When and as any dividend or distribution is
declared or paid by the Corporation on the Common Stock at any time prior to the
conversion of all of the outstanding Series B Shares, whether payable in cash,
property, securities or rights to acquire securities, the holders of Series B
Shares will be entitled to participate with the holders of Common Stock in such
dividend or distribution as set forth in this paragraph 2A. At the time such
dividends or distribution is payable to the holders of Common Stock, the
Corporation will pay each holder of Series B Shares a portion of such dividend
or distribution equal to the amount of the dividend or distribution per share of
Common Stock payable at such time multiplied by the number of shares of Common
Stock obtainable upon conversion of such holder's Series B Shares. To the extent
any dividends or distributions payable on any Series B Shares are not paid, the
amount of such dividends or distributions will be added to the Liquidation Value
of such Series B Shares and will remain a part thereof until such dividends or
distributions are paid. The provisions of this paragraph 2A shall not apply to
dividends or distributions payable in shares of Common Stock or in Options or
Convertible Securities (as defined in paragraph 6 of this Part D) or any other
dividend or distribution, if the declaration, distribution or payment thereof
has resulted or will result in an adjustment to the Conversion Price of Series B
Shares under paragraph 6 of this Part D.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then declared with
respect to the Series B Shares, such payment will be distributed ratably among
the holders of the Series B Shares.
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3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Series B Shares will be entitled to be paid
pro rata, on a proportionate basis with Series A Shares, before any distribution
or payment is made upon any shares of Junior Securities, an amount in cash equal
to the aggregate Liquidation Value of all Series B Shares outstanding, and the
holders of the Series B Shares will not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the Corporation, the
Corporation's assets to be distributed among the holders of Series A Shares and
Series B Shares are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid, then the entire assets to
be distributed will be distributed ratably among such holders based upon the
aggregate Liquidation Value of the Series A Shares and Series B Shares held by
each such holder. The Corporation will mail written notice of such liquidation,
dissolution or winding up, not less than 45 days prior to the payment date
stated therein, to each record holder of Series A Shares and Series B Shares.
The consolidation or merger of the Corporation into or with any other
corporation or corporations, or the sale or transfer by the Corporation of all
or substantially all of its assets, or the reduction of the capital stock of the
Corporation will be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this paragraph 3.
4. Redemptions.
4A. Scheduled Redemption. On each applicable Scheduled
Redemption Date (as defined in this paragraph 4A below), the Corporation will
redeem the then outstanding Series B Shares at a price per share equal to the
Redemption Price (as defined in paragraph 4B below) in accordance with the
following schedule:
(i) One-third (1/3) of the number of Series B Shares
outstanding on the fifth anniversary date of the Series B Closing Date (as
defined in paragraph 10 below) (hereinafter "First Series B SRD");
(ii) One-third (1/3) of the number of Series B
Shares outstanding on the sixth anniversary date of the Series B Closing Date
(hereinafter "Second Series B SRD"); and
(iii) One-third (1/3) of the number of Series B
Shares outstanding on the seventh anniversary date of the Series B Closing Date
(hereinafter "Third Series B SRD").
For purposes of this paragraph 4, the First Series B SRD, Second Series B
SRD and Third Series B SRD are sometimes hereinafter referred to, where no
distinction is required, as the "Scheduled Redemption Date".
Notwithstanding any provision to the contrary contained in this paragraph
4, a holder of Series B Shares may elect not to have the eligible Series B
Shares redeemed on the First Series B SRD; provided, that any shares eligible
for redemption on the First Series B SRD which are not then presented for
redemption, shall be eligible for redemption on the Second Series B SRD in
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accordance with this paragraph 4. Unless the redemption of all of the eligible
Series B Shares on the Second Series B SRD is waived or delayed in accordance
with this paragraph 4, all of the eligible shares which are not presented for
redemption by the holders of Series B Shares on the First Series B SRD shall be
presented by such holders of Series B Preferred for redemption by the
Corporation on the Second Series B SRD.
Notwithstanding any further provision to the contrary contained in this
paragraph 4, a holder of Series B Shares may elect not to have the eligible
Series B Shares redeemed on the Second Series B SRD (including any shares
eligible for redemption on the First Series B SRD which were not presented to
the Corporation for redemption and which then became eligible for redemption on
the Second Series B SRD); provided, that any shares eligible for redemption on
the Second Series B SRD which are not then presented for redemption, shall be
eligible for redemption on the Third Series B SRD in accordance with this
paragraph 4. Unless the redemption of all of the eligible Series B Shares on the
Second Series B SRD is waived or delayed in accordance with this paragraph 4,
all of the eligible shares which are not presented for redemption by the holders
of Series B Shares on the Second Series B SRD shall be presented by such holders
of Series B Preferred for redemption by the Corporation on the Third Series B
SRD.
If the funds of the Corporation legally available for redemption of the
Series B Shares on any applicable Scheduled Redemption Date are insufficient to
redeem the total number of Series B Shares presented for redemption on such
date, those funds which are legally available will be used to redeem the maximum
possible number of Series B Shares ratably among the Series B Shares presented
for redemption. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Series B Shares, such funds will
immediately be used to redeem the balance of the Series B Shares which were
presented for redemption on such date but which were not redeemed.
4B. Redemption Price. For each Series B Share which is to be
redeemed, the Corporation will be obligated on the Redemption Date to pay to the
holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Series B Share) an amount in
immediately available funds (the "Redemption Price") equal to (i) the
Liquidation Value thereof plus an accrued dividend of $160.00 per Series B
Preferred Share per annum (or any portion thereof) from the Series B Closing
Date to the actual Redemption Date.
4C. Notice of Redemption. The Corporation will mail written
notice of each applicable redemption of Series B Shares to each record holder
thereof not less than 30 days prior to the date on which such redemption is to
be made. In case fewer than the total number of Series B Shares represented by
any certificate are redeemed, a new certificate representing the number of
unredeemed Series B Shares will be issued to the holder thereof without cost to
such holder within ten business days after surrender of the certificate
representing the redeemed Series B Shares.
4D. Determination of the Number of Each Holder's Series B
Shares to be Redeemed. Except as otherwise provided herein, the number of Series
B Shares to be
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redeemed from each holder thereof on any Redemption Date hereunder will be the
number of Series B Shares determined by multiplying (i) the total number of
Series B Shares to be redeemed on a given Scheduled Redemption Date by (ii) a
fraction, the numerator of which will be the total number of Series B Shares
then held by such holder (which are subject to redemption on such Scheduled
Redemption Date) and the denominator of which will be the total number of Series
B Shares then outstanding (which are subject to redemption on such Scheduled
Redemption Date).
4E. Dividends After Redemption Date. No Series B Share is
entitled to any dividends declared after the date on which the Redemption Price
of such Series B Share is paid. On such date all rights of the holder of such
Series B Share will cease, and such Series B Share will not be deemed to be
outstanding.
4F. Redeemed or Otherwise Acquired Redemption Series B Shares.
Any Series B Shares which are redeemed or otherwise acquired by the Corporation
will be cancelled and will not be reissued, sold or transferred.
4G. Other Redemptions or Acquisitions. Neither the Corporation
nor any Subsidiary will redeem or otherwise acquire any Series B Shares, except
as otherwise expressly authorized herein or pursuant to a purchase offer made
pro rata to all holders of Series B Shares on the basis of the number of Series
B Shares owned by each such holder.
5. Voting Rights. Each holder of Series B Shares will be entitled to
notice of all stockholders meetings in accordance with the Corporation's bylaws.
Except as otherwise provided herein or as provided by law, the holders of Series
B Shares will be entitled to vote with the holders of Common Stock upon all
matters submitted to stockholders for a vote, with each Series B Share
representing the number of votes equal to the number of shares of Common Stock
into which each Series B Share is convertible at the time of such vote.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Series B Shares may
convert all or any portion of the Series B Shares (including any fraction of a
Series B Share) held by such holder into a number of shares of Common Stock
computed by multiplying the number of Series B Shares to be converted by
$1,600.00 and dividing the result by the Conversion Price then in effect.
(ii) Each conversion of Series B Shares will be deemed
to have been effected as of the close of business on the date on which the
certificate or certificates representing the Series B Shares to be converted
have been surrendered at the principal office of the Corporation or its transfer
agent, if any, provided that any such surrender must occur by 3:00 P.M. local
time. At such time as such conversion has been effected, the rights of the
holder of such Series B Shares as such holder will cease and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock are to be issued upon such
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conversion will be deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within seven business days in the case of
subparagraph (a) below), the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified;
(b) payment in an amount equal to all declared but
unpaid dividends with respect to each Series B Share converted plus the amount
payable under subparagraph (vi) below with respect to such conversion; and
(c) a certificate representing any Series B Shares
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series B Shares will be made without charge to the
holders of such Series B Shares for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion of each Series B
Share, the Corporation will take all such actions as are necessary in order to
ensure that the Common Stock issuable with respect to such conversion will be
validly issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the
transfer of Series B Shares or of Common Stock issued or issuable upon
conversion of Series B Shares in any manner which interferes with the timely
conversion of the Series B Shares.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this subparagraph (vi), be deliverable
upon any conversion of the Series B Shares, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
(i) The initial Conversion Price of the Series B
Preferred will be $200.30. In order to prevent dilution of the conversion rights
granted hereunder, the Conversion Price will be subject to adjustment from time
to time pursuant to this paragraph 6; provided, however, that notwithstanding
the foregoing, no adjustment to the Conversion Price will be made or considered
under this paragraph 6 with respect to the issuance or grant of up to 2200
shares of Common Stock, including options or warrants to acquire Common Stock,
in
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connection with any employee stock option or stock ownership plan, any
consulting agreement or arrangement or any restricted stock agreement providing
for the issuance of Common Stock at a price equal to the fair market value as
determined by the Board of Directors in good faith; provided that the Board of
Directors shall not issue or grant shares of Common Stock, including options or
warrants to acquire shares of Common Stock, to any person who holds or has the
right to acquire more than 3,000 shares of Common Stock (as presently
constituted), or any affiliate or relative of such person, without the approval
and consent of the member(s) of the Board of Directors designated by the holders
of Series B Shares.
(ii) If and whenever after the Series B Closing
Date, the Corporation issues or sells, or in accordance with paragraph 6C of
this Part D is deemed to have issued or sold, any share of Common Stock for a
consideration per share less than the Conversion Price in effect immediately
prior to such time, except as provided in paragraph 6B(i) of this Part D, then
forthwith upon such issue or sale the Conversion Price will be reduced to the
Conversion Price determined by dividing (a) the sum of (1) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale times the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes
of determining the adjusted Conversion Price under paragraph 6B of this Part D,
the following will be applicable:
(i) Issuance of Rights or Options. If the Corporation in
any manner grants any right or option to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock, including all Series B Shares outstanding at the time (such rights
or options being herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible Securities") and the price
per share for which Common Stock is issuable upon the exercise of any such
Options or upon conversion or exchange of any such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Option or upon conversion or exchange of the
total maximum amount of such Convertible Security issuable upon the exercise of
such Option will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. For purposes of this subparagraph
6C(i), the "price per share for which Common Stock is issuable" will be
determined by dividing (A) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of such Options, plus in the case of such Options which are
related to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the
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Conversion Price will be made upon the actual issuance of such Common Stock or
of such Convertible Security upon the exercise of such Options or upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Security.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then forthwith upon such issue or sale the
Conversion Price will be reduced as set forth in subparagraph 6B(ii) of this
Part D. For purposes of determining the new Conversion Price, the maximum number
of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities will be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. For purposes of this
subparagraph 6C(ii), the "price per share for which Common Stock is issuable"
will be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price will be made upon the actual issuance of Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this paragraph 6, no further adjustment of the Conversion
Price will be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration (if
any) payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or charged conversion rate, as the case may be, at the
time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder will
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount received by the Corporation therefor. In case any Common
Stock, Option or Convertible Security is issued or
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sold for a consideration other than cash, the amount of the consideration other
than cash received by the Corporation will be the fair value (as defined infra)
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Corporation will be
the Market Price thereof as of the date of receipt. If any Common Stock, Option
or Convertible Security is issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and
business of the non-surviving corporation as is attributable to such Common
Stock, Option or Convertible Security, as the case may be. The fair value of any
consideration other than cash and securities will be determined in good faith
jointly by the Corporation and the holders of a majority of the outstanding
Series B Shares. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration will be
determined by an independent appraiser jointly selected by the Corporation and
the holders of a majority of the outstanding Series B Shares.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration to be determined pursuant
to the procedures set forth in subparagraph 6C(v) of this Part D.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be; provided that if such dividend, distribution or
subscription is not ultimately consummated, no adjustment will be made to the
Conversion Price hereunder or, if so made, such adjustment will be rescinded.
6D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
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6E. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Corporation's assets to another Person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Series B Shares then outstanding) to ensure
that each of the holders of Series B Shares will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series B Shares, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted his or her Series B Shares immediately prior to such Organic
Change. In any such case, the Corporation will make appropriate provisions (in
form and substance satisfactory to the holders of a majority of the Series B
Shares then outstanding) to ensure that the provisions of this paragraph 6 and
paragraph 7 of this Part D will thereafter be applicable to the Series B Shares
(including, in the case of any such consolidation, merger or sale in which the
successor corporation or purchasing corporation is other than the Corporation,
an immediate adjustment of the Conversion Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series B Shares, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series B Shares then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 6 but not expressly provided
for by such provisions, then the Corporation's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the holders of Series B Shares; provided that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to this paragraph 6 or
decrease the number of shares of Common Stock issuable upon conversion of each
Series B Share.
6G. Notices.
(i) Within ten business days of any adjustment of the
Conversion Price, the Corporation will give written notice thereof to all
holders of Series B Shares.
(ii) The Corporation will give written notice to all
holders of Series B Shares at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with
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respect to any pro rata subscription offer to holders of Common Stock or (c) for
determining rights to vote with respect to any Organic Change, dissolution or
liquidation.
(iii) The Corporation will also give written notice
to the holders of Series B Shares at least 20 days prior to the date on which
any Organic Change will take place.
6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Series B Shares if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of its Common Stock in which the aggregate price paid by the
public for the shares will be at least $10,000,000. Any such mandatory
conversion shall only be effected at the time of and subject to the closing of
the sale of such shares pursuant to such Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Series B Shares prior
to such closing.
7. Purchase Rights. If at any time the Corporation grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series B Shares will
be entitled to acquire at the time of conversion of Series B Shares by such
holder (based on the number of shares of Common Stock issued upon such
conversion), upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series B Shares immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights; provided, however, that
holders of Series B Shares shall not be entitled to any Purchase Rights under
this Section 7 if such holders have received their pro rata share of such
Purchase Rights as a dividend or distribution under paragraph 2A of this Part D
or have received an adjustment in the Conversion Price of the Series B Shares
under paragraph 6 of this Part D with respect to the issuance of such Purchase
Rights.
8. Registration of Transfer. The Corporation will keep at its
principal office a register for the registration of Series B Shares. Upon the
surrender of any certificate representing Series B Shares at such place, the
Corporation will, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Series B Shares represented by the surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
Series B Shares as is requested by the holder of the surrendered certificate and
will be substantially identical in form to the surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series B Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity satisfactory to the Corporation (provided
that if the holder is an institutional investor its own agreement will be
satisfactory), or,
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in the case of any such mutilation upon surrender of such mutilated certificate,
the Corporation will (at the holder's expense) execute and deliver in lieu of
such certificate a new certificate of identical tenor representing the number of
Series B Shares represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
10. Definitions. As used in Part D of this Article FOURTH, the
following terms shall have the following meanings:
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of Series B Shares into
Common Stock, includes any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraph
6C.
"Junior Securities" means any of the Corporation's equity securities
other than the Series A Shares or the Series B Shares.
"Liquidation Value" of any Series B Share as of any particular date
will be equal to the sum of $1,600.00 plus any declared and unpaid dividends on
such Series B Share pursuant to paragraph 2A and not paid.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair value thereof
determined in good faith jointly by the Corporation and the holders of a
majority of the Series B Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
appraiser jointly selected by the Corporation and the holders of a majority of
the Series B Shares.
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"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that for purposes of
paragraph 6H, a Public Offering will not include an offering made in connection
with a business acquisition or an employee benefit plan.
"Redemption Date" as to any Series B Share means the date specified
herein in the case of each redemption; provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date, and if not so paid in full, the Redemption Date will be the date
on which such Redemption Price is fully paid.
"Series B Closing Date" means October 18, 1995.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
11. Amendment and Waiver. No amendment, modification or waiver will
be binding or effective with respect to any provision of this Part D of this
Article FOURTH of this Amended and Restated Certificate of Incorporation without
the prior written consent of the holders of a majority of the Series B Shares
outstanding at the time such action is taken.
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder)."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Assistant Secretary this 17th day of October, 1995.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece, President
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ATTEST:
By: /s/Stephen M. Kane
------------------
Stephen M. Kane
Assistant Secretary
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CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the written
consent of a majority in interest of each class of stockholders in accordance
with Sections 228 and 242 of the General Corporation Law of the State of
Delaware. Prompt written notice of the adoption of the amendment herein
certified has been given to those stockholders who have not consented in writing
thereto, as provided in Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation, as previously amended, is hereby further amended as follows:
(A) by deleting the first paragraph of Article Fourth (said
paragraph begins "The total number..." and ends ".... to
$1,020.00"), and inserting therefor the following:
"FOURTH. The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is 103,000 shares,
consisting of 100,000 shares of Common Stock, $.01 par value per share, and
3,000 shares of Preferred Stock, $.01 par value per share, amounting in the
aggregate to $1,030.00."
(B) by adding a new Part E to Article Fourth as follows:
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"E. Convertible Preferred Stock - Series C
1. Designation. One Thousand (1,000) shares of the authorized
Preferred Stock of the Corporation are hereby designated "Series C Convertible
Preferred Stock" (the "Series C Preferred"). The shares of Series C Preferred
are collectively referred to herein as "Series C Shares."
2. Dividends and Distributions.
2A. Dividends. When and as any dividend or distribution is
declared or paid by the Corporation on the Common Stock at any time prior to the
conversion of all of the outstanding Series C Shares, whether payable in cash,
property, securities or rights to acquire securities, the holders of Series C
Shares will be entitled to participate with the holders of Common Stock in such
dividend or distribution as set forth in this paragraph 2A. At the time such
dividends or distribution is payable to the holders of Common Stock, the
Corporation will pay each holder of Series C Shares a portion of such dividend
or distribution equal to the amount of the dividend or distribution per share of
Common Stock payable at such time multiplied by the number of shares of Common
Stock obtainable upon conversion of such holder's Series C Shares. To the extent
any dividends or distributions payable on any Series C Shares are not paid, the
amount of such dividends or distributions will be added to the Liquidation Value
of such Series C Shares and will remain a part thereof until such dividends or
distributions are paid. The provisions of this paragraph 2A shall not apply to
dividends or distributions payable in shares of Common Stock or in Options or
Convertible Securities (as defined in paragraph 6 of this Part E) or any other
dividend or distribution, if the declaration, distribution or payment thereof
has resulted or will result in an adjustment to the Conversion Price of Series C
Shares under paragraph 6 of this Part E.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then declared with
respect to the Series C Shares, such payment will be distributed ratably among
the holders of the Series C Shares.
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3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Series C Shares will be entitled to be paid
pro rata, on a proportionate basis with Series A Shares and Series B Shares,
before any distribution or payment is made upon any shares of Junior Securities,
an amount in cash equal to the aggregate Liquidation Value of all Series C
Shares outstanding, and the holders of the Series C Shares will not be entitled
to any further payment. If upon any such liquidation, dissolution or winding up
of the Corporation, the Corporation's assets to be distributed among the holders
of Series A Shares, Series B Shares and Series C Shares are insufficient to
permit payment to such holders of the aggregate amount which they are entitled
to be paid, then the entire assets to be distributed will be distributed ratably
among such holders based upon the aggregate Liquidation Value of the Series A
Shares, Series B Shares and Series C Shares held by each such holder. The
Corporation will mail written notice of such liquidation, dissolution or winding
up, not less than 45 days prior to the payment date stated therein, to each
record holder of Series A Shares, Series B Shares and Series C Shares. The
consolidation or merger of the Corporation into or with any other corporation or
corporations, or the sale or transfer by the Corporation of all or substantially
all of its assets, or the reduction of the capital stock of the Corporation will
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph 3.
4. Redemptions.
4A. Scheduled Redemption. On each applicable Scheduled
Redemption Date (as defined in this paragraph 4A below), the Corporation will
redeem the then outstanding Series C Shares at a price per share equal to the
Redemption Price (as defined in paragraph 4B below) in accordance with the
following schedule:
(i) One-third (1/3) of the number of Series C Shares
outstanding on the fifth anniversary date of the Series C Closing Date (as
defined in paragraph 10 below) (hereinafter "First Series C SRD");
(ii) One-third (1/3) of the number of Series C Shares
outstanding on the sixth anniversary date of the Series C Closing Date
(hereinafter "Second Series C SRD"); and
(iii) One-third (1/3) of the number of Series C Shares
outstanding on the seventh anniversary date of the Series C Closing Date
(hereinafter "Third Series C SRD").
For purposes of this paragraph 4, the First Series C SRD, Second Series C
SRD and Third Series C SRD are sometimes hereinafter referred to, where no
distinction is required, as the "Scheduled Redemption Date".
Notwithstanding any provision to the contrary contained in this paragraph
4, a holder of Series C Shares may elect not to have the eligible Series C
Shares redeemed on the First Series C SRD; provided, that any shares eligible
for redemption on the First Series C SRD which are not then presented for
redemption, shall be eligible for redemption on the Second Series C SRD in
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accordance with this paragraph 4. Unless the redemption of all of the eligible
Series C Shares on the Second Series C SRD is waived or delayed in accordance
with this paragraph 4, all of the eligible shares which are not presented for
redemption by the holders of Series C Shares on the First Series C SRD shall be
presented by such holders of Series C Preferred for redemption by the
Corporation on the Second Series C SRD.
Notwithstanding any further provision to the contrary contained in this
paragraph 4, a holder of Series C Shares may elect not to have the eligible
Series C Shares redeemed on the Second Series C SRD (including any shares
eligible for redemption on the First Series C SRD which were not presented to
the Corporation for redemption and which then became eligible for redemption on
the Second Series C SRD); provided, that any shares eligible for redemption on
the Second Series C SRD which are not then presented for redemption, shall be
eligible for redemption on the Third Series C SRD in accordance with this
paragraph 4. Unless the redemption of all of the eligible Series C Shares on the
Second Series C SRD is waived or delayed in accordance with this paragraph 4,
all of the eligible shares which are not presented for redemption by the holders
of Series C Shares on the Second Series C SRD shall be presented by such holders
of Series C Preferred for redemption by the Corporation on the Third Series C
SRD.
If the funds of the Corporation legally available for redemption of the
Series C Shares on any applicable Scheduled Redemption Date are insufficient to
redeem the total number of Series C Shares presented for redemption on such
date, those funds which are legally available will be used to redeem the maximum
possible number of Series C Shares ratably among the Series C Shares presented
for redemption. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Series C Shares, such funds will
immediately be used to redeem the balance of the Series C Shares which were
presented for redemption on such date but which were not redeemed.
4B. Redemption Price. For each Series C Share which is to be
redeemed, the Corporation will be obligated on the Redemption Date to pay to the
holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Series C Share) an amount in
immediately available funds (the "Redemption Price") equal to (i) the
Liquidation Value thereof plus an accrued dividend of $100.00 per Series C
Preferred Share per annum (or any portion thereof) from the Series C Closing
Date to the actual Redemption Date.
4C. Notice of Redemption. The Corporation will mail written
notice of each applicable redemption of Series C Shares to each record holder
thereof not less than 30 days prior to the date on which such redemption is to
be made. In case fewer than the total number of Series C Shares represented by
any certificate are redeemed, a new certificate representing the number of
unredeemed Series C Shares will be issued to the holder thereof without cost to
such holder within ten business days after surrender of the certificate
representing the redeemed Series C Shares.
4D. Determination of the Number of Each Holder's Series C
Shares to
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be Redeemed. Except as otherwise provided herein, the number of Series C Shares
to be redeemed from each holder thereof on any Redemption Date hereunder will be
the number of Series C Shares determined by multiplying (i) the total number of
Series C Shares to be redeemed on a given Scheduled Redemption Date by (ii) a
fraction, the numerator of which will be the total number of Series C Shares
then held by such holder (which are subject to redemption on such Scheduled
Redemption Date) and the denominator of which will be the total number of Series
C Shares then outstanding (which are subject to redemption on such Scheduled
Redemption Date).
4E. Dividends After Redemption Date. No Series C Share is
entitled to any dividends declared after the date on which the Redemption Price
of such Series C Share is paid. On such date all rights of the holder of such
Series C Share will cease, and such Series C Share will not be deemed to be
outstanding.
4F. Redeemed or Otherwise Acquired Redemption Series C Shares.
Any Series C Shares which are redeemed or otherwise acquired by the Corporation
will be cancelled and will not be reissued, sold or transferred.
4G. Other Redemptions or Acquisitions. Neither the Corporation
nor any Subsidiary will redeem or otherwise acquire any Series C Shares, except
as otherwise expressly authorized herein or pursuant to a purchase offer made
pro rata to all holders of Series C Shares on the basis of the number of Series
C Shares owned by each such holder.
5. Voting Rights. Each holder of Series C Shares will be entitled to
notice of all stockholders meetings in accordance with the Corporation's bylaws.
Except as otherwise provided herein or as provided by law, the holders of Series
C Shares will be entitled to vote with the holders of Common Stock upon all
matters submitted to stockholders for a vote, with each Series C Share
representing the number of votes equal to the number of shares of Common Stock
into which each Series C Share is convertible at the time of such vote.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Series C Shares may
convert all or any portion of the Series C Shares (including any fraction of a
Series C Share) held by such holder into a number of shares of Common Stock
computed by multiplying the number of Series C Shares to be converted by
$1,000.00 and dividing the result by the Conversion Price then in effect.
(ii) Each conversion of Series C Shares will be deemed
to have been effected as of the close of business on the date on which the
certificate or certificates representing the Series C Shares to be converted
have been surrendered at the principal office of the Corporation or its transfer
agent, if any, provided that any such surrender must occur by 3:00 P.M. local
time. At such time as such conversion has been effected, the rights of the
holder of such Series C Shares as such holder will cease and the Person or
Persons in whose name or
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names any certificate or certificates for shares of Common Stock are to be
issued upon such conversion will be deemed to have become the holder or holders
of record of the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within seven business days in the case of
subparagraph (a) below), the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified;
(b) payment in an amount equal to all declared but
unpaid dividends with respect to each Series C Share converted plus the amount
payable under subparagraph (vi) below with respect to such conversion; and
(c) a certificate representing any Series C Shares
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series C Shares will be made without charge to the
holders of such Series C Shares for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion of each Series C
Share, the Corporation will take all such actions as are necessary in order to
ensure that the Common Stock issuable with respect to such conversion will be
validly issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the
transfer of Series C Shares or of Common Stock issued or issuable upon
conversion of Series C Shares in any manner which interferes with the timely
conversion of the Series C Shares.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this subparagraph (vi), be deliverable
upon any conversion of the Series C Shares, the Corporation, in lieu of
delivering the fractional share therefor, will pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
(i) The initial Conversion Price of the Series C
Preferred will be $360.62. In order to prevent dilution of the conversion rights
granted hereunder, the Conversion Price will be subject to adjustment from time
to time pursuant to this paragraph 6; provided, however, that notwithstanding
the foregoing, no adjustment to the Conversion Price will be made or considered
under this paragraph 6 with respect to (i) the issuance or grant of up
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<PAGE>
to 6,000 shares of Common Stock, including options or warrants to acquire Common
Stock, in connection with any employee stock option or stock ownership plan, any
consulting agreement or arrangement or any restricted stock agreement providing
for the issuance of Common Stock at a price equal to the fair market value as
determined by the Board of Directors in good faith; provided that the Board of
Directors shall not issue or grant shares of Common Stock, including options or
warrants to acquire shares of Common Stock, to any person who holds or has the
right to acquire more than 3,000 shares of Common Stock (as presently
constituted), or any affiliate or relative of such person, without the approval
and consent of the member(s) of the Board of Directors designated by the holders
of Series B Shares; or (ii) the issuance or grant of Common Stock or options for
Common Stock to non-employee directors for their services as directors.
(ii) If and whenever after the Series C Closing Date,
the Corporation issues or sells, or in accordance with paragraph 6C of this Part
E is deemed to have issued or sold, any share of Common Stock for a
consideration per share less than the Conversion Price in effect immediately
prior to such time, except as provided in paragraph 6B(i) of this Part E, then
forthwith upon such issue or sale the Conversion Price will be reduced to the
Conversion Price determined by dividing (a) the sum of (1) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale times the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes
of determining the adjusted Conversion Price under paragraph 6B of this Part E,
the following will be applicable:
(i) Issuance of Rights or Options. If the Corporation in
any manner grants any right or option to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock, including all Series C Shares outstanding at the time (such rights
or options being herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible Securities") and the price
per share for which Common Stock is issuable upon the exercise of any such
Options or upon conversion or exchange of any such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Option or upon conversion or exchange of the
total maximum amount of such Convertible Security issuable upon the exercise of
such Option will be deemed to be outstanding and to have been issued and sold by
the Corporation for such price per share. For purposes of this subparagraph
6C(i), the "price per share for which Common Stock is issuable" will be
determined by dividing (A) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of such Options, plus in the case of such Options which are
related to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock
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issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price will be made upon the actual issuance
of such Common Stock or of such Convertible Security upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then forthwith upon such issue or sale the
Conversion Price will be reduced as set forth in subparagraph 6B(ii) of this
Part E. For purposes of determining the new Conversion Price, the maximum number
of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities will be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. For purposes of this
subparagraph 6C(ii), the "price per share for which Common Stock is issuable"
will be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price will be made upon the actual issuance of Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this paragraph 6, no further adjustment of the Conversion
Price will be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration (if
any) payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or charged conversion rate, as the case may be, at the
time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder will
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for
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cash, the consideration received therefor will be deemed to be the gross amount
received by the Corporation therefor. In case any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation will be
the fair value (as defined infra) of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities will be determined in good faith jointly by the Corporation
and the holders of a majority of the outstanding Series C Shares. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration will be determined by an independent appraiser
jointly selected by the Corporation and the holders of a majority of the
outstanding Series C Shares.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration to be determined pursuant
to the procedures set forth in subparagraph 6C(v) of this Part E.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be; provided that if such dividend, distribution or
subscription is not ultimately consummated, no adjustment will be made to the
Conversion Price hereunder or, if so made, such adjustment will be rescinded.
6D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately
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increased.
6E. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Corporation's assets to another Person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Series C Shares then outstanding) to ensure
that each of the holders of Series C Shares will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series C Shares, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted his or her Series C Shares immediately prior to such Organic
Change. In any such case, the Corporation will make appropriate provisions (in
form and substance satisfactory to the holders of a majority of the Series C
Shares then outstanding) to ensure that the provisions of this paragraph 6 and
paragraph 7 of this Part E will thereafter be applicable to the Series C Shares
(including, in the case of any such consolidation, merger or sale in which the
successor corporation or purchasing corporation is other than the Corporation,
an immediate adjustment of the Conversion Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series C Shares, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series C Shares then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 6 but not expressly provided
for by such provisions, then the Corporation's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights of
the holders of Series C Shares; provided that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to this paragraph 6 or
decrease the number of shares of Common Stock issuable upon conversion of each
Series C Share.
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6G. Notices.
(i) Within ten business days of any adjustment of the
Conversion Price, the Corporation will give written notice thereof to all
holders of Series C Shares.
(ii) The Corporation will give written notice to all
holders of Series C Shares at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation will also give written notice
to the holders of Series C Shares at least 20 days prior to the date on which
any Organic Change will take place.
6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Series C Shares if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of its Common Stock in which the aggregate price paid by the
public for the shares will be at least $10,000,000. Any such mandatory
conversion shall only be effected at the time of and subject to the closing of
the sale of such shares pursuant to such Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Series C Shares prior
to such closing.
7. Purchase Rights. If at any time the Corporation grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series C Shares will
be entitled to acquire at the time of conversion of Series C Shares by such
holder (based on the number of shares of Common Stock issued upon such
conversion), upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series C Shares immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights; provided, however, that
holders of Series C Shares shall not be entitled to any Purchase Rights under
this Section 7 if such holders have received their pro rata share of such
Purchase Rights as a dividend or distribution under paragraph 2A of this Part E
or have received an adjustment in the Conversion Price of the Series C Shares
under paragraph 6 of this Part E with respect to the issuance of such Purchase
Rights.
8. Registration of Transfer. The Corporation will keep at its
principal office a register for the registration of Series C Shares. Upon the
surrender of any certificate representing Series C Shares at such place, the
Corporation will, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Series C Shares
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represented by the surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of Series C Shares as is
requested by the holder of the surrendered certificate and will be substantially
identical in form to the surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series C Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity satisfactory to the Corporation (provided
that if the holder is an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
mutilated certificate, the Corporation will (at the holder's expense) execute
and deliver in lieu of such certificate a new certificate of identical tenor
representing the number of Series C Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
10. Definitions. As used in Part E of this Article FOURTH, the
following terms shall have the following meanings:
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of Series C Shares into
Common Stock, includes any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraph
6C.
"Junior Securities" means any of the Corporation's equity securities
other than the Series A Shares, the Series B Shares or the Series C Shares.
"Liquidation Value" of any Series C Share as of any particular date
will be equal to the sum of $1,000.00 plus any declared and unpaid dividends on
such Series C Share pursuant to paragraph 2A and not paid.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
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consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair value thereof
determined in good faith jointly by the Corporation and the holders of a
majority of the Series C Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
appraiser jointly selected by the Corporation and the holders of a majority of
the Series C Shares.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that for purposes of
paragraph 6H, a Public Offering will not include an offering made in connection
with a business acquisition or an employee benefit plan.
"Redemption Date" as to any Series C Share means the date specified
herein in the case of each redemption; provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date, and if not so paid in full, the Redemption Date will be the date
on which such Redemption Price is fully paid.
"Series C Closing Date" means the date on which the first Series C
Shares are sold and issued, which date is expected to be August 21, 1996.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
11. Amendment and Waiver. No amendment, modification or waiver will
be binding or effective with respect to any provision of this Part E of this
Article FOURTH of this Amended and Restated Certificate of Incorporation without
the prior written consent of the holders of a majority of the Series C Shares
outstanding at the time such action is taken.
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder)."
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Assistant Secretary this 19th day of August, 1996.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece, President
ATTEST:
By: /s/ Stephen M. Kane
-------------------
Stephen M. Kane
Assistant Secretary
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CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the written
consent of a majority in interest of each class of stockholders in accordance
with Sections 228 and 242 of the General Corporation Law of the State of
Delaware. Prompt written notice of the adoption of the amendment herein
certified has been given to those stockholders who have not consented in writing
thereto, as provided in Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation, as previously amended, is hereby further amended as follows:
(A) by deleting the first paragraph of Article Fourth (said
paragraph begins "The total number..." and ends ".... to
$1,030.00"), and inserting therefor the following:
"FOURTH. The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is 104,667 shares,
consisting of 100,000 shares of Common Stock, $.01 par value per share, and
4,667 shares of Preferred Stock, $.01 par value per share, amounting in the
aggregate to $1,046.67."
(B) by adding a new Part F to Article Fourth as follows:
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"F. Convertible Preferred Stock - Series D
1. Designation. One Thousand Six Hundred Sixty-seven (1,667) shares
of the authorized Preferred Stock of the Corporation are hereby designated
"Series D Convertible Preferred Stock" (the "Series D Preferred"). The shares of
Series D Preferred are collectively referred to herein as "Series D Shares."
2. Dividends and Distributions.
2A. Dividends. When and as any dividend or distribution is
declared or paid by the Corporation on the Common Stock at any time prior to the
conversion of all of the outstanding Series D Shares, whether payable in cash,
property, securities or rights to acquire securities, the holders of Series D
Shares will be entitled to participate with the holders of Common Stock in such
dividend or distribution as set forth in this paragraph 2A. At the time such
dividends or distribution is payable to the holders of Common Stock, the
Corporation will pay each holder of Series D Shares a portion of such dividend
or distribution equal to the amount of the dividend or distribution per share of
Common Stock payable at such time multiplied by the number of shares of Common
Stock obtainable upon conversion of such holder's Series D Shares. To the extent
any dividends or distributions payable on any Series D Shares are not paid, the
amount of such dividends or distributions will be added to the Liquidation Value
of such Series D Shares and will remain a part thereof until such dividends or
distributions are paid. The provisions of this paragraph 2A shall not apply to
dividends or distributions payable in shares of Common Stock or in Options or
Convertible Securities (as defined in paragraph 6 of this Part F) or any other
dividend or distribution, if the declaration, distribution or payment thereof
has resulted or will result in an adjustment to the Conversion Price of Series D
Shares under paragraph 6 of this Part F.
2B. Distribution of Partial Dividend Payments. If at any time
the Corporation pays less than the total amount of dividends then declared with
respect to the Series D Shares, such payment will be distributed ratably among
the holders of the Series D Shares.
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3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, the holders of the Series D Shares will be entitled to be paid
pro rata, on a proportionate basis with Series A Shares, Series B Shares and
Series C Shares, before any distribution or payment is made upon any shares of
Junior Securities, an amount in cash equal to the aggregate Liquidation Value of
all Series D Shares outstanding, and the holders of the Series D Shares will not
be entitled to any further payment. If upon any such liquidation, dissolution or
winding up of the Corporation, the Corporation's assets to be distributed among
the holders of Series A Shares, Series B Shares, Series C Shares and Series D
Shares are insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets to be
distributed will be distributed ratably among such holders based upon the
aggregate Liquidation Value of the Series A Shares, Series B Shares, Series C
Shares and Series D Shares held by each such holder. The Corporation will mail
written notice of such liquidation, dissolution or winding up, not less than 45
days prior to the payment date stated therein, to each record holder of Series A
Shares, Series B Shares, Series C Shares and Series D Shares. The consolidation
or merger of the Corporation into or with any other corporation or corporations,
or the sale or transfer by the Corporation of all or substantially all of its
assets, or the reduction of the capital stock of the Corporation will be deemed
to be a liquidation, dissolution or winding up of the Corporation within the
meaning of this paragraph 3.
To the extent that the terms of this paragraph 3 conflict with or are
different from the plans of distribution set forth in paragraph 3 of Parts C, D,
and E of this Article FOURTH, the terms of this paragraph 3 govern, and the
terms of paragraph 3 of Parts C, D, and E of this Article FOURTH are hereby
deemed amended and restated to conform to the plan of distribution set forth in
this paragraph 3.
4. Redemptions.
4A. Scheduled Redemption. On each applicable Scheduled
Redemption Date (as defined in this paragraph 4A below), the Corporation will
redeem the then outstanding Series D Shares at a price per share equal to the
Redemption Price (as defined in paragraph 4B below) in accordance with the
following schedule:
(i) One-third (1/3) of the number of Series D Shares
outstanding on the fifth anniversary date of the Series D Closing Date (as
defined in paragraph 10 below) (hereinafter "First Series D SRD");
(ii) One-third (1/3) of the number of Series D Shares
outstanding on the sixth anniversary date of the Series D Closing Date
(hereinafter "Second Series D SRD"); and
(iii) One-third (1/3) of the number of Series D Shares
outstanding on the seventh anniversary date of the Series D Closing Date
(hereinafter "Third Series D SRD").
For purposes of this paragraph 4, the First Series D SRD, Second Series D
SRD and
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Third Series D SRD are sometimes hereinafter referred to, where no distinction
is required, as the "Scheduled Redemption Date".
Notwithstanding any provision to the contrary contained in this paragraph
4, a holder of Series D Shares may elect not to have the eligible Series D
Shares redeemed on the First Series D SRD; provided, that any shares eligible
for redemption on the First Series D SRD which are not then presented for
redemption, shall be eligible for redemption on the Second Series D SRD in
accordance with this paragraph 4. Unless the redemption of all of the eligible
Series D Shares on the Second Series D SRD is waived or delayed in accordance
with this paragraph 4, all of the eligible shares which are not presented for
redemption by the holders of Series D Shares on the First Series D SRD shall be
presented by such holders of Series D Preferred for redemption by the
Corporation on the Second Series D SRD.
Notwithstanding any further provision to the contrary contained in this
paragraph 4, a holder of Series D Shares may elect not to have the eligible
Series D Shares redeemed on the Second Series D SRD (including any shares
eligible for redemption on the First Series D SRD which were not presented to
the Corporation for redemption and which then became eligible for redemption on
the Second Series D SRD); provided, that any shares eligible for redemption on
the Second Series D SRD which are not then presented for redemption, shall be
eligible for redemption on the Third Series D SRD in accordance with this
paragraph 4. Unless the redemption of all of the eligible Series D Shares on the
Second Series D SRD is waived or delayed in accordance with this paragraph 4,
all of the eligible shares which are not presented for redemption by the holders
of Series D Shares on the Second Series D SRD shall be presented by such holders
of Series D Preferred for redemption by the Corporation on the Third Series D
SRD.
If the funds of the Corporation legally available for redemption of the
Series D Shares on any applicable Scheduled Redemption Date are insufficient to
redeem the total number of Series D Shares presented for redemption on such
date, those funds which are legally available will be used to redeem the maximum
possible number of Series D Shares ratably among the Series D Shares presented
for redemption. At any time thereafter when additional funds of the Corporation
are legally available for the redemption of Series D Shares, such funds will
immediately be used to redeem the balance of the Series D Shares which were
presented for redemption on such date but which were not redeemed.
4B. Redemption Price. For each Series D Share which is to be
redeemed, the Corporation will be obligated on the applicable Scheduled
Redemption Date to pay to the holder thereof (upon surrender by such holder at
the Corporation's principal office of the certificate representing such Series D
Share) an amount in immediately available funds (the "Redemption Price") equal
to (i) the Liquidation Value thereof plus an accrued dividend of $150.00 per
Series D Preferred Share per annum (or any portion thereof) from the Series D
Closing Date to the actual Redemption Date.
4C. Notice of Redemption. The Corporation will mail written
notice of each applicable redemption of Series D Shares to each record holder
thereof not less than 30 days
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prior to the date on which such redemption is to be made. In case fewer than the
total number of Series D Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Series D Shares will be
issued to the holder thereof without cost to such holder within ten business
days after surrender of the certificate representing the redeemed Series D
Shares.
4D. Determination of the Number of Each Holder's Series D
Shares to be Redeemed. Except as otherwise provided herein, the number of Series
D Shares to be redeemed from each holder thereof on any Redemption Date
hereunder will be the number of Series D Shares determined by multiplying (i)
the total number of Series D Shares to be redeemed on a given Scheduled
Redemption Date by (ii) a fraction, the numerator of which will be the total
number of Series D Shares then held by such holder (which are subject to
redemption on such Scheduled Redemption Date) and the denominator of which will
be the total number of Series D Shares then outstanding (which are subject to
redemption on such Scheduled Redemption Date).
4E. Dividends After Redemption Date. No Series D Share is
entitled to any dividends declared after the date on which the Redemption Price
of such Series D Share is paid. On such date all rights of the holder of such
Series D Share will cease, and such Series D Share will not be deemed to be
outstanding.
4F. Redeemed or Otherwise Acquired Redemption Series D Shares.
Any Series D Shares which are redeemed or otherwise acquired by the Corporation
will be cancelled and will not be reissued, sold or transferred.
4G. Other Redemptions or Acquisitions. Neither the Corporation
nor any Subsidiary will redeem or otherwise acquire any Series D Shares, except
as otherwise expressly authorized herein, in accordance with the terms of a
certain agreement entered into by and among the Corporation and substantially
all holders of the Corporation's capital stock in connection with the issuance
of the Series D Shares, or pursuant to a purchase offer made pro rata to all
holders of Series D Shares on the basis of the number of Series D Shares owned
by each such holder.
5. Voting Rights. Each holder of Series D Shares will be entitled to
notice of all stockholders meetings in accordance with the Corporation's bylaws.
Except as otherwise provided herein or as provided by law, the holders of Series
D Shares will be entitled to vote with the holders of Common Stock upon all
matters submitted to stockholders for a vote, with each Series D Share
representing the number of votes equal to the number of shares of Common Stock
into which each Series D Share is convertible at the time of such vote.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Series D Shares may
convert all
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or any portion of the Series D Shares (including any fraction of a Series D
Share) held by such holder into a number of shares of Common Stock computed by
multiplying the number of Series D Shares to be converted by $1,500.00 and
dividing the result by the Conversion Price then in effect.
(ii) Each conversion of Series D Shares will be deemed
to have been effected as of the close of business on the date on which the
certificate or certificates representing the Series D Shares to be converted
have been surrendered at the principal office of the Corporation or its transfer
agent, if any, provided that any such surrender must occur by 3:00 P.M. local
time. At such time as such conversion has been effected, the rights of the
holder of such Series D Shares as such holder will cease and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be deemed to have become
the holder or holders of record of the shares of Common Stock represented
thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within seven business days in the case of
subparagraph (a) below), the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified;
(b) payment in an amount equal to all declared but
unpaid dividends with respect to each Series D Share converted plus the amount
payable under subparagraph (vi) below with respect to such conversion; and
(c) a certificate representing any Series D Shares
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series D Shares will be made without charge to the
holders of such Series D Shares for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion of each Series D
Share, the Corporation will take all such actions as are necessary in order to
ensure that the Common Stock issuable with respect to such conversion will be
validly issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the
transfer of Series D Shares or of Common Stock issued or issuable upon
conversion of Series D Shares in any manner which interferes with the timely
conversion of the Series D Shares.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this subparagraph (vi), be deliverable
upon any conversion of
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the Series D Shares, the Corporation, in lieu of delivering the fractional share
therefor, will pay an amount to the holder thereof equal to the Market Price of
such fractional interest as of the date of conversion.
6B. Conversion Price.
(i) The initial Conversion Price of the Series D
Preferred will be $373.10. In order to prevent dilution of the conversion rights
granted hereunder, the Conversion Price will be subject to adjustment from time
to time pursuant to this paragraph 6; provided, however, that notwithstanding
the foregoing, no adjustment to the Conversion Price will be made or considered
under this paragraph 6 with respect to (a) the issuance or grant of up to 6,000
shares of Common Stock, including options or warrants to acquire Common Stock,
in connection with any employee stock option or stock ownership plan, any
consulting agreement or arrangement or any restricted stock agreement providing
for the issuance of Common Stock at a price equal to the fair market value as
determined by the Board of Directors in good faith; or (b) the issuance or grant
of Common Stock or options for Common Stock to non-employee directors for their
services as directors.
(ii) If and whenever after the Series D Closing Date,
the Corporation issues or sells, or in accordance with paragraph 6C of this Part
F is deemed to have issued or sold, any share of Common Stock for a
consideration per share less than the Conversion Price in effect immediately
prior to such time, except as provided in paragraph 6B(i) of this Part F, then
forthwith upon such issue or sale the Conversion Price will be reduced to the
Conversion Price determined by dividing (a) the sum of (1) the product derived
by multiplying the Conversion Price in effect immediately prior to such issue or
sale times the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes
of determining the adjusted Conversion Price under paragraph 6B of this Part F,
the following will be applicable:
(i) Issuance of Rights or Options. If the Corporation in
any manner grants any right or option to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock, including all Series D Shares outstanding at the time (such rights
or options being herein called "Options" and such convertible or exchangeable
stock or securities being herein called "Convertible Securities") and the price
per share for which Common Stock is issuable upon the exercise of any such
Options or upon conversion or exchange of any such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum
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number of shares of Common Stock issuable upon the exercise of such Option or
upon conversion or exchange of the total maximum amount of such Convertible
Security issuable upon the exercise of such Option will be deemed to be
outstanding and to have been issued and sold by the Corporation for such price
per share. For purposes of this subparagraph 6C(i), the "price per share for
which Common Stock is issuable" will be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of such Options, plus in
the case of such Options which are related to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of the Conversion Price will be made upon
the actual issuance of such Common Stock or of such Convertible Security upon
the exercise of such Options or upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Conversion Price in effect immediately prior to the
time of such issue or sale, then forthwith upon such issue or sale the
Conversion Price will be reduced as set forth in subparagraph 6B(ii) of this
Part F. For purposes of determining the new Conversion Price, the maximum number
of shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities will be deemed to be outstanding and to have been issued
and sold by the Corporation for such price per share. For purposes of this
subparagraph 6C(ii), the "price per share for which Common Stock is issuable"
will be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price will be made upon the actual issuance of Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this paragraph 6, no further adjustment of the Conversion
Price will be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration (if
any) payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change will be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or charged conversion rate, as the case may be, at the
time initially granted, issued or sold.
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(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder will
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the gross amount received by the Corporation therefor. In case any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation will be the fair value (as defined infra) of such consideration,
except where such consideration consists of securities, in which case the amount
of consideration received by the Corporation will be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible Security is
issued in connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities will be determined in good faith jointly by the Corporation
and the holders of a majority of the outstanding Series D Shares. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration will be determined by an independent appraiser
jointly selected by the Corporation and the holders of a majority of the
outstanding Series D Shares.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
will be deemed to have been issued for a consideration to be determined pursuant
to the procedures set forth in subparagraph 6C(v) of this Part F.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held will be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of
the holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may
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<PAGE>
be; provided that if such dividend, distribution or subscription is not
ultimately consummated, no adjustment will be made to the Conversion Price
hereunder or, if so made, such adjustment will be rescinded.
6D. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
6E. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any capital reorganization, reclassification, consolidation, merger or
sale of all or substantially all of the Corporation's assets to another Person
which is effected in such a way that holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to herein as
an Organic Change. Prior to the consummation of any Organic Change, the
Corporation will make appropriate provisions (in form and substance satisfactory
to the holders of a majority of the Series D Shares then outstanding) to ensure
that each of the holders of Series D Shares will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series D Shares, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted his or her Series D Shares immediately prior to such Organic
Change. In any such case, the Corporation will make appropriate provisions (in
form and substance satisfactory to the holders of a majority of the Series D
Shares then outstanding) to ensure that the provisions of this paragraph 6 and
paragraph 7 of this Part F will thereafter be applicable to the Series D Shares
(including, in the case of any such consolidation, merger or sale in which the
successor corporation or purchasing corporation is other than the Corporation,
an immediate adjustment of the Conversion Price to the value for the Common
Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series D Shares, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series D Shares then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type
contemplated by the provisions of this paragraph 6 but not expressly provided
for by such provisions, then the Corporation's Board of Directors will make an
appropriate adjustment in the Conversion Price so
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<PAGE>
as to protect the rights of the holders of Series D Shares; provided that no
such adjustment will increase the Conversion Price as otherwise determined
pursuant to this paragraph 6 or decrease the number of shares of Common Stock
issuable upon conversion of each Series D Share.
6G. Notices.
(i) Within ten business days of any adjustment of the
Conversion Price, the Corporation will give written notice thereof to all
holders of Series D Shares.
(ii) The Corporation will give written notice to all
holders of Series D Shares at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation will also give written notice
to the holders of Series D Shares at least 20 days prior to the date on which
any Organic Change will take place.
6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Series D Shares if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of its Common Stock in which the aggregate price paid by the
public for the shares will be at least $10,000,000. Any such mandatory
conversion shall only be effected at the time of and subject to the closing of
the sale of such shares pursuant to such Public Offering and upon written notice
of such mandatory conversion delivered to all holders of Series D Shares prior
to such closing.
7. Purchase Rights. If at any time the Corporation grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series D Shares will
be entitled to acquire at the time of conversion of Series D Shares by such
holder (based on the number of shares of Common Stock issued upon such
conversion), upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series D Shares immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights; provided, however, that
holders of Series D Shares shall not be entitled to any Purchase Rights under
this Section 7 if such holders have received their pro rata share of such
Purchase Rights as a dividend or distribution under paragraph 2A of this Part F
or have received an adjustment in the Conversion Price of the Series D Shares
under paragraph 6 of this Part F with respect to the issuance of such Purchase
Rights.
8. Registration of Transfer. The Corporation will keep at its
principal office
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<PAGE>
a register for the registration of Series D Shares. Upon the surrender of any
certificate representing Series D Shares at such place, the Corporation will, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of Series D Shares represented
by the surrendered certificate. Each such new certificate will be registered in
such name and will represent such number of Series D Shares as is requested by
the holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series D Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity satisfactory to the Corporation (provided
that if the holder is an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
mutilated certificate, the Corporation will (at the holder's expense) execute
and deliver in lieu of such certificate a new certificate of identical tenor
representing the number of Series D Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
10. Definitions. As used in Part F of this Article FOURTH and, with
respect to the term "Junior Securities", as such term is used in Parts C, D and
E of this Article FOURTH, notwithstanding any definition of such term in such
Parts to the contrary, the following terms shall have the following meanings:
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of Series D Shares into
Common Stock, includes any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to paragraph
6C.
"Junior Securities" means any of the Corporation's equity securities
other than the Series A Shares, the Series B Shares, the Series C Shares or the
Series D Shares.
"Liquidation Value" of any Series D Share as of any particular date
will be equal to the sum of $1,500.00 plus any declared and unpaid dividends on
such Series D Share pursuant to paragraph 2A and not paid.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and
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<PAGE>
lowest asked prices on all such exchanges at the end of such day, or, if on any
day such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being determined and
the 20 consecutive business days prior to such day. If at any time such security
is not listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair value thereof
determined in good faith jointly by the Corporation and the holders of a
majority of the Series D Shares. If such parties are unable to reach agreement
within a reasonable period of time, such fair value will be determined by an
appraiser jointly selected by the Corporation and the holders of a majority of
the Series D Shares. The cost of such appraisal shall be paid fifty percent
(50%) by the Company and fifty percent (50%) by the holders of Series D Shares.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a limited liability partnership, a
joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that for purposes of
paragraph 6H, a Public Offering will not include an offering made in connection
with a business acquisition or an employee benefit plan.
"Redemption Date" as to any Series D Share means the date specified
herein in the case of each redemption; provided that no such date will be a
Redemption Date unless the applicable Redemption Price is actually paid in full
on such date, and if not so paid in full, the Redemption Date will be the date
on which such Redemption Price is fully paid.
"Series D Closing Date" means the date on which the first Series D
Shares are sold and issued, which date is expected to be December 20, 1996.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the Board of Directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
11. Amendment and Waiver. No amendment, modification or waiver will
be binding or effective with respect to any provision of this Part F of this
Article FOURTH of this Amended and Restated Certificate of Incorporation without
the prior written consent of the holders of a majority of the Series D Shares
outstanding at the time such action is taken.
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<PAGE>
12. Notices. Except as otherwise expressly provided, all notices
referred to herein will be in writing and will be delivered by registered or
certified mail, return receipt requested, postage prepaid and will be deemed to
have been given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated in
writing by any such holder)."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Assistant Secretary this 19th day of December, 1996.
HEALTHGATE DATA CORP.
[CORPORATE SEAL]
By: /s/ William S. Reece
--------------------
William S. Reece, President
ATTEST:
By: /s/ Stephen M. Kane
-------------------
Stephen M. Kane
Assistant Secretary
55
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the vote of a
majority in interest of each class of stockholders at the annual meeting of
stockholders of the Corporation in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
THIRD: That the Certificate of Incorporation of the Corporation, as
previously amended, is hereby further amended by revising Section B of Article
Fourth to read in its entirety as follows:
"B. Preferred Stock
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is expressly authorized to issue the shares of Preferred
Stock in such series and to fix from time to time before issuance the number of
shares to be included in any series and the voting powers, designations,
preferences and relative participating options or other rights, if any, and the
qualifications, limitations or restrictions thereof, if any, of all shares of
such series. The authority of the Board of Directors with respect to each series
shall include, without limitation thereto, the determination of all of the
following, and the shares of each series may vary from the shares of any other
series in any or all of the following respects:
(1) the number of shares constituting such series, and the
designation thereof to distinguish the shares of all other series;
(2) the annual dividend rate on the shares of such series, whether
such dividends are payable in installments and whether such dividends
shall be cumulative and, if cumulative, the date from which such dividends
shall accumulate;
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<PAGE>
(3) the preference, if any, of the shares of such series in the
event of any voluntary or involuntary liquidation or dissolution of the
Corporation;
(4) the voting rights, if any, of the shares of such series, in
addition to the voting rights prescribed by law, and the terms and
conditions of exercise of any such voting rights;
(5) the redemption price or prices, if any, of the shares of such
series, and the terms and conditions of any such redemption;
(6) the right, if any, of the shares of such series to be converted
into shares of any other series or class, and the terms and conditions of
any such conversion; and
(7) any other relative rights, preferences and limitations of the
shares of such series.
Any shares of Preferred Stock which may be redeemed, purchased or acquired
by the corporation may be reissued except as otherwise provided by law.
Different series of Preferred Stock shall not be construed to constitute
different classes of shares for the purpose of voting by classes unless
expressly provided herein or by law."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
this 20th day of June, 1997.
HEALTHGATE DATA CORP.
[CORPORATE SEAL]
By: /s/ William S. Reece
--------------------
William S. Reece, President
57
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the written
consent of a majority in interest of each class of stockholders in accordance
with Sections 228 and 242 of the General Corporation Law of the State of
Delaware. Prompt written notice of the adoption of the amendment herein
certified has been given to those stockholders who have not consented in writing
thereto, as provided in Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation, as previously amended, is hereby further amended as follows:
(1) Each of Section 6B(i) of Part C of Article Fourth, Section 6B(i) of
Part D of Article Fourth, Section 6B(i) of Part E of Article Fourth and Section
6(B)(i) of Part F of Article Fourth are hereby amended by adding to the end of
each such Section the following:
"Furthermore, no adjustment to the Conversion Price will be
made or considered pursuant to this paragraph 6 with respect to the
issuance or grant of Common Stock or options or warrants for the
issuance of Common Stock to institutional investors in connection
with or as partial consideration for a loan, line of credit or other
financing in excess of $500,000 to the Corporation. Without limiting
the generality of the foregoing, there shall be no adjustment of the
Conversion Price in connection with the anticipated issuance of
warrants for this Corporation's Common Stock to Petra Capital LLC,
or any of its affiliates, in connection with Petra's anticipated
loan to the Corporation in or around March 1998."
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<PAGE>
(2) (a) Article FOURTH, Part C, Paragraph 4 of is hereby amended by adding
to the end thereof the following:
"4H. Subordination of Redemption Rights to Corporation's
Repayment of Petra Loan. Notwithstanding any other term and
condition of this paragraph 4, no redemption of any Series A Shares
shall be made until (i) the Corporation has paid in full all amounts
due and owing Petra Capital, LLC ("Petra") incurred by the
Corporation in connection with a Loan and Security Agreement between
the Corporation and Petra to be dated on or about March 27, 1998, as
such Loan and Security Agreement may be amended or modified from
time to time, or (ii) Petra has consented in writing to such
redemption."
(b) Article FOURTH, Part D, Paragraph 4 of is hereby amended by adding to
the end thereof the following:
"4H. Subordination of Redemption Rights to Corporation's
Repayment of Petra Loan. Notwithstanding any other term and
condition of this paragraph 4, no redemption of any Series B Shares
shall be made until (i) the Corporation has paid in full all amounts
due and owing Petra Capital, LLC ("Petra") incurred by the
Corporation in connection with a Loan and Security Agreement between
the Corporation and Petra to be dated on or about March 27, 1998, as
such Loan and Security Agreement may be amended or modified from
time to time, or (ii) Petra has consented in writing to such
redemption."
(c) Article FOURTH, Part E, Paragraph 4 of is hereby amended by adding to
the end thereof the following:
"4H. Subordination of Redemption Rights to Corporation's
Repayment of Petra Loan. Notwithstanding any other term and
condition of this paragraph 4, no redemption of any Series C Shares
shall be made until (i) the Corporation has paid in full all amounts
due and owing Petra Capital, LLC ("Petra") incurred by the
Corporation in connection with a Loan and Security Agreement between
the Corporation and Petra to be dated on or about March 27, 1998, as
such Loan and Security Agreement may be amended or modified from
time to time, or (ii) Petra has consented in writing to such
redemption."
(d) Article FOURTH, Part F, Paragraph 4 of is hereby amended by adding to
the end thereof the following:
"4H. Subordination of Redemption Rights to Corporation's
Repayment of Petra Loan. Notwithstanding any other term and
condition of this paragraph 4, no redemption of any Series D Shares
shall be made until (i) the Corporation has paid in full all amounts
due and owing Petra Capital, LLC ("Petra") incurred
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<PAGE>
by the Corporation in connection with a Loan and Security Agreement
between the Corporation and Petra to be dated on or about March 27,
1998, as such Loan and Security Agreement may be amended or modified
from time to time, or (ii) Petra has consented in writing to such
redemption."
[SIGNATURES ON FOLLOWING PAGE]
60
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Assistant Secretary this 26th day of March, 1998.
HEALTHGATE DATA CORP.
[CORPORATE SEAL]
By: /s/ William S. Reece
--------------------
William S. Reece, President
ATTEST:
By: /s/ Stephen M. Kane
-------------------
Stephen M. Kane
Assistant Secretary
61
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Section 242 of the General Corporation Law of the State
of Delaware, setting forth an amendment to the Corporation's Amended and
Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by a majority in
interest of each class of stockholders at a meeting held on May 22, 1998 in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation, as previously amended, is hereby further amended by deleting the
first paragraph of Article Fourth (said paragraph begins "The total number..."
and ends ".... to $1,046.67"), and inserting therefor the following two
paragraphs:
"FOURTH. The total number of shares of capital stock of all classes which
the Corporation shall have authority to issue is 20,004,667 shares, consisting
of 20,000,000 shares of Common Stock, $.01 par value per share, and 4,667 shares
of Preferred Stock, $.01 par value per share, amounting in the aggregate to
$200,046.67.
On the close of business on the day this amendment shall become effective
each share of this Corporation's Common Stock, par value $0.01 per share, issued
and outstanding immediately prior thereto (the "Old Stock") shall, ipso facto,
and without any action on the part of the holders of shares of Old Stock, be
changed, converted and reclassified into fifty (50) shares of Common Stock (the
"New Stock"); and as a result of such action, the Conversion Prices set forth in
Sections (C)(6B), (D)(6B), (E)(6B) and (F)(6B) of Article Fourth shall be
proportionally reduced as provided in each such sections."
[SIGNATURES ON FOLLOWING PAGE]
62
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Assistant Secretary this 22nd day of May, 1998.
HEALTHGATE DATA CORP.
[CORPORATE SEAL]
By: /s/ William S. Reece
--------------------
William S. Reece, President
ATTEST:
By: /s/ William S. Reece
--------------------
Stephen M. Kane
Assistant Secretary
63
<PAGE>
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HEALTHGATE DATA CORP.
HealthGate Data Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has duly adopted a
resolution, pursuant to Section 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Corporation's Amended
and Restated Certificate of Incorporation and declaring said amendment to be
advisable.
SECOND: That the stockholders of the Corporation have duly approved said
amendment by the required vote of such stockholders, adopted by the written
consent of a majority in interest of each class of stockholders in accordance
with Sections 228 and 242 of the General Corporation Law of the State of
Delaware. Prompt written notice of the adoption of the amendment herein
certified has been given to those stockholders who have not consented in writing
thereto, as provided in Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Corporation, as previously amended, is hereby further amended as follows:
(A) by deleting the first paragraph of Article Fourth
(said paragraph begins "The total number..." and
ends ".... to $200,046.67"), and inserting
therefor the following:
"FOURTH. The total number of shares of capital stock of all classes which
the Corporation shall have authority to issue is 20,834,629 shares, consisting
of 20,000,000 shares of Common Stock, $.01 par value per share, and 834,629
shares of Preferred Stock, $.01 par value per share, amounting in the aggregate
to $208,346.29."
(B) by adding a new Part G to Article Fourth as follows:
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"G. Redeemable Convertible Preferred Stock - Series E
1. Designation and Number.
1A. 829,962 shares of the authorized Preferred Stock of the Corporation are
hereby designated "Series E Redeemable Convertible Preferred Stock" (the "Series
E Preferred"). The shares of Series E Preferred are collectively referred to
herein as the "Series E Shares."
1B. The Series E Shares shall, with respect to dividend rights and rights on
liquidation, dissolution or winding up, rank senior to the Common Stock, the
Series A Shares, the Series B Shares, the Series C Shares, the Series D Shares
and any other class or series of capital stock of the Corporation issued
hereafter.
2. Dividends and Distributions.
2A. The holders of Series E Shares shall be entitled to receive dividends, out
of any assets legally available therefor, prior and in preference to any
declaration or payment of any dividend on any other class or series of capital
stock of the Corporation, at an annual rate of 7% per share, commencing on the
date of issuance of such Series E Share (the "Series E Original Issue Date").
Each of such dividends shall be fully cumulative, shall accrue on each share
from the Series E Original Issue Date of such share, and shall accrue thereafter
from day to day. All dividends hereunder shall be payable to holders of Series E
Shares only upon redemption of such shares pursuant to Section 4, conversion of
such shares pursuant to Section 6 or upon liquidation, dissolution or winding up
pursuant to Section 3. Any dividends payable with respect to any dividend period
of more or less than one year shall be computed on the basis of a 360-day year
and the actual number of days elapsed in that period. All accrued but unpaid
dividends shall compound annually at a rate of 7%.
2B. The Corporation shall not declare, pay or set apart for payment any dividend
on any other class or series of capital stock of the Corporation without the
affirmative vote of a majority of the holders of the outstanding Series E
Shares, voting separately as a single class.
2C. When and as any dividend or distribution is declared or paid by the
Corporation on the Common Stock at any time prior to the conversion of all of
the outstanding Series E Shares, whether payable in cash, property, securities
or rights to acquire securities, the holders of Series E Shares will be entitled
to participate with the holders of Common Stock in such dividend or distribution
as set forth in this paragraph 2C. At the time such dividends or distribution is
payable to the holders of Common Stock, the Corporation will pay each holder of
Series E Shares a portion of such dividend or distribution equal to the amount
of the dividend or distribution per share of Common Stock payable at such time
multiplied by the number of shares of Common Stock obtainable upon conversion of
such holder's Series E Shares.
2D. To the extent any dividends or distributions payable on any Series E Shares
are not paid, the amount of such dividends or distributions will be added to the
Liquidation Value of such Series E Shares and will remain a part thereof until
such dividends or distributions are paid. The
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provisions of this paragraph 2D shall not apply to dividends or distributions
payable in shares of Common Stock or in Options or Convertible Securities (as
defined in Section 6 of this Part G) or any other dividend or distribution, if
the declaration, distribution or payment thereof has resulted or will result in
an adjustment to the Conversion Price of Series E Shares under Section 6 of this
Part G.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, each holder of the Series E Shares will be entitled to be paid,
before any distribution or payment is made upon any shares of any other class or
series of capital stock of the Corporation, an amount in cash per share equal to
the Liquidation Value of such Series E Share outstanding, and the holders of the
Series E Shares will not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of Series E Shares are insufficient
to permit payment to such holders of the aggregate amounts which they are
entitled to be paid, then the entire assets to be distributed will be
distributed ratably among such holders. The Corporation will mail written notice
of such liquidation, dissolution or winding up, not less than 45 days prior to
the payment date stated therein, to each record holder of Series E Shares. The
consolidation or merger of the Corporation into or with any other corporation or
corporations, or the sale or transfer by the Corporation of all or substantially
all of its assets, or the reduction of the capital stock of the Corporation will
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this paragraph 3.
To the extent that the terms of this paragraph 3 conflict with or are different
from the plans of distribution set forth in paragraph 3 of Parts C, D, E and F
of this Article FOURTH, the terms of this paragraph 3 govern, and the terms of
paragraph 3 of Parts C, D, and E of this Article FOURTH are hereby deemed
amended and restated to conform to the plan of distribution set forth in this
paragraph 3.
4. Redemptions.
4A. Optional Redemption. Each outstanding Series E Share shall be redeemable, at
the option of the holder thereof, at any time within 180 days after (i) a Change
in Control or (ii) April 5, 2005, by written notice to the Corporation (a
"Redemption Notice"), requiring the Corporation to redeem out of funds legally
available therefor any or all outstanding Series E Shares held by such holder.
Notwithstanding any other provision of the Certificate of Incorporation of the
Corporation, no redemption payment with respect to any other class or series of
capital stock of the Corporation shall be made, and the Company shall have no
obligation to make any such payment, until the expiration of the period during
which the Series E Shares are redeemable pursuant to clause (ii) of this
paragraph.
If the funds of the Corporation legally available for redemption of the Series E
Shares on any applicable date are insufficient to redeem the total number of
Series E Shares presented for redemption on such date, those funds which are
legally available will be used to redeem the maximum possible number of Series E
Shares ratably among the Series E Shares presented for redemption. At any time
thereafter when additional funds of the Corporation are legally
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available for the redemption of Series E Shares, such funds will immediately be
used to redeem the balance of the Series E Shares which were presented for
redemption on such date but which were not redeemed.
4B. Redemption Price. For each Series E Share which is to be redeemed, the
Corporation will be obligated on the date of receipt of the Redemption Notice
therefor and surrender by such holder at the Corporation's principal office of
the certificate representing such Series E Share to pay an amount in immediately
available funds (the "Redemption Price") equal to the Liquidation Value thereof.
4C. Dividends After Redemption Date. No Series E Share is entitled to any
dividends declared after the date on which the Redemption Price of such Series E
Share is paid. On such date all rights of the holder of such Series E Share will
cease, and such Series E Share will not be deemed to be outstanding.
4D. Redeemed or Otherwise Acquired Redemption Series E Shares. Any Series E
Shares which are redeemed or otherwise acquired by the Corporation will be
cancelled and will not be reissued, sold or transferred.
To the extent that the terms of this Section 4 conflict with or are different
from the redemption terms set forth in Section 4 of Parts C, D, E and F of this
Article FOURTH, the terms of this Section 4 govern, and the terms of Section 4
of Parts C, D, E and F of this Article FOURTH are hereby deemed amended and
restated to conform to the redemption terms set forth in this Section 4.
5. Voting Rights.
5A. Each holder of Series E Shares will be entitled to notice of all
stockholders meetings in accordance with the Corporation's bylaws. Except as
otherwise provided herein or as provided by law, the holders of Series E Shares
will be entitled to vote with the holders of Common Stock upon all matters
submitted to stockholders for a vote, with each Series E Share representing the
number of votes equal to the number of shares of Common Stock into which each
Series E Share is convertible at the time of such vote.
5B. Notwithstanding subparagraph 5A, the affirmative vote of the holders of not
less than 66-2/3% of the outstanding shares of Series E Preferred, voting
separately as a single class, shall be necessary to authorize:
(i) the authorization of, or any increase in the authorized number of
shares of, or issuance of (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any debt
securities or any shares of any class or classes or series within a class of the
Corporation's capital stock ranking senior to or pari passu with (either as to
dividends or upon voluntary or involuntary liquidation, dissolution or winding
up) the Series E Shares;
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(ii) any increase in the authorized number of shares of, or, except as
expressly contemplated by the Series E Preferred Stock Purchase Agreement,
issuance (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) of any shares of Series E Preferred;
(iii) the sale, lease or exchange of any assets of the Corporation and/or
any Subsidiary representing in the aggregate more than 10% of the Corporation's
Consolidated Net Worth, except for sales in the ordinary course of business;
(iv) the merger or consolidation of the Corporation with or into any other
Person; or
(v) the acquisition (including pursuant to a merger or consolidation) by
the Corporation or any of its Subsidiaries of 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.
5C. The affirmative vote of a majority of the outstanding shares of Series E
Preferred, voting separately as a single class, shall be necessary for the
adoption or approval of an amendment to the Certificate of Incorporation of the
Corporation which would increase or decrease the par value of the Series E
Shares, or alter or change the powers, preferences or special rights of the
Series E Shares. However, no such amendment may be made, without the consent of
each holder of Series E Shares, which would:
(i) change the optional redemption dates of the Series E Shares;
(ii) reduce the Stated Value of the Series E Shares;
(iii) change the place or currency of payment of the Stated Value or
liquidation preference of, or dividend on, the Series E Shares;
(iv) impair the right to institute suit for the enforcement of any payment
on or with respect to any Series E Shares;
(v) adversely affect the right to convert the Series E Shares;
(vi) reduce the percentage of outstanding Series E Shares necessary to
modify or amend the terms thereof or to grant waivers; or
(vii) reduce the percentage of outstanding Series E Shares necessary to
modify or amend the Series E Preferred Stock Purchase Agreement or to grant any
waiver thereunder.
5D. If on any date (i) any dividend payable on the Series E Shares shall not
have been paid in full, (ii) the Corporation shall have breached in any material
respect any of the covenants, representations and warranties, or expense and
indemnity provisions set forth in the Series E Preferred Stock Purchase
Agreement (except for the covenant in Section 4.13 thereof) and such
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breach continues for a period of 45 days after notice in writing by the holders
of a majority of the Series E Shares, or (iii) the Corporation shall have failed
to satisfy its obligation to redeem Series E Shares pursuant to Section 4 above,
whether or not by reason of the absence of legally available funds therefor,
then, in each such case, (A) the number of directors constituting the Board of
Directors of the Corporation shall, without further action, be increased by such
number of directors that, when added to any director currently serving on the
Board of Directors who was nominated for election by the holders of a majority
of the Series E Shares, will constitute a majority of the entire Board of
Directors of the Corporation (the "Additional Directors"), and the holders of
Series E Shares shall have, in addition to the other voting rights set forth
herein, the exclusive right, voting separately as a single class, to elect the
Additional Directors who shall be in addition to the remaining directors; and
(B) the holders of Series E Shares shall be entitled to a quarterly cash
dividend at an annual rate per share of 2% of the Stated Value payable on each
March 31, June 30, September 30 and December 31, from the date of such failure
to pay, breach, or failure to redeem, as the case may be. In the case of any
increase in the size of the Board of Directors pursuant to this paragraph, the
Additional Directors shall continue as directors and such additional voting
rights shall continue, and in the case of any penalty dividend pursuant to this
paragraph, the penalty dividend shall continue, until such time as (A) all
dividends accumulated on the Series E Shares shall have been paid in full, (B)
such breach shall have been cured, or (C) any redemption obligation provided in
Section 4 which has become due shall have been satisfied, subject to revesting
in the event of each and every subsequent event of the character indicated
above.
5E. If on any date the Corporation shall have breached the covenant in Section
4.13 of the Series E Preferred Stock Purchase Agreement, and such breach
continues for seven days after notice in writing by the holders of a majority of
the outstanding Series E Shares (provided that such cure period shall no longer
apply after such covenant shall have previously been breached and notice of such
breach has been delivered to the Company on at least two separate occasions),
holders of Series E Shares shall have the right to sell to the Corporation, at
the Put Price Per Share (as defined below), all of the Series E Shares owned by
holders of Series E Shares at the time of such breach or any portion thereof
(the "Put Securities"), and the Corporation shall be required to purchase such
Put Securities at the Put Price Per Share. The "Put Price Per Share" shall mean
the greater of (i) the Fair Market Value of a share of Common Stock as of the
day before the date of such breach, or (ii) the Stated Value per share plus an
amount constituting a 20.00% compound annual rate of return on each Series E
Share, calculated from the Series E Original Issue Date.
5F. (i) The foregoing rights of holders of Series E Shares to take any actions
as provided in this Section 5 may be exercised at any annual meeting of
stockholders or at a special meeting of stockholders held for such purpose as
hereinafter provided or at any adjournment thereof or by written consent of the
holders of the number of Series E Shares required to authorize such action at an
annual or special meeting of stockholders.
(ii) At each meeting of stockholders at which the holders of Series E
Shares shall have the right, voting separately as a single class, to take any
actions as provided in this Section 5, the presence in person or by proxy of the
holders of record of one-third of the total
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number of Series E Shares then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum of the holders of
Series E Shares. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of Series E
Shares shall not prevent the election of directors other than
those to be elected by the holders of Series E Shares and the
absence of a quorum of the holders of shares of any other
class or series of capital stock shall not prevent the taking
of any action as provided in this Section 5; and
(B) in the absence of a quorum of the holders of Series
E Shares, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting
as to the actions to be taken by the holders of Series E
Shares from time to time and place to place without notice
other than announcement at the meeting until a quorum shall be
present.
For the taking of any action as provided in this Section 5 by the holders
of Series E Shares, except as provided in subparagraph 5A, each such holder
shall have one vote for each Series E Share standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day next preceding
the day on which notice is given, or if notice is waived, at the close of
business on the Business Date next preceding the day on which the meeting is
held.
6. Conversion.
6A. Conversion Procedure.
(i) At any time any holder of Series E Shares may convert all or any
portion of the Series E Shares (including any fraction of a Series E Share) held
by such holder into a number of shares of Common Stock computed by multiplying
each Series E Share to be converted by the Liquidation Value of such Series E
Share and dividing the result by the Conversion Price then in effect.
(ii) Each conversion of Series E Shares will be deemed to have been
effected as of the close of business on the date on which the certificate or
certificates representing the Series E Shares to be converted have been
surrendered at the principal office of the Corporation or its transfer agent, if
any, provided that any such surrender must occur by 3:00 P.M. local time. At
such time as such conversion has been effected, the rights of the holder of such
Series E Shares as such holder will cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been effected (but in any
event within
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seven Business Days in the case of subparagraph (a) below), the Corporation will
deliver to the converting holder:
(a) a certificate or certificates representing the number of shares
of Common Stock issuable by reason of such conversion in such name or names and
such denomination or denominations as the converting holder has specified;
(b) the amount payable under subparagraph (vi) below with respect to
such conversion; and
(c) a certificate representing any Series E Shares which were
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of Series E Shares will be made without charge to the holders of such
Series E Shares for any issuance tax in respect thereof or other cost incurred
by the Corporation in connection with such conversion and the related issuance
of shares of Common Stock. Upon conversion of each Series E Share, the
Corporation will take all such actions as are necessary in order to ensure that
the Common Stock issuable with respect to such conversion will be validly
issued, fully paid and nonassessable.
(v) The Corporation will not close its books against the transfer of
Series E Shares or of Common Stock issued or issuable upon conversion of Series
E Shares in any manner which interferes with the timely conversion of the Series
E Shares.
(vi) If any fractional interest in a share of Common Stock would, except
for the provisions of this subparagraph (vi), be deliverable upon any conversion
of Series E Shares, the Corporation, in lieu of delivering the fractional share
therefor, will pay an amount to the holder thereof equal to the Market Price of
such fractional interest as of the date of conversion.
6B. Conversion Price.
(i) The initial Conversion Price of the Series E Preferred will be
$11.4463. In order to prevent dilution of the conversion rights granted
hereunder, the Conversion Price will be subject to adjustment from time to time
pursuant to this Section 6; provided, however, that notwithstanding the
foregoing, no adjustment to the Conversion Price will be made or considered
under this Section 6 with respect to the issuance of shares of Common Stock upon
the exercise of convertible securities, options, warrants and other rights which
were outstanding or issuable under the Company's 1994 Stock Option Plan as of
April 5, 1999 and disclosed in the Schedules to the Series E Preferred Stock
Purchase Agreement.
(ii) If and whenever after April 5, 1999, the Corporation issues or sells,
or in accordance with paragraph 6C of this Part G is deemed to have issued or
sold, any share of Common Stock for a consideration per share less than the
Applicable Price in effect immediately
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prior to such time, except as provided in paragraph 6B(i) of this Part G, then
forthwith upon such issue or sale the Conversion Price will be reduced to the
Conversion Price determined by multiplying the Conversion Price in effect
immediately prior to such issue or sale by a fraction, the numerator of which
shall be equal to the sum of (1) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale plus (2) the number of
shares of Common Stock which would have been issued in exchange for the
aggregate consideration received by the Corporation upon such issue or sale if
such shares had been issued or sold at the Applicable Price, and the denominator
of which shall be the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale.
6C. Effect on Conversion Price of Certain Events. For purposes of determining
the adjusted Conversion Price under paragraph 6B of this Part G, the following
will be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner grants
any right or option to subscribe for or to purchase Common Stock or any stock or
other securities convertible into or exchangeable for Common Stock, including
all Series E Shares outstanding at the time (such rights or options being herein
called "Options" and such convertible or exchangeable stock or securities being
herein called "Convertible Securities") and the price per share for which Common
Stock is issuable upon the exercise of any such Options or upon conversion or
exchange of any such Convertible Securities is less than the Applicable Price in
effect immediately prior to the time of the granting of such Option, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Option or upon conversion or exchange of the total maximum amount of such
Convertible Security issuable upon the exercise of such Option will be deemed to
be outstanding and to have been issued and sold by the Corporation for such
price per share. For purposes of this subparagraph 6C(i), the "price per share
for which Common Stock is issuable" will be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of such Options, plus in
the case of such Options which are related to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of the Conversion Price will be made upon
the actual issuance of such Common Stock or of such Convertible Security upon
the exercise of such Options or upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Security.
(ii) Issuance of Convertible Securities. If the Corporation in any manner
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange thereof is less than the
Applicable Price in effect immediately prior to the time of such issue or sale,
then forthwith upon such issue or sale the Conversion Price will be reduced as
set forth in subparagraph 6B(ii) of this Part G. For purposes of determining the
new Conversion Price, the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be deemed to be
outstanding and to have been issued
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and sold by the Corporation for such price per share. For purposes of this
subparagraph 6C(ii), the "price per share for which Common Stock is issuable"
will be determined by dividing (A) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price will be made upon the actual issuance of Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issuance
or sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 6, no further adjustment of the Conversion
Price will be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration (if any) payable upon
the issue, conversion or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exchangeable for Common
Stock change at any time, the Conversion Price in effect at the time of such
change will be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or charged
conversion rate, as the case may be, at the time initially granted, issued or
sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
Upon the expiration of any Option or the termination of any right to convert or
exchange any Convertible Security without the exercise of any such Option or
right, the Conversion Price then in effect hereunder will be adjusted to the
Conversion Price which would have been in effect at the time of such expiration
or termination had such Option or Convertible Security, to the extent
outstanding immediately prior to such expiration or termination, never been
issued.
(v) Calculation of Consideration Received. If any Common Stock, Option or
Convertible Security is issued or sold or deemed to have been issued or sold for
cash, the consideration received therefor will be deemed to be the gross amount
received by the Corporation therefor. In case any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation will be
the fair value (as defined infra) of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Option or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities will be determined in good faith jointly by the Corporation
and the holders of a majority of the outstanding Series E Shares. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration will be determined by an independent appraiser
jointly selected by the Corporation
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and the holders of a majority of the outstanding Series E Shares.
(vi) Integrated Transactions. In case any Option is issued in connection
with the issue or sale of other securities of the Corporation, together
comprising one integrated transaction in which no specific consideration is
allocated to such Option by the parties thereto, the Option will be deemed to
have been issued for a consideration to be determined pursuant to the procedures
set forth in subparagraph 6C(v) of this Part G.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at
any given time does not include shares owned or held by or for the account of
the Corporation or any Subsidiary, and the disposition of any shares so owned or
held will be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of the holders of
Common Stock for the purpose of entitling them (a) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be; provided that if such dividend, distribution or subscription is not
ultimately consummated, no adjustment will be made to the Conversion Price
hereunder or, if so made, such adjustment will be rescinded.
6D. Subdivision or Combination of Common Stock. If the Corporation at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced, and if the Corporation at any time
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
6E. Reorganization, Reclassification, Consolidation, Merger or Sale. Any capital
reorganization, reclassification, consolidation, merger or sale of all or
substantially all of the Corporation's assets to another Person which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
Organic Change. Prior to the consummation of any Organic Change, the Corporation
will make appropriate provisions (in form and substance satisfactory to the
holders of a majority of the Series E Shares then outstanding) to ensure that
each of the holders of Series E Shares will thereafter have the right to acquire
and receive, in lieu of or in addition to the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Series E Shares, such shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such holder had
converted his or her Series E Shares immediately prior to such Organic Change.
In any such case, the Corporation will make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the
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Series E Shares then outstanding) to ensure that the provisions of this Section
6 and Section 7 of this Part G will thereafter be applicable to the Series E
Shares (including, in the case of any such consolidation, merger or sale in
which the successor corporation or purchasing corporation is other than the
Corporation, an immediate adjustment of the Conversion Price to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and a corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series E Shares, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series E Shares then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6F. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 6 but not expressly provided for by such provisions,
then the Corporation's Board of Directors will make an appropriate adjustment in
the Conversion Price so as to protect the rights of the holders of Series E
Shares; provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of shares
of Common Stock issuable upon conversion of each Series E Share.
6G. Notices.
(i) Within ten Business Days of any adjustment of the Conversion Price,
the Corporation will give written notice thereof to all holders of Series E
Shares.
(ii) The Corporation will give written notice to all holders of Series E
Shares at least 20 days prior to the date on which the Corporation closes its
books or takes a record (a) with respect to any dividend or distribution upon
Common Stock, (b) with respect to any pro rata subscription offer to holders of
Common Stock or (c) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Corporation will also give written notice to the holders of
Series E Shares at least 20 days prior to the date on which any Organic Change
will take place. 6H. Mandatory Conversion. The Corporation may at any time
require the conversion of all of the outstanding Series E Shares if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering (as defined in the Series E Preferred Stock Purchase Agreement). Any
such mandatory conversion shall only be effected at the time of and subject to
the closing of the sale of such shares pursuant to such Public Offering and upon
written notice of such mandatory conversion delivered to all holders of Series E
Shares prior to such closing.
7. Purchase Rights. If at any time the Corporation grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of
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Series E Shares will be entitled to acquire at the time of conversion of Series
E Shares by such holder (based on the number of shares of Common Stock issued
upon such conversion), upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon conversion of such
holder's Series E Shares immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights; provided,
however, that holders of Series E Shares shall not be entitled to any Purchase
Rights under this Section 7 if such holders have received their pro rata share
of such Purchase Rights as a dividend or distribution under subparagraph 2A of
this Part G or have received an adjustment in the Conversion Price of the Series
E Shares under Section 6 of this Part G with respect to the issuance of such
Purchase Rights.
8. Registration of Transfer. The Corporation will keep at its principal office a
register for the registration of Series E Shares. Upon the surrender of any
certificate representing Series E Shares at such place, the Corporation will, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of Series E Shares represented
by the surrendered certificate. Each such new certificate will be registered in
such name and will represent such number of Series E Shares as is requested by
the holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate.
9. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Series E Shares, and in the case of any such loss, theft or
destruction, upon receipt of indemnity satisfactory to the Corporation (provided
that if the holder is an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
mutilated certificate, the Corporation will (at the holder's expense) execute
and deliver in lieu of such certificate a new certificate of identical tenor
representing the number of Series E Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
10. Definitions. As used in Part G of this Article FOURTH, the following terms
shall have the following meanings:
"Applicable Price" shall mean the greater of (x) $11.4463 per share
(subject to adjustment for stock dividends, stock splits,
reclassifications and other transactions which require an adjustment
pursuant to Section 6) and (y) the Market Price.
"Affiliate" has 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.
"beneficial owner" has the meaning given to such term in Rule 13d-3
under the
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Exchange Act, and the terms "beneficially own" and "beneficial ownership"
shall have the correlative meanings.
"Business Day" shall mean any day other than a Saturday, Sunday, or
a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Change in Control" shall mean (i) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership (with the meaning of
Rule 13d-3 promulgated under the Exchange Act), in one transaction or a
series of related transactions, of securities which result in such
individual, entity or group having beneficial ownership of 35% or more of
the Common Stock; (ii) a sale of all or substantially all of the assets of
the Corporation and its Subsidiaries taken as a whole; (iii) a merger or
consolidation of the Company with any Person, if as a result of such
merger or consolidation the stockholders of the Company immediately prior
to such transaction do not own at least a majority of the voting power in
the election of directors of the surviving company or its parent entity;
or (iv) any stockholder of the Corporation who owned more than 5% of the
outstanding shares of Common Stock on a fully diluted basis as of April 5,
1999 shall have sold or otherwise disposed, except for a Permitted
Transfer, of more than 25% of such shares (as adjusted for stock splits,
stock dividends, recapitalizations and similar transactions) in the
aggregate in one or more transactions.
"Commission" means the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other
federal securities laws.
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and for purposes other than the conversion of the Series E
Shares into Common Stock, includes any capital stock of any class of the
Corporation hereafter authorized which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon
any liquidation, dissolution or winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus
the number of shares of Common Stock deemed to be outstanding pursuant to
paragraph 6C.
"Consolidated Net Worth" shall mean the consolidated stockholders'
equity of the Corporation determined in accordance with generally accepted
accounting principles consistently applied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time. Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of
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any such successor federal statute.
"Fair Market Value" of the Common Stock or any other property means
the fair market value of such Common Stock or other property as determined
(unless expressly otherwise provided herein) by mutual agreement between
the Corporation and the holders of not less than a majority of the Series
E Shares or, if the parties are unable to agree, as determined by a
nationally recognized independent investment banking firm selected by
mutual agreement between the Corporation and the holders of not less than
a majority of the Series E Shares.
"GE" shall mean GE Capital Equity Investments, Inc., a Delaware
corporation.
"Liquidation Value" as of any date shall mean an amount per share
equal to the Stated Value, plus all accrued dividends thereon.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 21 days consisting of the day as of which
"Market Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Market Price" will be the Fair Market Value thereof.
"Permitted Transfer" shall mean any assignment, transfer or other
disposition (i) by an individual stockholder to such stockholder's spouse,
child, parent, siblings, and descendants, whether natural or adopted
(collectively, "Relatives") or to or among a trust of which there are no
principal beneficiaries other than one or more Relatives of such
stockholder; and (ii) by any stockholder to any of its Affiliates or
partners.
"Person" shall mean any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise)
of such entity.
"Preferred Stock" shall mean and include the Series A Shares, the
Series B Shares, the Series C Shares, the Series D Shares, the Series E
Shares and any other series of preferred stock hereafter designated by the
Corporation.
"Public Offering" shall have the meaning set forth in the Series E
Preferred Stock Purchase Agreement.
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"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Series E Original Issue Date" shall mean, as to any Series E Share,
the date on which such share is sold and issued by the Corporation.
"Series E Preferred Stock Purchase Agreement" shall mean the stock
purchase agreement by and between the Corporation, GE Capital Equity
Investments, Inc. and Blackwell Science, Ltd., dated on or about April 5,
1999.
"Stated Value" shall mean $11.4463 per share.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
11. Amendment and Waiver. No amendment, modification or waiver will be binding
or effective with respect to any provision of this Part G of this Article FOURTH
of this Amended and Restated Certificate of Incorporation without the prior
written consent of the holders of a majority of the Series E Shares outstanding
at the time such action is taken or such greater percentage as may be required
by any other provision of this Part G.
12. Notices. Except as otherwise expressly provided, all notices referred to
herein will be in writing and will be delivered by registered or certified mail,
return receipt requested, postage prepaid and will be deemed to have been given
when so mailed (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated in writing by any such
holder)."
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IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be affixed
hereto and this Certificate of Amendment to be signed by its President and
attested by its Assistant Secretary this 2nd day of April, 1999.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece
President
Attest:
By: /s/ Stephen M. Kane
-------------------
Stephen M. Kane
Assistant Secretary
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Exhibit 3.4
HEALTHGATE DATA CORP.
(formerly known as MEDICAL DATA INTERFACE DESIGN, INC.)
AMENDED AND RESTATED BYLAWS
(includes 10/12/95 Amendment)
ARTICLE I
OFFICES
SECTION 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other places,
both within and without the State of Delaware, as the Board of Directors may
from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of
directors shall be held at such place, either within or without the State of
Delaware, as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice or waiver of notice of such meeting.
SECTION 2. The Annual Meeting of the stockholders for the election of
directors and for the transaction of any other proper business, shall be held on
the fourth Tuesday of April, or on such other day as may be fixed by the Board
of Directors in each year commencing with the fiscal year 1995.
SECTION 3. Written notice of the Annual Meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
SECTION 4. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise provided by statute or by the certificate of
incorporation, may be called by the president or the secretary and shall be
called by the president or secretary at the request in writing of a majority of
the Board of Directors or at the request in writing of the holders of not less
than twenty-five percent of the shares of common stock of the corporation issued
and outstanding and entitled to vote at such meeting. Any such request shall
state the purpose or purposes of the proposed meeting.
SECTION 5. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
<PAGE>
SECTION 6. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 7. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 8. At each meeting of the stockholders, except as otherwise
provided by statute or by the certificate of incorporation, the holders of a
majority of the issued and outstanding shares of each class of stock entitled to
vote thereat, present in person or represented by proxy, shall be necessary and
sufficient to constitute a quorum for the transaction of business. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the quorum shall be
present or represented. At any such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting in accordance with the original notice. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 9. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the shares of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes or of the certificate of incorporation or of these by-laws a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
SECTION 10. At each meeting of the stockholders, each stockholder
shall, unless otherwise provided by the certificate of incorporation, be
entitled to one vote in person or by proxy for each share of stock held by him
which has voting power upon the matter in question, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
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SECTION 11. Any action required to be taken, or any action which may be
taken, at any annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by (a) the holders
of the outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted, and (b) a majority in
interest of the holders of each outstanding series of the Corporation's
securities. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and shall be delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. The number of directors which shall constitute the whole
board initially shall be two and thereafter shall be such as from time to time
may be fixed by resolution of the Board of Directors at a duly held regular or
special meeting, but in no case shall the number be less than one.
SECTION 2. Directors shall, except as otherwise required or provided by
statute, the certificate of incorporation or these bylaws, be elected by a
majority of the votes cast at a meeting of the stockholders by the holders of
shares entitled to vote in the election.
SECTION 3. Any director may resign at any time by giving written notice
to the president or the secretary. The resignation of any director shall take
effect at the time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 4. Any director may be removed, either with or without cause,
at any time by the affirmative vote of the holders of record of a majority of
the outstanding shares of stock entitled to vote in the election of directors,
at a special meeting of the stockholders called for the purpose; and the vacancy
in the Board of Directors caused by any such removal may be filled by the
stockholders as set forth in Section 2 of this Article at such meeting.
SECTION 5. Except as set forth in Section 4 of this Article, vacancies
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by a majority of the directors then in office
although less than a quorum or by a sole remaining director.
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SECTION 6. After each annual election of directors and on the same day,
the Board of Directors may meet for the purposes of organization, the election
of officers and the transaction of other business at the place where regular
meetings of the Board of Directors are held. Notice of such meeting need not be
given. Such meeting may be held at any other time or place which shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors or in a consent and waiver of notice thereof signed by all
the directors.
SECTION 7. Regular meetings of the Board of Directors may be held at
such places and at such times as the board shall by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at such place at the same hour and on the next succeeding
business day not a legal holiday. Notice of regular meetings need not be given.
SECTION 8. Special meetings of the Board of Directors shall be held
whenever called by the president or the secretary or any two of the directors.
Notice of each such meeting shall be mailed to each director, addressed to each
director at each director's residence or usual place of business, at least five
days before the day on which the meeting is to be held, or shall be sent to each
director by telegraph, cable or wireless so addressed, or shall be delivered
personally or by telephone, at least 24 hours before the time the meeting is to
be held. Each such notice shall state the time and place of the meeting but need
not state the purposes thereof, except as otherwise provided by statute or by
these bylaws. Notice of any meeting of the board need not be given to any
director who shall be present at such meeting; and any meeting of the board
shall be a legal meeting without any notice thereof having been given, if all of
the directors then in office shall be present thereat.
SECTION 9. Except as otherwise provided by statute or by these bylaws,
a majority of the directors then in office shall be required to constitute a
quorum for the transaction of business at any meeting, and the affirmative vote
of a majority of the directors present at the meeting shall be necessary for the
adoption of any resolution or the taking of any other action. In the absence of
a quorum, the director or directors present may adjourn any meeting from time to
time until a quorum is obtained. Notice of any adjourned meeting need not be
given.
SECTION 10. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all members of the board or of such committee, as the case may be,
consent thereto in writing and such written consent is filed with the minutes or
proceedings of the board or such committee.
SECTION 11. Nothing herein contained shall be construed so as to
preclude any director from serving the corporation in any other capacity, or
from serving any of its stockholders, subsidiaries or affiliated corporations in
any capacity, and receiving compensation therefor.
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ARTICLE IV
NOTICES
SECTION 1. Whenever under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be necessary that personal notice
be given, and such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegraph, cable or wireless, and
such notice shall be deemed to be given when the same shall be filed. Notice to
directors may also be given in person or by telephone, and such notice shall be
deemed to be given when the same shall be delivered.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be a president, one or
more vice presidents, a secretary, a treasurer, and, if the board shall so
determine, such other subordinate officers as may be appointed by the Board of
Directors. Any two or more offices may be held by the same person.
SECTION 2. The officers shall be elected annually by the Board of
Directors, and except in the case of officers appointed in accordance with the
provisions of Section 3 of this Article, each shall hold office until the next
annual election of officers and until his or her successor shall have been
elected and qualified, unless his or her death, resignation or removal from
office, in the manner hereinafter provided, shall earlier occur.
SECTION 3. In addition to the officers named in Section 1 of this
Article, the corporation may have such other officers and agents as may be
deemed necessary or desirable by the Board of Directors. Such other officers and
agents shall be appointed in such manner, have such duties and hold their
offices for such terms as may be determined by resolution of the Board of
Directors.
SECTION 4. Any officer may resign at any time by giving written notice
of his or her resignation to the Board of Directors, to the president or to the
secretary of the corporation. Any such resignation shall take effect at the time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
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SECTION 5. Any officer may be removed, either with or without cause, by
action of the Board of Directors.
SECTION 6. A vacancy in any office because of death, resignation,
removal or any other cause shall be filled for the unexpired portion of the term
in the manner prescribed in these bylaws for election or appointment to such
office.
SECTION 7. The president shall have direct charge of the business of
the corporation, subject to the general control of the Board of Directors, and
shall be the chief executive officer of the corporation unless the chairman of
the Board of Directors is designated chief executive officer by the board.
SECTION 8. In the event of the absence or disability of the president,
the vice president, or, in case there shall be more than one vice president, the
vice president designated by the Board of Directors, shall perform all of the
duties of the president, and when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the president. Except where by law the
signature of the president is required, each of the vice presidents shall
possess the same power as the president to sign all certificates, contracts,
obligations and other instruments of the corporation. Any vice president shall
perform such other duties and may exercise such other powers as from time to
time may be assigned to such vice president by these bylaws or by the Board of
Directors or by the president.
SECTION 9. The secretary of the corporation, if present, shall act as
secretary of, and keep the minutes of, all the proceedings of the meeting of the
stockholders and of the Board of Directors and of any committee of the Board of
Directors in one or more books to be kept for that purpose; shall perform such
other duties as shall be assigned to the secretary by the president or the Board
of Directors; and, in general, shall perform all duties incident to the office
of secretary.
SECTION 10. If required by the Board of Directors, the treasurer shall
give a bond for the faithful discharge of the duties of treasurer, in such sum
and with such surety or sureties as the Board of Directors shall determine. The
treasurer shall keep or cause to be kept full and accurate records of all
receipts and disbursements in the books of the corporation and shall have the
care and custody of all funds and securities of the corporation. The treasurer
shall disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president and directors, whenever they request
it, an account of all transactions as treasurer and shall perform such other
duties as may be assigned to the treasurer by the president or the Board of
Directors; and, in general, shall perform all duties incident to the office of
treasurer.
SECTION 11. The salaries of the officers shall be fixed from time to
time by the Board of Directors. Nothing contained herein shall preclude any
officer from serving the corporation in any other capacity, including that of
director, or from serving any of the corporation's stockholders, subsidiaries
or affiliated corporations in any capacity, and receiving compensation
therefor.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS, DEPOSITS, ETC.
SECTION 1. All contracts and agreements authorized by the Board of
Directors, and all checks, drafts, bills of exchange or other orders for the
payment of money, issued in the name of the corporation, shall be signed by such
person or persons and in such manner as may from time to time be designated by
the Board of Directors, which designation may be general or confined to specific
instances; and unless so designated by the Board of Directors or in these
bylaws, no officer, agent or employee shall have any power or authority to bind
the corporation by any contract or engagement or to pledge its credit or to
render it liable pecuniarily for any purpose or for any amount.
SECTION 2. No loan shall be contracted on behalf of the corporation,
and no evidence of indebtedness shall be issued in its name, unless authorized
by the Board of Directors. Such authorization may be general or confined to
specific instances. Loans so authorized by the Board of Directors may be
effected at any time for the corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds, debentures,
notes and other obligations or evidences of indebtedness of the corporation
issued for such loans shall be made, executed and delivered as the Board of
Directors shall authorize. When so authorized by the Board of Directors any part
of or all the properties, including contract rights, assets, business or good
will of the corporation, whether then owned or thereafter acquired, may be
mortgaged, pledged, hypothecated or conveyed or assigned in trust as security
for the payment of such bonds, debentures, notes and other obligations or
evidences of indebtedness of the corporation, and of the interest thereon, by
instruments executed and delivered in the name of the corporation.
SECTION 3. All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as the Board of Directors may select. The
Board of Directors may make such special rules and regulations with respect to
such bank accounts not inconsistent with the provisions of these bylaws, as it
may deem expedient. For the purpose of deposit and for the purpose of collection
for the account of the corporation, checks, drafts and other orders for the
payment of money which are payable to the order of the corporation shall be
endorsed, assigned and delivered by such person or persons and in such manner as
may from time to time be designated by the Board of Directors.
SECTION 4. Unless otherwise provided by resolution adopted by the Board
of Directors, the president or any vice president may from time to time appoint
an attorney or attorneys, or an agent or agents, to exercise in the name and on
behalf of the corporation the powers and rights which the corporation may have
as the holder of stock or other securities in any other corporation to vote or
to consent in respect of
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such stock or other securities; and the president or any vice president may
instruct the person or persons so appointed as to the manner of exercising
such powers and rights and the president or any vice president may execute or
cause to be executed in the name and on behalf of the corporation and under
its corporate seal, or otherwise, all such written proxies, powers of
attorney or other written instruments as such officer may deem necessary in
order that the corporation may exercise such powers and rights.
ARTICLE VII
SHARES AND THEIR TRANSFER
SECTION 1. Every stockholder shall be entitled to have a certificate
certifying the number of shares of stock of the corporation owned by such
stockholder, signed by, or in the name of the corporation by the president or a
vice president and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation (except that when any such
certificate is countersigned by a transfer agent other than the corporation or
its employee, the signatures of any such officers may be facsimiles). If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the designation, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the corporation shall issue to represent such class or
series of stock, provided that, except in the case of restrictions on transfers
of securities which are required to be noted on the certificate, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
SECTION 2. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen, or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or such
owner's legal representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 3. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation, subject to the provisions of Section 1 above, to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
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SECTION 4. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the
adjournment meeting.
SECTION 5. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SECTION 2. The corporate seal shall be in such form or forms as from
time to time may be adopted by the Board of Directors.
ARTICLE IX
AMENDMENTS
SECTION 1. These bylaws may be altered or repealed at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
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Exhibit 4.2
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of March 16, 1995 is made between Medical Data
Interface Design, Inc., a Delaware corporation (the "Company") and David
Friend and William G. Nelson (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Purchase
Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of
the Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing six months
after the closing of a public offering of the Company's Common Stock pursuant
to a registration statement filed under the Securities Act, the holders of
at least 40% of the Registrable Securities may request registration under the
Securities Act of all or part of their Registrable Securities on Form S-1 or
any similar or successor long-form registration ("Long-Form Registrations"),
and the holders of at least 25% of the Registrable Securities may request
registration under the Securities Act of all or part of their Registrable
Securities on Form S-3 or any similar or successor short-form registration
("Short-Form Registrations"), if a Short-Form Registration is then available
to the Company. Within twenty business days after receipt of any such
request, the Company will give written notice of such requested registration
to all other holders of Registrable Securities and will include in such
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the
receipt of the Company's notice. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations".
(b) LONG-FORM REGISTRATION. The holders of Registrable Securities
will be entitled to request one Long-Form Registration in which the Company
will pay all Registration Expenses; provided that the aggregate offering
value of the Registrable Securities
<PAGE>
requested to be registered in the Long-Form Registration must equal at least
$1,000,000 and each Long-Form Registration shall be underwritten on a best
efforts basis. A registration will not count as a Long-Form Registration
until it has become effective unless discontinued at the request of the
holders of the Registrable Securities included therein.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to paragraph 1(b), the holders of Registrable
Securities will be entitled to request not more than two Short-Form
Registrations in which the Company will pay all Registration Expenses;
provided that the offering value of the Registrable Securities requested to
be registered in any Short-Form Registration shall be at least $1,000,000 and
not more than one Short-Form Registration may be effected in any calendar
year. Demand Registrations will be Short-Form Registrations whenever the
Company is permitted to use any applicable short form. Once the Company has
become subject to the reporting requirements of the Securities Exchange Act,
the Company will use its best efforts to make Short-Form Registrations
available for the sale of Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not include
in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority of the
Registrable Securities requesting such registration. If a Demand Registration
is an underwritten offering, and the managing underwriters advise the Company
in writing that in their opinion the number of Registrable Securities and
other securities requested to be included exceeds the number of Registrable
Securities and other securities which can be sold in such offering, the
Company will include in such registration prior to the inclusion of any
securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold, pro rata among the respective holders on the basis of the amount
of Registrable Securities owned. Any persons other than the holders of
Registrable Securities who participate in Demand Registrations must pay their
share of the Registration Expenses as provided in paragraph 5 unless
otherwise agreed to by the Company's board of directors.
(e) RESTRICTIONS. If at the time of any request to register
Registrable Securities pursuant to this paragraph 1, the Company
(i) has filed, or has definite plans to file within 90 days
after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
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(ii) is engaged in any other activity which, in the good faith
determination of the Company's board of directors, would be adversely
affected by the requested registration to the material detriment of the
Company,
then the Company's board of directors may at its option direct that such
request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
activity, as the case may be, and such right to delay a requested
registration may not be exercised by the Company more than once in any
12-month period. If the holders of Registrable Securities included therein
elect to discontinue a delayed registration, the Company will pay all of the
Registration Expenses in connection therewith, and such registration will not
count as one of the permitted Demand Registrations. The Company will not in
any event be obligated to effect any demand Registration within six months
after the effective date of a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities included in any Demand Registration will have the
right to select investment banker(s) and manager(s) to administer the
offering , subject to the Company's approval which will not be unreasonably
withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement
and subject to the provisions of Section 8 herein, the Company will not grant
to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into
or exercisable for such securities, without the written consent of the
holders of a majority of the Registrable Securities; provided that the
Company may grant rights to other Persons to participate in Piggyback
Registrations so long as such rights are subject to the provisions of
paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the Securities Act (other than pursuant to a
Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the
Company will give prompt written notice to all holders of Registrable
Securities of its intention to effect such a registration and will include in
such registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 15 days
after the Company gives its notice.
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(b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Company which is an initial public offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number
of shares owned by such holders, and (iii) third, other securities requested
to be included in such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company
which is not an initial public offering, or a secondary registration on
behalf of holders of the company's securities, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
required to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i)
first, the securities requested to be included therein by the holders
requesting such registration and (ii) second, the Registrable Securities and
other securities requested to be included in such registration, pro rata
among the holders of such securities on the basis of the number of securities
so requested to be included therein.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous
registration has not been withdrawn or abandoned, the Company will not file
or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable for
its equity securities under the Securities Act (except on Form S-8 or any
successor form), whether on its own behalf or at the request of any holder or
holders of such securities, until a period of at least three months has
elapsed from the effective date of such previous registration, except in the
case that the registration is a firm commitment underwriting, in which event
the restrictions contained in this paragraph 2(e) will terminate upon the
closing of such firm commitment underwriting.
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3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 180-day period beginning
on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration) unless the
underwriters managing such registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior
to and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
in which Registrable Securities are included (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form) unless the underwriters managing such registered public
offering otherwise agree, and (ii) to use its best efforts to cause each
Person who holds at least 10% of the Common Stock of the Company (on a
fully-diluted basis), acquired at any time after the date of this Agreement
(other than in a registered public offering), to agree not to effect any
public sale or distribution of any such securities during such period (except
as part of such underwritten registration, if otherwise permitted) unless the
underwriters managing such registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company will use its best efforts to effect
the registration and the sale of such Registrable Securities in accordance
with the intended method of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities, and use
its best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered
by such registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel);
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(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 90 days and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided, that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
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(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the holders
of a majority of the Registrable Securities being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities; and
(i) make available for inspection by any seller of such Registrable
Securities, any underwriter participating in any disposition pursuant to
this Agreement, and any attorney, accountant or other agent retained by any
such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company with
all information and copies of all documents reasonably necessary to effect
such registration in compliance with the Securities Act and the rules and
regulations thereunder and shall otherwise cooperate with the Company and its
counsel in expediting the effectiveness of any such registration.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions and excluding
legal fees and disbursements of any counsel for the holders of Registrable
Securities) and other Persons retained by the Company (all such expenses
being herein called "Registration Expenses") will be borne as provided in
this Agreement, except that the Company will, in any event, pay its internal
expenses (including without limitation all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange
on which similar securities issued by the Company are then listed.
(b) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration
hereunder will pay those Registration Expenses allocable to the registration
of such holder's securities so
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<PAGE>
included, and any Registration expenses not so allocable will be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, such holder's officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained
in any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning
of the Securities Act) to the same extent as provided above with respect to
the indemnification of the holders of Registrable Securities; provided that
such underwriters indemnify the Company to the same extent as provided in
subparagraph (b) below with respect to the indemnification of the Company by
the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to
the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission or
alleged untrue statement or om omission is contained in any information or
affidavit so furnished in writing by such holder; provided, that
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the obligation to indemnify will be several, not joint and several, among
such holders of Registrable Securities participating in the registration and
the liability of each such holder of Registrable Securities will be in
proportion to and limited to the gross amount received by such holder from
the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which such person seeks indemnification and (ii) unless in the reasonable
judgment of counsel for such indemnified party (given in writing) a conflict
of interest between such indemnified parties exists with respect to such
claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party. If such
defense is so assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without the
indemnifying party's consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect
to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and will survive the transfer of securities.
The Company also agrees to make such provisions for contribution to any
indemnified party in the event the Company's indemnification is unavailable
for any reason as are reasonably requested by any indemnified party.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. The Purchaser and the Company
agree to amend, restate or modify this Agreement at the first such time after
the date of this Agreement that any Person purchases an aggregate number of
shares of the capital stock of the Company for an aggregate gross purchase
price in excess of
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$1,000,000 and such Person desires to enter into and execute a Registration
Agreement with the Company (a "Third Party Registration Agreement"); PROVIDED
that (i) the Purchaser receives written notice of a request for amendment,
restatement, or modification of this Agreement from the Company accompanied
with a copy of any such Third Party Registration Agreement, (ii) the
amendment, restatement or modification of this Agreement shall consist of the
same or equivalent terms and conditions as those terms and conditions agreed
to and stated in any Third Party Registration Agreement, and (iii) such
amendment, restatement or modification of this Agreement is entered into and
executed by the Purchaser and the Company concurrently with the execution of
the Third Party Registration Agreement. Notwithstanding anything to the
contrary contained herein, if the Company desires to enter into or does enter
into a Registration Agreement at any time with any Person other than this
Agreement or the Third Party Registration Agreement (the "New Registration
Agreement") and such New Registration Agreement provides for rights more
beneficial to such Person than those rights provided to Purchaser herein or
provided to Purchaser pursuant to any amendment, restatement or modification
of this Agreement, the Company and the Purchaser shall agree to further
amend, restate or modify this Agreement to provide the Purchaser with the
equivalent rights as those provided in the New Registration Agreement.
9. DEFINITIONS.
(a) the term "Registrable Securities" means (i) any Common Stock
issued upon the conversion of any Class A Preferred issued pursuant to the
Purchase Agreement, (ii) any Common Stock issued or issuable with respect to
the Common Stock referred to in clause (i) by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, and (iii) any other shares of
Common Stock held by Persons holding securities described in clauses (i) or
(ii) above. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have ceased to be Restricted
Securities under the particular Purchase Agreement pursuant to which such
securities were issued; provided that any securities which cease to be
Restricted Securities solely because they have become eligible for transfer
pursuant to Rule 144 (or any similar rule then in force) will not cease to be
Registrable Securities until they have actually been sold in compliance with
Rule 144 (or any similar rule then in force). For purposes of this Agreement,
a Person will be deemed to be a holder of Registrable Securities whenever
such Person has the right to acquire such Registrable Securities (by
conversion or otherwise), but disregarding any legal restrictions upon the
exercise of such right), whether or not such acquisition has actually been
effected.
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(b) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders
of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements 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; provided, however, that no transferee of any
Purchaser shall be entitled to any rights hereunder unless such transferee
(a) acquires a number of Registrable Securities with an aggregate initial
cost of at least $50,000 (as proportionally adjusted for stock splits, stock
dividends and recapitalizations affecting the Common Stock) or (b) is a
member of the " affiliated group" of the Purchase (as defined below). The
Company shall be given written notice by such Purchaser a reasonable time
after such transfer stating the name and address of the transferee and
identifying the securities with respect to which its rights hereunder are
being assigned. Any transferee to whom rights hereunder are transferred
shall, as a condition to such transfer, deliver to the Company a
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written instrument by which the transferee agrees to be bound by the obligations
imposed upon such Purchaser hereunder to the same extent as if such transferee
were an original party hereto. Notwithstanding the foregoing, any Purchaser
which is a partnership or corporation may transfer rights granted to it to any
partner or stockholder thereof to whom Registrable Securities are transferred
and who delivers to the Company a written instrument by which such transferee
agrees to be bound by the obligations imposed upon such Purchaser hereunder to
the same extent as if such transferee were an original party hereto. As used
herein, the term "affiliated group" includes a Purchaser's spouse, parents,
siblings and descendants (whether natural or adopted) and any trust solely for
the benefit of such Purchaser and/or such Purchaser's spouse, parents, siblings
and/or descendants and, in the case of a Purchaser which is a corporation or
partnership, any shareholder or partner thereof or any entity which controls, is
controlled by or is under common control with such corporation or partnership.
(f) 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.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware will
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
internal law, and not the law of conflicts, of the Commonwealth of
Massachusetts.
(j) 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
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To the Company: Medical Data Interface Design, Inc.
380 Pleasant Street
Suite 230
Malden, MA 02148
Attention: William S. Reece, President
with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
To the Purchaser: David Friend
267 Clarendon Street
Boston, MA 02115
with a copy to: Susan E. Pravda, Esq.
Epstein Becker & Green, P.C.
75 State Street
Boston, MA 02109
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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
/s/ David Friend
-----------------------------------
David Friend
/s/ William G. Nelson
-----------------------------------
William G. Nelson
MEDICAL DATA INTERFACE DESIGN, INC.
/s/ William S. Reece
-----------------------------------
William S. Reece, President
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Exhibit 4.3
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of October 18, 1995 is made between HealthGate
Data Corp. (formerly known as Medical Data Interface Design, Inc.), a Delaware
corporation (the "Company"), and Nichols Research Corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Purchase
Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing six
months after the closing of a public offering of the Company's Common Stock
pursuant to a registration statement filed under the Securities Act, the holders
of at least 40% of the Registrable Securities may request registration under the
Securities Act of all or part of their Registrable Securities on Form S-1 or any
similar or successor long-form registration ("Long-Form Registrations"), and the
holders of at least 25% of the Registrable Securities may request registration
under the Securities Act of all or part of their Registrable Securities on Form
S-3 or any similar or successor short-form registration ("Short-Form
Registrations"), if a Short-Form Registration is then available to the Company.
Within twenty business days after receipt of any such request, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "Demand Registrations".
b) LONG-FORM REGISTRATION. The holders of Registrable
Securities will be entitled to request one Long-Form Registration in which the
Company will pay all Registration Expenses; provided that the aggregate offering
value of the Registrable Securities requested to be registered in the Long-Form
Registration must equal at least $1,000,000 and each Long-Form Registration
shall be underwritten on a best efforts basis. A registration will not count as
a Long-Form Registration until it has become effective unless discontinued at
the request of the holders of the Registrable Securities included therein.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to paragraph l(b), the holders of Registrable
Securities will be entitled to request not more than two Short-Form
Registrations in which the Company will pay all Registration Expenses; provided
that the offering value of the Registrable Securities requested to
<PAGE>
be registered in any Short-Form Registration shall be at least $1,000,000 and
not more than one Short-Form Registration may be effected in any calendar year.
Demand Registrations will be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Once the Company has become subject
to the reporting requirements of the Securities Exchange Act, the Company will
use its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority of the
Registrable Securities requesting such registration. If a Demand Registration is
an underwritten offering, and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
securities requested to be included exceeds the number of Registrable Securities
and other securities which can be sold in such offering, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the respective holders on the basis of the amount of Registrable Securities
owned. Any Persons other than holders of Registrable Securities who participate
in Demand Registrations must pay their share of the Registration Expenses as
provided in paragraph 5 unless otherwise agreed to by the Company's board of
directors.
(e) RESTRICTIONS. If, at the time of any request to register
Registrable Securities pursuant to this paragraph 1, the Company
(i) has filed, or has definite plans to file within
90 days after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
(ii) is engaged in any other activity which, in the
good faith determination of the Company's board of directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company's board of directors may at its option direct that such request
be delayed for a period not in excess of six months from the effective date of
such offering or the date of commencement of such other activity, as the case
may be, and such right to delay a requested registration may not be exercised by
the Company more than once in any 12-month period. If the holders of Registrable
Securities included therein elect to discontinue a delayed registration, the
Company will pay all of the Registration Expenses in connection therewith, and
such registration will not count as one of the permitted Demand Registrations.
The Company will not in any event be obligated to effect any Demand Registration
within six months after the effective date of a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable
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Securities included in any Demand Registration will have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval which will not be unreasonably withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and subject to the provisions of Section 8 herein, the Company will
not grant to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of a
majority of the Registrable Securities; provided that the Company may grant
rights to other Persons to participate in Piggyback Registrations so long as
such rights are subject to the provisions of paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the Company gives
its notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is an initial public offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by such holders, and (iii) third, other securities requested to be
included in such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is not an initial public offering, or a secondary registration on
behalf of holders of the Company's securities, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities requested to be included therein by the holders requesting such
registration and (ii) second, the Registrable Securities and other securities
requested to be included in such registration, pro rata among the
3
<PAGE>
holders of such securities on the basis of the number of securities so requested
to be included therein.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least three months has elapsed from the effective date of such
previous registration, except in the case that the registration is a firm
commitment underwriting, in which event the restrictions contained in this
paragraph 2(e) will terminate upon the closing of such firm commitment
underwriting.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part of
such underwritten registration) unless the underwriters managing such registered
public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form)
unless the underwriters managing such registered public offering otherwise
agree, and (ii) to use its best efforts to cause each Person who holds at least
10% of the Common Stock of the Company (on a fully-diluted basis), acquired at
any time after the date of this Agreement (other than in a registered public
offering), to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted) unless the underwriters managing such registered public
offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration
4
<PAGE>
statement with respect to such Registrable Securities, and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 90 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not
5
<PAGE>
later than the effective date of such registration statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities; and
(i) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to this Agreement, and any attorney, accountant or other agent retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company with all
information and copies of all documents reasonably necessary to effect such
registration in compliance with the Securities Act and the rules and regulations
thereunder and shall otherwise cooperate with the Company and its counsel in
expediting the effectiveness of any such registration.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions and excluding
legal fees and disbursements of any counsel for the holders of Registrable
Securities) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne as provided in this
Agreement, except that the Company will, in any event, pay its internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed.
(b) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
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<PAGE>
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities, such holder's officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities; provided that such underwriters indemnify the Company to
the same extent as provided in subparagraph (b) below with respect to the
indemnification of the Company by the holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission or alleged untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided, that the obligation to indemnify will be several, not joint
and several, among such holders of Registrable Securities participating in the
registration and the liability of each such holder of Registrable Securities
will be in proportion to and limited to the gross amount received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which such person seeks indemnification and (ii) unless in the reasonable
judgment of counsel for such indemnified party (given in writing) a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is so assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without the
indemnifying party's consent (but such consent will not be unreasonably
7
<PAGE>
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions for contribution to any indemnified
party in the event the Company's indemnification is unavailable for any reason
as are reasonably requested by any indemnified party.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. If the Company desires to enter
into or does enter into a Registration Agreement at any time with any Person
other than this Agreement or the Company's Registration Agreement with David
Friend and William Nelson dated March 16, 1995, (the "New Registration
Agreement") and such New Registration Agreement provides for rights more
beneficial to such Person than those rights provided to Purchaser herein or
provided to Purchaser pursuant to any amendment, restatement or modification of
this Agreement, the Company and the Purchaser shall agree to further amend,
restate or modify this Agreement to provide the Purchaser with the equivalent
rights as those provided in the New Registration Agreement.
9. DEFINITIONS.
(a) The term "Registrable Securities" means (i) any Common
Stock issued upon the conversion of any Series B Preferred or Series A
Preferred, (ii) any Common Stock issued or issuable with respect to the Common
Stock referred to in clause (i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of Common Stock held by
Persons holding securities described in clauses (i) or (ii) above. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when they have ceased to be Restricted Securities under the
particular Purchase Agreement pursuant to which such securities were issued;
provided that any securities which cease to be Restricted Securities solely
because they have become eligible for transfer pursuant to Rule 144 (or any
similar rule then in force) will not cease to be Registrable Securities until
they have actually been sold in compliance with Rule 144 (or any
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<PAGE>
similar rule then in force). For purposes of this Agreement, a Person will be
deemed to be a holder of Registrable Securities whenever such Person has the
right to acquire such Registrable Securities (by conversion or otherwise), but
disregarding any legal restrictions upon the exercise of such right), whether or
not such acquisition has actually been effected.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders
of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements 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; provided, however, that no transferee of any
Purchaser shall be entitled to any rights hereunder unless such transferee (a)
acquires a number of Registrable Securities with an aggregate initial cost of at
least $160,000 (as proportionally adjusted for stock splits, stock dividends and
recapitalization affecting the Common Stock) or (b) is a member of the
"affiliated group" of the Purchaser (as defined below). The Company shall be
given written notice by such Purchaser a reasonable time after such transfer
stating the name and address of the transferee and identifying the securities
with respect to which its rights hereunder are being assigned. Any transferee to
whom rights hereunder are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which the transferee agrees to be
bound by the obligations imposed upon such Purchaser hereunder to the same
extent as if such transferee were an original party hereto. Notwithstanding
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the foregoing, any Purchaser which is a partnership, limited liability company
or corporation may transfer rights granted to it to any partner or stockholder
thereof to whom Registrable Securities are transferred and who delivers to the
Company a written instrument by which such transferee agrees to be bound by the
obligations imposed upon such Purchaser hereunder to the same extent as if such
transferee were an original party hereto. As used herein, the term "affiliated
group" includes a Purchaser's spouse, parents, siblings and descendants (whether
natural or adopted) and any trust solely for the benefit of such Purchaser
and/or such Purchaser's spouse, parents, siblings and/or descendants and, in the
case of a Purchaser which is a corporation, limited liability company or
partnership, any shareholder or partner thereof or any entity which controls, is
controlled by or is under common control with such corporation, limited
liability company or partnership.
(f) 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.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
will govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
internal law, and not the law of conflicts, of the Commonwealth of
Massachusetts.
(j) 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.
380 Pleasant Street
Suite 230
Malden, MA 02148
Attention: William S. Reece, President
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with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
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To the Purchaser: Nichols Research Corporation
4040 South Memorial Parkway
Huntsville, AL 35802-1326
Attn: Chris H. Horgen, Chief Executive Officer
with a copy to: John Wynn, Esq.
Lanier Ford Shaver & Payne, P.C.
200 West Court Square, Suite 500
Huntsville, AL 35804
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------------------------
William S. Reece, President
NICHOLS RESEARCH CORPORATION
By: /s/ Patsy L. Hattox
--------------------------------------
Patty L. Hattox, Vice President
12
<PAGE>
Exhibit 4.4
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of August 21, 1996 is made between HealthGate
Data Corp. (formerly known as Medical Data Interface Design, Inc.), a Delaware
corporation (the "Company"), Nichols Research Corporation ("Nichols") and other
individuals (the "Other Purchasers") listed on Schedule 1 to the Purchase
Agreement (as such term is hereinafter defined)(Nichols and the Other Purchasers
are hereinafter collectively referred to as the "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a Purchase
Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing six
months after the closing of a public offering of the Company's Common Stock
pursuant to a registration statement filed under the Securities Act, the holders
of at least 40% of the Registrable Securities may request registration under the
Securities Act of all or part of their Registrable Securities on Form S-1 or any
similar or successor long-form registration ("Long-Form Registrations"), and the
holders of at least 25% of the Registrable Securities may request registration
under the Securities Act of all or part of their Registrable Securities on Form
S-3 or any similar or successor short-form registration ("Short-Form
Registrations"), if a Short-Form Registration is then available to the Company.
Within twenty business days after receipt of any such request, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "Demand Registrations".
b) LONG-FORM REGISTRATION. The holders of Registrable
Securities will be entitled to request one Long-Form Registration in which the
Company will pay all Registration Expenses; provided that the aggregate offering
value of the Registrable Securities requested to be registered in the Long-Form
Registration must equal at least $1,000,000 and each Long-Form Registration
shall be underwritten on a best efforts basis. A registration will not count as
a Long-Form Registration until it has become effective unless discontinued at
the request of the holders of the Registrable Securities included therein.
<PAGE>
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to paragraph l(b), the holders of Registrable
Securities will be entitled to request not more than two Short-Form
Registrations in which the Company will pay all Registration Expenses; provided
that the offering value of the Registrable Securities requested to be registered
in any Short-Form Registration shall be at least $1,000,000 and not more than
one Short-Form Registration may be effected in any calendar year. Demand
Registrations will be Short-Form Registrations whenever the Company is permitted
to use any applicable short form. Once the Company has become subject to the
reporting requirements of the Securities Exchange Act, the Company will use its
best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority of the
Registrable Securities requesting such registration. If a Demand Registration is
an underwritten offering, and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
securities requested to be included exceeds the number of Registrable Securities
and other securities which can be sold in such offering, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the respective holders on the basis of the amount of Registrable Securities
owned. Any Persons other than holders of Registrable Securities who participate
in Demand Registrations must pay their share of the Registration Expenses as
provided in paragraph 5 unless otherwise agreed to by the Company's board of
directors.
(e) RESTRICTIONS. If, at the time of any request to register
Registrable Securities pursuant to this paragraph 1, the Company
(i) has filed, or has definite plans to file within
90 days after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
(ii) is engaged in any other activity which, in the
good faith determination of the Company's board of directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company's board of directors may at its option direct that such request
be delayed for a period not in excess of six months from the effective date of
such offering or the date of commencement of such other activity, as the case
may be, and such right to delay a requested registration may not be exercised by
the Company more than once in any 12-month period. If the holders of Registrable
Securities included therein elect to discontinue a delayed registration, the
Company will pay all of the Registration Expenses in connection therewith, and
such registration will not count as one of the permitted Demand Registrations.
The Company will not in any event be obligated to effect any Demand Registration
within six months after the effective date of a previous Demand Registration.
<PAGE>
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities included in any Demand Registration will have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which will not be unreasonably
withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and subject to the provisions of Section 8 herein, the Company will
not grant to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of a
majority of the Registrable Securities; provided that the Company may grant
rights to other Persons to participate in Piggyback Registrations so long as
such rights are subject to the provisions of paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the Company gives
its notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is an initial public offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by such holders, and (iii) third, other securities requested to be
included in such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is not an initial public offering, or a secondary registration on
behalf of holders of the Company's securities, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities requested to be included therein by the holders requesting such
registration and (ii) second, the Registrable Securities and other securities
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of securities so requested to be
included therein.
<PAGE>
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least three months has elapsed from the effective date of such
previous registration, except in the case that the registration is a firm
commitment underwriting, in which event the restrictions contained in this
paragraph 2(e) will terminate upon the closing of such firm commitment
underwriting.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part of
such underwritten registration) unless the underwriters managing such registered
public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form)
unless the underwriters managing such registered public offering otherwise
agree, and (ii) to use its best efforts to cause each Person who holds at least
10% of the Common Stock of the Company (on a fully-diluted basis), acquired at
any time after the date of this Agreement (other than in a registered public
offering), to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted) unless the underwriters managing such registered public
offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities,
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents will be subject to
<PAGE>
the review of such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 90 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities; and
<PAGE>
(i) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to this Agreement, and any attorney, accountant or other agent retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company with all
information and copies of all documents reasonably necessary to effect such
registration in compliance with the Securities Act and the rules and regulations
thereunder and shall otherwise cooperate with the Company and its counsel in
expediting the effectiveness of any such registration.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions and excluding
legal fees and disbursements of any counsel for the holders of Registrable
Securities) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne as provided in this
Agreement, except that the Company will, in any event, pay its internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed.
(b) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities and, as applicable, such holder's
officers and directors and each Person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the
<PAGE>
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities; provided that such underwriters indemnify the Company to
the same extent as provided in subparagraph (b) below with respect to the
indemnification of the Company by the holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission or alleged untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided, that the obligation to indemnify will be several, not joint
and several, among such holders of Registrable Securities participating in the
registration and the liability of each such holder of Registrable Securities
will be in proportion to and limited to the gross amount received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which such person seeks indemnification and (ii) unless in the reasonable
judgment of counsel for such indemnified party (given in writing) a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is so assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without the
indemnifying party's consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions for contribution to any indemnified
party in the event the Company's indemnification is unavailable for any reason
as are reasonably requested by any indemnified party.
<PAGE>
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. If the Company desires to enter
into or does enter into a Registration Agreement with any Person at any time (a
"New Registration Agreement") other than this Agreement, the Company's
Registration Agreement with David Friend and William Nelson dated March 16,
1995, or the Company's Registration Agreement with Nichols dated October 18,
1995, and such New Registration Agreement provides for rights more beneficial to
such Person than those rights provided to Purchaser herein or provided to
Purchaser pursuant to any amendment, restatement or modification of this
Agreement, the Company and the Purchaser shall agree to further amend, restate
or modify this Agreement to provide the Purchaser with the equivalent rights as
those provided in the New Registration Agreement.
9. DEFINITIONS.
(a) The term "Registrable Securities" means (i) any Common
Stock issued upon the conversion of any Series C Preferred, Series B Preferred
or Series A Preferred, (ii) any Common Stock issued or issuable with respect to
the Common Stock referred to in clause (i) by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of Common
Stock held by Persons holding securities described in clauses (i) or (ii) above.
As to any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have ceased to be Restricted Securities under
the particular Purchase Agreement pursuant to which such securities were issued;
provided that any securities which cease to be Restricted Securities solely
because they have become eligible for transfer pursuant to Rule 144 (or any
similar rule then in force) will not cease to be Registrable Securities until
they have actually been sold in compliance with Rule 144 (or any similar rule
then in force). For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to acquire
such Registrable Securities (by conversion or otherwise), but disregarding any
legal restrictions upon the exercise of such right), whether or not such
acquisition has actually been effected.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
<PAGE>
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders
of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements 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; provided, however, that no transferee of any
Purchaser shall be entitled to any rights hereunder unless such transferee (a)
acquires a number of Registrable Securities with an aggregate initial cost of at
least $160,000 (as proportionally adjusted for stock splits, stock dividends and
recapitalization affecting the Common Stock) or (b) is a member of the
"affiliated group" of the Purchaser (as defined below). The Company shall be
given written notice by such Purchaser a reasonable time after such transfer
stating the name and address of the transferee and identifying the securities
with respect to which its rights hereunder are being assigned. Any transferee to
whom rights hereunder are transferred shall, as a condition to such transfer,
deliver to the Company a written instrument by which the transferee agrees to be
bound by the obligations imposed upon such Purchaser hereunder to the same
extent as if such transferee were an original party hereto. Notwithstanding the
foregoing, any Purchaser which is a partnership, limited liability company or
corporation may transfer rights granted to it to any partner or stockholder
thereof to whom Registrable Securities are transferred and who delivers to the
Company a written instrument by which such transferee agrees to be bound by the
obligations imposed upon such Purchaser hereunder to the same extent as if such
transferee were an original party hereto. As used herein, the term "affiliated
group" includes a Purchaser's spouse, parents, siblings and descendants (whether
natural or adopted) and any trust solely for the benefit of such Purchaser
and/or such Purchaser's spouse, parents, siblings and/or descendants and, in the
case of a Purchaser which is a corporation, limited liability company or
partnership, any shareholder or partner thereof or any entity which controls, is
controlled by or is under common control with such corporation, limited
liability company or partnership.
(f) 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.
<PAGE>
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
will govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
internal law, and not the law of conflicts, of the Commonwealth of
Massachusetts.
(j) 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.
380 Pleasant Street
Suite 230
Malden, MA 02148
Attention: William S. Reece, President
with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
<PAGE>
To Nichols: Nichols Research Corporation
4040 South Memorial Parkway
Huntsville, AL 35802-1326
Attn: Chris H. Horgen, Chief Executive Officer
with a copy to: John Wynn, Esq.
Lanier Ford Shaver & Payne, P.C.
200 West Court Square, Suite 500
Huntsville, AL 35804
To the Other Purchasers: Account Management Corporation
2 Newbury Street
Boston, MA 02116
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
---------------------------------
William S. Reece, President
NICHOLS RESEARCH CORPORATION
By: /s/ Patsy L. Hattox
---------------------------------
Patsy L. Hattox, Vice President
ACCOUNT MANAGEMENT CORP.,
as Attorney-in-Fact for Stephen L.
Brown and Arleen C. Brown
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Peter deRoetth
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
<PAGE>
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Nicholas DeWolf
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for
Christopher Egan
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Michael J. Egan,
Trustee of the 1995 Michael J. Egan
Revocable Trust under Declaration of
Trust dated March 29, 1995
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Richard E. &
Maureen E. Egan, Trustees of the
Richard E. & Maureen E. Egan
Grandchildrens Trust under Declaration
of Trust dated June 29, 1994
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Richard Egan,
Trustee of the 1986 Richard E. Egan
Trust under Declaration of Trust dated
May 27, 1986
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Steuart Evans
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
<PAGE>
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Ray Fambrough
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Donald A. Foss
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert Glenn
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Roger M. Marino
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Ray W. Miller
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for William Miller
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Michael J. Ritter
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
<PAGE>
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Shirley J. Ritter
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for James K. Schuler
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert Thurber
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Gerald D. Turbow
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Jane Westervelt
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert and Linda
Williams
By: /s/ Richard C. Albright
---------------------------------
Title: Vice President
------------------------------
<PAGE>
Exhibit 4.5
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of December 20, 1996 is made between
HealthGate Data Corp., a Delaware corporation (the "Company") and Blackwell
Science, Ltd. ("BSL" or "Purchaser").
WHEREAS, the Company and the Purchaser have entered into a
Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, the Company and the Purchaser desire to provide for
certain arrangements with respect to the registration of shares of capital
stock of the Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing six
months after the closing of a public offering of the Company's Common Stock
pursuant to a registration statement filed under the Securities Act, the
holders of at least 40% of the Registrable Securities may request
registration under the Securities Act of all or part of their Registrable
Securities on Form S-1 or any similar or successor long-form registration
("Long-Form Registrations"), and the holders of at least 25% of the
Registrable Securities may request registration under the Securities Act of
all or part of their Registrable Securities on Form S-3 or any similar or
successor short-form registration ("Short-Form Registrations"), if a
Short-Form Registration is then available to the Company. Within twenty
business days after receipt of any such request, the Company will give
written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all
Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of
the Company's notice. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations".
b) LONG-FORM REGISTRATION. The holders of Registrable
Securities will be entitled to request one Long-Form Registration in which
the Company will pay all Registration Expenses; provided that the aggregate
offering value of the Registrable Securities requested to be registered in
the Long-Form Registration must equal at least $1,000,000 and each
Long-Form Registration shall be underwritten on a best efforts basis. A
registration will not count as a Long-Form Registration until it has become
effective unless discontinued at the request of the holders of the
Registrable Securities included therein.
(c) SHORT-FORM REGISTRATIONS. In addition to the
Long-Form Registration provided pursuant to paragraph l(b), the holders of
Registrable Securities will be entitled to request not more than two
Short-Form Registrations in which the Company will pay all Registration
Expenses; provided that the offering value of the Registrable Securities
requested to
<PAGE>
be registered in any Short-Form Registration shall be at least $1,000,000 and
not more than one Short-Form Registration may be effected in any calendar year.
Demand Registrations will be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Once the Company has become subject
to the reporting requirements of the Securities Exchange Act, the Company will
use its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will
not include in any Demand Registration any securities which are not
Registrable Securities without the written consent of the holders of a
majority of the Registrable Securities requesting such registration. If a
Demand Registration is an underwritten offering, and the managing
underwriters advise the Company in writing that in their opinion the number
of Registrable Securities and other securities requested to be included
exceeds the number of Registrable Securities and other securities which can
be sold in such offering, the Company will include in such registration
prior to the inclusion of any securities which are not Registrable
Securities the number of Registrable Securities requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
respective holders on the basis of the amount of Registrable Securities
owned. Any Persons other than holders of Registrable Securities who
participate in Demand Registrations must pay their share of the
Registration Expenses as provided in paragraph 5 unless otherwise agreed to
by the Company's board of directors.
(e) RESTRICTIONS. If, at the time of any request to
register Registrable Securities pursuant to this paragraph 1, the Company
(i) has filed, or has definite plans to file within
90 days after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
(ii) is engaged in any other activity which, in
the good faith determination of the Company's board of directors, would be
adversely affected by the requested registration to the material detriment of
the Company,
then the Company's board of directors may at its option direct that such
request be delayed for a period not in excess of six months from the
effective date of such offering or the date of commencement of such other
activity, as the case may be, and such right to delay a requested
registration may not be exercised by the Company more than once in any
12-month period. If the holders of Registrable Securities included therein
elect to discontinue a delayed registration, the Company will pay all of
the Registration Expenses in connection therewith, and such registration
will not count as one of the permitted Demand Registrations. The Company
will not in any event be obligated to effect any Demand Registration within
six months after the effective date of a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority
of the Registrable
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<PAGE>
Securities included in any Demand Registration will have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval which will not be unreasonably withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and subject to the provisions of Section 8 herein, the Company
will not grant to any Persons the right to request the Company to register
any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the written
consent of the holders of a majority of the Registrable Securities;
provided that the Company may grant rights to other Persons to participate
in Piggyback Registrations so long as such rights are subject to the
provisions of paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than
pursuant to a Demand Registration) and the registration form to be used may
be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company will give prompt written notice to all holders
of Registrable Securities of its intention to effect such a registration
and will include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion
therein within 15 days after the Company gives its notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all
Piggyback Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If
a Piggyback Registration is an underwritten primary registration on behalf
of the Company which is an initial public offering, and the managing
underwriters advise the Company in writing that in their opinion the number
of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on
the basis of the number of shares owned by such holders, and (iii) third,
other securities requested to be included in such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on behalf of
the Company which is not an initial public offering, or a secondary
registration on behalf of holders of the Company's securities, and the
managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will
include in such registration (i) first, the securities requested to be
included therein by the holders requesting such registration and (ii)
second, the Registrable Securities and other securities requested to be
included in such registration, pro rata among the
3
<PAGE>
holders of such securities on the basis of the number of securities so requested
to be included therein.
(e) OTHER REGISTRATIONS. If the Company has previously
filed a registration statement with respect to Registrable Securities
pursuant to paragraph 1 or pursuant to this paragraph 2, and if such
previous registration has not been withdrawn or abandoned, the Company will
not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on
Form S-8 or any successor form), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at
least three months has elapsed from the effective date of such previous
registration, except in the case that the registration is a firm commitment
underwriting, in which event the restrictions contained in this paragraph
2(e) will terminate upon the closing of such firm commitment underwriting.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to
effect any public sale or distribution of equity securities of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period beginning
on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration) unless the
underwriters managing such registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale
or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven
days prior to and during the 90-day period beginning on the effective date
of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part
of such underwritten registration or pursuant to registrations on Form S-8
or any successor form) unless the underwriters managing such registered
public offering otherwise agree, and (ii) to use its best efforts to cause
each Person who holds at least 10% of the Common Stock of the Company (on a
fully-diluted basis), acquired at any time after the date of this Agreement
(other than in a registered public offering), to agree not to effect any
public sale or distribution of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted)
unless the underwriters managing such registered public offering otherwise
agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company will use its best efforts to effect
the registration and the sale of such Registrable Securities in accordance
with the intended method of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration
4
<PAGE>
statement with respect to such Registrable Securities, and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period of not less than 90 days
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of such Registrable Securities
such number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided, that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company
are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not
5
<PAGE>
later than the effective date of such registration statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as the holders of a majority of the Registrable Securities being sold or
the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities; and
(i) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to this Agreement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company
with all information and copies of all documents reasonably necessary to
effect such registration in compliance with the Securities Act and the
rules and regulations thereunder and shall otherwise cooperate with the
Company and its counsel in expediting the effectiveness of any such
registration.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of
or compliance with this Agreement, including without limitation all
registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts
and commissions and excluding legal fees and disbursements of any counsel
for the holders of Registrable Securities) and other Persons retained by
the Company (all such expenses being herein called "Registration Expenses")
will be borne as provided in this Agreement, except that the Company will,
in any event, pay its internal expenses (including without limitation all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the expense of any
liability insurance and the expenses and fees for listing the securities to
be registered on each securities exchange on which similar securities
issued by the Company are then listed.
(b) To the extent Registration Expenses are not required
to be paid by the Company, each holder of securities included in any
registration hereunder will pay those Registration Expenses allocable to
the registration of such holder's securities so included, and any
Registration Expenses not so allocable will be borne by all sellers of
securities included in such registration in proportion to the aggregate
selling price of the securities to be so registered.
6. INDEMNIFICATION.
6
<PAGE>
(a) The Company agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities and, as applicable,
such holder's officers and directors and each Person who controls such
holder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly
for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient
number of copies of the same. In connection with an underwritten offering,
the Company will indemnify such underwriters, their officers and directors
and each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities; provided that
such underwriters indemnify the Company to the same extent as provided in
subparagraph (b) below with respect to the indemnification of the Company
by the holders of Registrable Securities.
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
will furnish to the Company in writing such information and affidavits as
the Company reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
will indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or
omission or alleged untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder; provided,
that the obligation to indemnify will be several, not joint and several,
among such holders of Registrable Securities participating in the
registration and the liability of each such holder of Registrable
Securities will be in proportion to and limited to the gross amount
received by such holder from the sale of Registrable Securities pursuant to
such registration statement.
(c) Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which such person seeks indemnification and (ii) unless in the
reasonable judgment of counsel for such indemnified party (given in
writing) a conflict of interest between such indemnified and indemnifying
parties exists with respect to such claim, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to
the indemnified party. If such defense is so assumed, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified
7
<PAGE>
party without the indemnifying party's consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made
by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer
of securities. The Company also agrees to make such provisions for
contribution to any indemnified party in the event the Company's
indemnification is unavailable for any reason as are reasonably requested
by any indemnified party.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting
arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. If the Company desires to
enter into or does enter into a Registration Agreement with any Person at
any time (a "New Registration Agreement") other than this Agreement, the
Company's Registration Agreement with David Friend and William Nelson dated
March 16, 1995, the Company's Registration Agreement with Nichols Research
Corporation dated October 18, 1995, or the Company's Registration Agreement
dated August 21, 1996, and such New Registration Agreement provides for
rights more beneficial to such Person than those rights provided to
Purchaser herein or provided to Purchaser pursuant to any amendment,
restatement or modification of this Agreement, the Company and the
Purchaser shall agree to further amend, restate or modify this Agreement to
provide the Purchaser with the equivalent rights as those provided in the
New Registration Agreement.
9. DEFINITIONS.
(a) The term "Registrable Securities" means (i) any
Common Stock issued upon the conversion of any of the Company's Series D
Convertible Preferred Stock, Series C Convertible Preferred Stock, Series B
Convertible Preferred Stock or Series A Convertible Preferred Stock, (ii)
any Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of Common
Stock held by Persons holding securities described in clauses (i) or (ii)
above. As to any particular Registrable Securities, such securities will
cease to be Registrable
8
<PAGE>
Securities when they have ceased to be Restricted Securities under the
particular Purchase Agreement pursuant to which such securities were issued;
provided that any securities which cease to be Restricted Securities solely
because they have become eligible for transfer pursuant to Rule 144 (or any
similar rule then in force) will not cease to be Registrable Securities until
they have actually been sold in compliance with Rule 144 (or any similar rule
then in force). For purposes of this Agreement, a Person will be deemed to be
a holder of Registrable Securities whenever such Person has the right to
acquire such Registrable Securities (by conversion or otherwise), but
disregarding any legal restrictions upon the exercise of such right), whether
or not such acquisition has actually been effected.
(b) Unless otherwise stated, other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The
Company will not take any action, or permit any change to occur, with
respect to its securities which would materially and adversely affect the
ability of the holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this
Agreement or which would materially and adversely affect the marketability
of such Registrable Securities in any such registration (including, without
limitation, effecting a stock split or a combination of shares).
(c) REMEDIES. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages caused by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements
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; provided, however, that no
transferee of any Purchaser shall be entitled to any rights hereunder
unless such transferee (a) acquires a number of Registrable Securities with
an aggregate initial cost of at least $160,000 (as proportionally adjusted
for stock splits, stock dividends and recapitalization affecting the Common
Stock) or (b) is a member of the "affiliated group" of the Purchaser (as
defined below). The Company shall be given written notice by such Purchaser
a reasonable time after such
9
<PAGE>
transfer stating the name and address of the transferee and identifying the
securities with respect to which its rights hereunder are being assigned. Any
transferee to whom rights hereunder are transferred shall, as a condition to
such transfer, deliver to the Company a written instrument by which the
transferee agrees to be bound by the obligations imposed upon such Purchaser
hereunder to the same extent as if such transferee were an original party
hereto. Notwithstanding the foregoing, any Purchaser which is a partnership,
limited liability company or corporation may transfer rights granted to it to
any partner or stockholder thereof to whom Registrable Securities are
transferred and who delivers to the Company a written instrument by which such
transferee agrees to be bound by the obligations imposed upon such Purchaser
hereunder to the same extent as if such transferee were an original party
hereto. As used herein, the term "affiliated group" includes a Purchaser's
spouse, parents, siblings and descendants (whether natural or adopted) and any
trust solely for the benefit of such Purchaser and/or such Purchaser's spouse,
parents, siblings and/or descendants and, in the case of a Purchaser which is a
corporation, limited liability company or partnership, any shareholder or
partner thereof or any entity which controls, is controlled by or is under
common control with such corporation, limited liability company or partnership.
(f) 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.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts
taken together will constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a
part of this Agreement.
(i) GOVERNING LAW. The corporate law of the State of
Delaware will govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the
construction, validity and interpretation of this Agreement and the
schedule hereto will be governed by the internal law, and not the law of
conflicts, of the Commonwealth of Massachusetts.
(j) 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, sent by confirmed fax 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
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<PAGE>
To the Company: HealthGate Data Corp.
380 Pleasant Street
Suite 230
Malden, MA 02148
Fax: (617) 321-5577
Attention: William S. Reece, President
with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Fax: (617) 556-3889
To BSL: Blackwell Science, Ltd.
Osney Mead, Oxford
OX2 OEL, United Kingdom
Fax: 011 441 865 721 205
with a copy to: John Taylor Williams, Esq.
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
----------------------------------
William S. Reece, President
BLACKWELL SCIENCE, LTD.
By: /s/ William Gibson
----------------------------------
Name: William Gibson
Title: Director
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Exhibit 4.6
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of March 26, 1998 is made between HealthGate
Data Corp., a Delaware corporation (the "Company") and Petra Capital, LLC
("Petra"), a Georgia limited liability company.
WHEREAS, the Company and the Petra have entered into a Loan and
Security Agreement of even date herewith and in connection therewith the Company
has issued Petra a Stock Purchase Warrant for shares of the Company common stock
(the "Petra Warrant"); and
WHEREAS, the Company and the Petra desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing six
months after the closing of a public offering of the Company's Common Stock
pursuant to a registration statement filed under the Securities Act, the holders
of at least 40% of the Registrable Securities may request registration under the
Securities Act of all or part of their Registrable Securities on Form S-1 or any
similar or successor long-form registration ("Long-Form Registrations"), and the
holders of at least 25% of the Registrable Securities may request registration
under the Securities Act of all or part of their Registrable Securities on Form
S-3 or any similar or successor short-form registration ("Short-Form
Registrations"), if a Short-Form Registration is then available to the Company.
Within twenty business days after receipt of any such request, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "Demand Registrations".
b) LONG-FORM REGISTRATION. The holders of Registrable
Securities will be entitled to request one Long-Form Registration in which the
Company will pay all Registration Expenses; provided that the aggregate offering
value of the Registrable Securities requested to be registered in the Long-Form
Registration must equal at least $1,000,000 and each Long-Form Registration
shall be underwritten on a best efforts basis. A registration will not count as
a Long-Form Registration until it has become effective unless discontinued at
the request of the holders of the Registrable Securities included therein.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to paragraph l(b), the holders of Registrable
Securities will be entitled to request not more than two Short-Form
Registrations in which the Company will pay all Registration Expenses; provided
that the offering value of the Registrable Securities requested to
<PAGE>
be registered in any Short-Form Registration shall be at least $1,000,000 and
not more than one Short-Form Registration may be effected in any calendar year.
Demand Registrations will be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Once the Company has become subject
to the reporting requirements of the Securities Exchange Act, the Company will
use its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority of the
Registrable Securities requesting such registration. If a Demand Registration is
an underwritten offering, and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
securities requested to be included exceeds the number of Registrable Securities
and other securities which can be sold in such offering, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the respective holders on the basis of the amount of Registrable Securities
owned. Any Persons other than holders of Registrable Securities who participate
in Demand Registrations must pay their share of the Registration Expenses as
provided in paragraph 5 unless otherwise agreed to by the Company's board of
directors.
(e) RESTRICTIONS. If, at the time of any request to register
Registrable Securities pursuant to this paragraph 1, the Company
(i) has filed, or has definite plans to file within
90 days after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
(ii) is engaged in any other activity which, in the
good faith determination of the Company's board of directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company's board of directors may at its option direct that such request
be delayed for a period not in excess of six months from the effective date of
such offering or the date of commencement of such other activity, as the case
may be, and such right to delay a requested registration may not be exercised by
the Company more than once in any 12-month period. If the holders of Registrable
Securities included therein elect to discontinue a delayed registration, the
Company will pay all of the Registration Expenses in connection therewith, and
such registration will not count as one of the permitted Demand Registrations.
The Company will not in any event be obligated to effect any Demand Registration
within six months after the effective date of a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable
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Securities included in any Demand Registration will have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
Company's approval which will not be unreasonably withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and subject to the provisions of Section 8 herein, the Company will
not grant to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of a
majority of the Registrable Securities; provided that the Company may grant
rights to other Persons to participate in Piggyback Registrations so long as
such rights are subject to the provisions of paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the Company gives
its notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is an initial public offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by such holders, and (iii) third, other securities requested to be
included in such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is not an initial public offering, or a secondary registration on
behalf of holders of the Company's securities, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities requested to be included therein by the holders requesting such
registration and (ii) second, the Registrable Securities and other securities
requested to be included in such registration, pro rata among the
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<PAGE>
holders of such securities on the basis of the number of securities so requested
to be included therein.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least three months has elapsed from the effective date of such
previous registration, except in the case that the registration is a firm
commitment underwriting, in which event the restrictions contained in this
paragraph 2(e) will terminate upon the closing of such firm commitment
underwriting.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 90-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration in which Registrable Securities are included (except as part of
such underwritten registration) unless the underwriters managing such registered
public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form)
unless the underwriters managing such registered public offering otherwise
agree, and (ii) to use its best efforts to cause each Person who holds at least
10% of the Common Stock of the Company (on a fully-diluted basis), acquired at
any time after the date of this Agreement (other than in a registered public
offering), to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted) unless the underwriters managing such registered public
offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration
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<PAGE>
statement with respect to such Registrable Securities, and use its best efforts
to cause such registration statement to become effective (provided that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 90 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not
5
<PAGE>
later than the effective date of such registration statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities; and
(i) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to this Agreement, and any attorney, accountant or other agent retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company with all
information and copies of all documents reasonably necessary to effect such
registration in compliance with the Securities Act and the rules and regulations
thereunder and shall otherwise cooperate with the Company and its counsel in
expediting the effectiveness of any such registration.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions and excluding
legal fees and disbursements of any counsel for the holders of Registrable
Securities) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne as provided in this
Agreement, except that the Company will, in any event, pay its internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed.
(b) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
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(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities and, as applicable, such holder's
officers and directors and each Person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities; provided that such underwriters indemnify the Company
to the same extent as provided in subparagraph (b) below with respect to the
indemnification of the Company by the holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission or alleged untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided, that the obligation to indemnify will be several, not joint
and several, among such holders of Registrable Securities participating in the
registration and the liability of each such holder of Registrable Securities
will be in proportion to and limited to the gross amount received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which such person seeks indemnification and (ii) unless in the reasonable
judgment of counsel for such indemnified party (given in writing) a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to assume the defense of such
claim with counsel reasonably satisfactory to the indemnified party. If such
defense is so assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without the
indemnifying party's consent (but such consent will not be unreasonably
7
<PAGE>
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions for contribution to any indemnified
party in the event the Company's indemnification is unavailable for any reason
as are reasonably requested by any indemnified party.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. If the Company desires to enter
into or does enter into a Registration Agreement with any Person at any time (a
"New Registration Agreement") other than this Agreement, the Company's
Registration Agreement with David Friend and William Nelson dated March 16, 1995
(the "Friend Registration Agreement"), the Company's Registration Agreement with
Nichols Research Corporation dated October 18, 1995 (the "Nichols Registration
Agreement") , the Company's Registration Agreement dated August 21, 1996 (the
"Company Registration Agreement") or the Company's Registration Agreement with
Blackwell Science, Ltd. dated December 20, 1996 (the "Blackwell Registration
Agreement"), and such New Registration Agreement provides for rights more
beneficial to such Person than those rights provided to Petra herein or provided
to Petra pursuant to any amendment, restatement or modification of this
Agreement, or if the Company amends, restates, supplements, or modifies the
Friend Registration Agreement, the Nichols Registration Agreement, the Company
Registration Agreement, or the Blackwell Registration Agreement (collectively,
an "Amended Registration Agreement"), and such Amended Registration Agreement
provides for rights more beneficial to such Person than those rights provided to
Petra herein or provided to Petra pursuant to any amendment, restatement or
modification of this Agreement, the Company and Petra shall agree to further
amend, restate or modify this Agreement to provide Petra with the equivalent
rights as those provided in the New Registration Agreement or in the Amended
Registration Agreement.
9. DEFINITIONS.
(a) The term "Registrable Securities" means (i) any Common
Stock issued upon
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the conversion of any of the Company's Series D Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series A Convertible Preferred Stock or upon the exercise or conversion of the
Petra Warrant, (ii) any Common Stock issued or issuable with respect to the
Common Stock referred to in clause (i) by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, and (iii) any other shares of Common
Stock held by Persons holding securities described in clauses (i) or (ii) above.
As to any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have ceased to be Restricted Securities under
the particular Purchase Agreement pursuant to which such securities were issued;
provided that any securities which cease to be Restricted Securities solely
because they have become eligible for transfer pursuant to Rule 144 (or any
similar rule then in force) will not cease to be Registrable Securities until
they have actually been sold in compliance with Rule 144 (or any similar rule
then in force). For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to acquire
such Registrable Securities (by conversion or otherwise), but disregarding any
legal restrictions upon the exercise of such right), whether or not such
acquisition has actually been effected.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders
of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by
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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; provided, however, that no transferee of any Petra shall be entitled to
any rights hereunder unless such transferee is a member of the "affiliated
group" of the Petra (as defined below). The Company shall be given written
notice by Petra a reasonable time after such transfer stating the name and
address of the transferee and identifying the securities with respect to which
its rights hereunder are being assigned. Any transferee to whom rights hereunder
are transferred shall, as a condition to such transfer, deliver to the Company a
written instrument by which the transferee agrees to be bound by the obligations
imposed upon such Petra hereunder to the same extent as if such transferee were
an original party hereto. Notwithstanding the foregoing, Petra may transfer
rights granted to it to any partner or stockholder thereof to whom Registrable
Securities are transferred and who delivers to the Company a written instrument
by which such transferee agrees to be bound by the obligations imposed upon such
Petra hereunder to the same extent as if such transferee were an original party
hereto. As used herein, the term "affiliated group" includes any shareholder or
partner of Petra or any entity which controls, is controlled by or is under
common control with such corporation, limited liability company or partnership,
Petra Special Purpose, LLC, a Georgia limited liability company, ABN AMRO Bank,
N.V., as Facility Agent under that certain Revolver Warehouse Financing
Agreement, dated as of September 24, 1997 among Petra Special Purpose, LLC, as
Customer, Petra Capital, LLC, individually and as the Initial Servicer,
SunAmerica Life Insurance Company, as Sponsor, Master Servicer and a Lender,
First Union National Bank, as Custodian, and ABN AMRO Bank, N.V., as Facility
Agent (the "Warehouse Agreement"), and any and all successors and assigns under
the Warehouse Agreement.
(f) 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.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
will govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
internal law, and not the law of conflicts, of the Commonwealth of
Massachusetts.
(j) NOTICES. All notices, demands or other communications to
be given or
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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, sent by
confirmed fax 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.
380 Pleasant Street
Suite 230
Malden, MA 02148
Fax: (617) 321-5577
Attention: William S. Reece, President
with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Fax: (617) 556-3889
To Petra: Petra Capital, LLC
172 Second Avenue North
Suite 112
Nashville, TN 37201
Fax: (615) 313-5990
Attention: Robert G. Shuler
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Fax: (404) 572-5100
Attention: Hector E. Llorens, Jr., Esq.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
----------------------------------
William S. Reece, President
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PETRA CAPITAL, LLC
By: /s/ Robert G. Shuler
----------------------------------
Name: Robert G. Shuler
Title: Member
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Exhibit 4.7
REGISTRATION AGREEMENT
THIS AGREEMENT dated as of April 7, 1999 is made between HealthGate
Data Corp., a Delaware corporation (the "Company") and GE Capital Equity
Investments, Inc. (the "Purchaser") and Blackwell Science, Ltd. ("Blackwell" and
collectively with the Purchaser, the "Series E Holders") and Blackwell
Wissenschafts-Verlag GmbH ("Blackwell-Germany").
WHEREAS, the Company, Blackwell, and the Purchaser have entered into a
Purchase Agreement of even date herewith (the "Purchase Agreement");
WHEREAS, the Company, Blackwell and the Purchaser desire to provide for
certain arrangements with respect to the registration of shares of capital stock
of the Company under the Securities Act of 1933; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time commencing upon the
earlier of (i) six months after the closing of a public offering of the
Company's Common Stock pursuant to a registration statement filed under the
Securities Act and (ii) the second anniversary of the Closing, the Purchaser may
request registration under the Securities Act of all or part of its Registrable
Securities on (i) Form S-1 or any similar or successor long-form registration
("Long-Form Registrations"), or (ii) Form S-3 or any similar or successor
short-form registration ("Short-Form Registrations"), if a Short-Form
Registration is then available to the Company. Within twenty business days after
receipt of any such request, the Company will give written notice of such
requested registration to all other holders of Registrable Securities and will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 15 days
after the receipt of the Company's notice. All registrations requested pursuant
to this paragraph 1(a) are referred to herein as "Demand Registrations".
(b) LONG-FORM REGISTRATION. The Purchaser will be entitled to
request two Long-Form Registrations in which the Company will pay all
Registration Expenses; provided that each Long-Form Registration include the
lesser of (i) at least 30% of the Common Stock issuable upon conversion of the
Initial Shares and (ii) Registrable Securities having a minimum anticipated
offering price of at least $5,000,000. A registration will not count as a
Long-Form Registration until it has become effective unless discontinued at the
request of the holders of the Registrable Securities included therein.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registration provided pursuant to paragraph l(b), the Purchaser will be entitled
to request not more than four Short-Form Registrations in which the Company will
pay all Registration Expenses. Demand Registrations will be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form. Once the Company has become subject to the reporting requirements of the
Securities Exchange Act, the Company will use its best efforts to make
Short-Form Registrations available for the sale of Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. Except for the piggyback
registration rights set forth in Section 2 of each of the following agreements:
(i) the Company's Registration Agreement with David Friend and William Nelson,
dated March 16, 1995, (ii) the Company's Registration Agreement with Nichols
Research Corporation, dated October 18, 1995, (iii) the Company's Registration
Agreement with Purchasers of Series C Preferred Shares, dated August 21, 1996,
and (iv) the Company's Registration Agreement with Petra Capital, LLC, dated
March 26, 1998, and except for the registration rights set forth in the
Company's Registration Agreement with Blackwell Science, Ltd., dated December
20, 1996 (which piggyback and registration rights are subject to the priority in
such registration of all Registrable Securities and are subject to cut-back as
provided in the second sentence of this paragraph 1(d)), the Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the holders of a majority of the
Registrable Securities requesting such registration. If a Demand Registration is
an underwritten offering, and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
securities requested to be included exceeds the number of Registrable Securities
and other securities which can be sold in such offering, the Company will
include in such registration prior to the inclusion of any securities which are
not Registrable Securities the number of Registrable Securities requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the respective holders on the basis of the amount of Registrable Securities
owned. Any Persons other than holders of Registrable Securities who participate
in Demand Registrations must pay their share of the Registration Expenses as
provided in paragraph 5 unless otherwise agreed to by the Company's board of
directors.
(e) RESTRICTIONS. If, at the time of any request to register
Registrable Securities pursuant to this paragraph 1, the Company
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(i) has filed, or has definite plans to file within
90 days after the time of the request, a registered public offering as to which
the holders may include Registrable Securities pursuant to paragraph 2, or
(ii) is engaged in any other activity which, in the
good faith determination of the Company's board of directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company's board of directors may at its option direct that such request
be delayed for a period not in excess of six months from the effective date of
such offering or ninety days from the date of commencement of such other
activity, as the case may be, and such right to delay a requested registration
may not be exercised by the Company more than once in any 12-month period. If
the holders of Registrable Securities included therein elect to discontinue a
delayed registration, the Company will pay all of the Registration Expenses in
connection therewith, and such registration will not count as one of the
permitted Demand Registrations. The Company will not in any event be obligated
to effect any Demand Registration within six months after the effective date of
a previous Demand Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of
the Registrable Securities included in any Demand Registration will have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which will not be unreasonably
withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement and subject to the provisions of Section 8 herein, the Company will
not grant to any Persons the right to request the Company to register any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the written consent of the holders of a
majority of the Registrable Securities; provided that the Company may grant
rights to other Persons to participate in Piggyback Registrations so long as
such rights are subject to the provisions of paragraphs 2(c) and 2(d) hereof.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the Company gives
its notice.
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(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities will be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON INITIAL PUBLIC OFFERING REGISTRATION. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company which is an initial public offering, and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by such holders, (iii) third, other securities requested to be included in
such registration.
(d) PRIORITY ON PRIMARY AND SECONDARY REGISTRATIONS. If a
Piggyback Registration is an (x) underwritten primary registration on behalf of
the Company which is not an initial public offering, or (y) a secondary
registration on behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration (i) first, the securities requested to be included in such
registration by the Company for its own account up to a maximum aggregate
offering price of $20 million, if such registration is being initiated by the
Company, (ii) second, the Registrable Securities requested to be included in
such registration, pro rata among the holders of such Registrable Securities on
the basis of the number of shares owned by such holders, (iii) third, the
balance of the securities requested to be included in such registration by the
Company for its own account, in the case of a registration initiated by the
Company, or the securities requested to be included in such registration by the
persons initiating such registration, if other than the Company, pro rata among
such holders on the basis of the number of such securities so requested to be
included therein, and (iv) fourth, any other securities requested to be included
in such registration, pro rata among the holders of such securities on the basis
of the number of securities so requested to be included therein.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least six months has elapsed from the effective date of such
previous registration.
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3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect
any public sale or distribution of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during (i) the seven days prior to and the 180-day period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which Registrable Securities are included (except as
part of such underwritten registration) and (ii) the 180-day period following
the date of the final prospectus filed by the Company with the Securities and
Exchange Commission in connection with the first underwritten public offering of
the Company's common stock unless the underwriters managing such registered
public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration in
which Registrable Securities are included (except as part of such underwritten
registration or pursuant to registrations on Form S-8 or any successor form)
unless the underwriters managing such registered public offering otherwise
agree, and (ii) to use its best efforts to cause each Person who holds at least
5% of the Common Stock of the Company (on a fully-diluted basis), acquired at
any time after the date of this Agreement (other than in a registered public
offering), to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration,
if otherwise permitted) unless the underwriters managing such registered public
offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities,
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel);
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(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 90 days and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided, that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
holders of a majority
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of the Registrable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities; and
(i) make available for inspection by any seller of such
Registrable Securities, any underwriter participating in any disposition
pursuant to this Agreement, and any attorney, accountant or other agent retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
In connection with any Demand Registration or Piggyback Registration, the
holders of Registrable Securities will expeditiously supply the Company with all
information and copies of all documents reasonably necessary to effect such
registration in compliance with the Securities Act and the rules and regulations
thereunder and shall otherwise cooperate with the Company and its counsel in
expediting the effectiveness of any such registration.
5. REGISTRATION EXPENSES.
(a) Except as otherwise provided herein, all expenses incident
to the Company's performance of or compliance with this Agreement, including
without limitation all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding underwriters'
discounts and commissions) and other Persons retained by the Company and all
other expenses of the Company, including internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed (all such expenses being herein called "Registration
Expenses") will be borne by the Company.
(b) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable will be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. INDEMNIFICATION.
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(a) The Company agrees to indemnify, to the extent permitted
by law, each holder of Registrable Securities and, as applicable, such holder's
officers and directors and each Person who controls such holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities; provided that such underwriters indemnify the Company
to the same extent as provided in subparagraph (b) below with respect to the
indemnification of the Company by the holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission or alleged untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided, that the obligation to indemnify will be several, not joint
and several, among such holders of Registrable Securities participating in the
registration and the liability of each such holder of Registrable Securities
will be in proportion to and limited to the net proceeds received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which such person seeks indemnification and (ii) unless in the reasonable
judgment of counsel for such indemnified party (given in writing) a conflict of
interest between such indemnified and indemnifying parties exists with respect
to such claim, permit such indemnifying party to
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assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is so assumed, the indemnifying party will
not be subject to any liability for any settlement made by the indemnified party
without the indemnifying party's consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions for contribution to any indemnified
party in the event the Company's indemnification is unavailable for any reason
as are reasonably requested by any indemnified party.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in the
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
8. AMENDMENT OF REGISTRATION AGREEMENT. If the Company desires to enter
into or does enter into a Registration Agreement with any Person at any time (a
"New Registration Agreement") and such New Registration Agreement provides for
rights more beneficial to such Person than those rights provided to the Series E
Holders herein or provided to the Series E Holders pursuant to any amendment,
restatement or modification of this Agreement, the Company and the Series E
Holders shall agree to further amend, restate or modify this Agreement to
provide the Series E Holders with the equivalent rights as those provided in the
New Registration Agreement.
9. DEFINITIONS.
(a) The term "Registrable Securities" means (i) (A) any Common
Stock issued upon the conversion of the Series E Preferred Stock issued to the
Purchaser pursuant to the Purchase Agreement or any other security issued by the
Company to the Purchaser pursuant to the Purchase Agreement after the date of
this Agreement, and (B) any Common Stock issued upon the conversion of the
Series E Preferred Stock issued
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to Blackwell pursuant to the Purchase Agreement or any other security issued by
the Company to Blackwell pursuant to the Purchase Agreement after the date of
this Agreement and any Common Stock issued to Blackwell-Germany or any member of
its affiliated group upon conversion of 334 shares of the Company's Series D
Preferred Stock presently owned by Blackwell-Germany; provided, however, that
the maximum number of shares of Common Stock issued to Blackwell and to
Blackwell-Germany in the aggregate and included as part of Registrable
Securities shall not exceed the total number of shares of Common Stock issuable
upon conversion of the shares of Series E Preferred Stock issued to Blackwell
pursuant to the Purchase Agreement, and (ii) any Common Stock issued or issuable
with respect to the Common Stock referred to in clause (i) 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 Registrable Securities, such securities will cease to be Registrable
Securities when they have ceased to be Restricted Securities under the
particular Purchase Agreement pursuant to which such securities were issued;
provided that any securities which cease to be Restricted Securities solely
because they have become eligible for transfer pursuant to Rule 144 (or any
similar rule then in force) will not cease to be Registrable Securities until
they have actually been sold in compliance with Rule 144 (or any similar rule
then in force). For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to acquire
such Registrable Securities (by conversion or otherwise), but disregarding any
legal restrictions upon the exercise of such right, whether or not such
acquisition has actually been effected.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
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(c) REMEDIES. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(d) AMENDMENTS AND WAIVERS. Except as otherwise 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 holders
of a majority of the Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements 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; provided, however, that no transferee of any Series
E Holder or Blackwell-Germany shall be entitled to any rights hereunder unless
such transferee (a) acquires a number of Registrable Securities representing not
less than 150,000 shares of Common Stock on an as converted basis (as
proportionally adjusted for stock splits, stock dividends and recapitalization
affecting the Common Stock) or (b) is a member of the "affiliated group" of a
Series E Holder or Blackwell-Germany (as defined below). The Company shall be
given written notice by the Series E Holder a reasonable time after such
transfer stating the name and address of the transferee and identifying the
securities with respect to which its rights hereunder are being assigned. Any
transferee to whom rights hereunder are transferred shall, as a condition to
such transfer, deliver to the Company a written instrument by which the
transferee agrees to be bound by the obligations imposed upon the Series E
Holders hereunder to the same extent as if such transferee were an original
party hereto. As used herein, the term "affiliated group" includes a Series E
Holder, Blackwell-Germany or any transferee's spouse, parents, siblings and
descendants (whether natural or adopted) and any trust solely for the benefit of
such person and/or such person spouse, parents, siblings and/or descendants and,
in the case of a corporation, limited liability company or partnership, any
shareholder or partner thereof or any entity which controls, is controlled by or
is under common control with such corporation, limited liability company or
partnership.
(f) 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.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one
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party, but all such counterparts taken together will constitute one and the same
Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. 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.
(j) 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, sent by confirmed fax 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
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To the Company: HealthGate Data Corp.
25 Corporate Drive, Suite 310
Burlington, MA 01803
Fax: (781) 685-4040
Attention: William S. Reece, President
with a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Fax: (617) 556-3889
To the 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.
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.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece, President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Richard J. Miller
---------------------
Name: Richard J. Miller
Title: Senior Vice President
BLACKWELL SCIENCE, LTD.
By: /s/ Martin Wilkinson
--------------------
Name: Martin Wilkinson
Title: Director
BLACKWELL WISSENSCHAFTS VERLAG GmbH
By: /s/ Martin Wilkinson
--------------------
/s/ R.M. Campbell
-----------------
Name: M. Wilkinson/R.M. Campbell
Title: Joint Managing Directors
<PAGE>
Exhibit 4.8
AMENDMENT TO PURCHASE AGREEMENTS
AND REGISTRATION AGREEMENTS
THIS AMENDMENT TO PURCHASE AGREEMENTS AND REGISTRATION AGREEMENTS is
made as of the 23rd day of March, 1998, by and among HealthGate Data Corp., a
Delaware corporation (the "Company"), the holders of a majority of the Company's
Series A Preferred Stock as set forth on the signature page to this Amendment
(collectively the "Series A Stockholders"), Nichols Research Corporation, a
Delaware corporation and holder of all the Company's Series B Preferred Stock
("NRC"), the holders of a majority of the Company's Series C Preferred Stock as
set forth on the signature page to this Amendment (collectively the "Series C
Stockholders") and the holders of a majority of the Company's Series D Preferred
Stock as set forth on the signature page to this Amendment (collectively the
"Series D Stockholders")
WHEREAS, the Company, David Friend and William G. Nelson entered into a
Purchase Agreement, dated as of March 16, 1995 and amended October 18, 1995 (as
amended, the "First Purchase Agreement"), with respect to the purchase and sale
of shares of the Company's Series A Preferred Stock;
WHEREAS, the Company and NRC entered into a Stock Purchase Agreement,
dated October 18, 1995 (the "Second Purchase Agreement"), with respect to the
purchase and sale of the Company's Series B Preferred Stock;
WHEREAS, the Company and certain persons and entities entered into a
Stock Purchase Agreement, dated August 21, 1996 (the "Third Purchase
Agreement"), with respect to the purchase and sale of the Company's Series C
Preferred Stock;
WHEREAS, the Company and Blackwell Science, Ltd. ("Blackwell") entered
into a Stock Purchase Agreement, dated December 20, 1996 (the "Fourth Purchase
Agreement"), with respect to the purchase and sale of the Company's Series D
Preferred Stock;
WHEREAS, Company desires to enter into a Loan and Security Agreement
with Petra Capital, LLC ("Petra"), providing for Petra's loan of $2,000,000 to
the Company and the Company's issuance to Petra of a Stock Purchase Warrant
pursuant to which Petra may purchase shares of the Company's common stock for
the exercise price of $0.01 per share (the "Petra Warrant") (collectively the
Loan and issuance of the Petra Warrant shall be referred to as the "Petra
Transaction");
WHEREAS, Company and the Series A Stockholders desire to amend the
First Purchase
<PAGE>
Agreement as provided herein to permit the Petra Transaction and Section 9.4 of
the First Purchase Agreement provides that the First Purchase Agreement may be
amended with the written consent of the holders of a majority of the outstanding
shares of Series A Preferred;
WHEREAS, the Company and NRC desire to amend the Second Purchase
Agreement as provided herein to permit the Petra transaction;
WHEREAS, the Company and the Series C Stockholders desire to amend the
Third Purchase Agreement as provided herein to permit the Petra Transaction and
Section 9.4 of the Third Purchase Agreement provides that the Third Purchase
Agreement may be amended with the written consent of the holders of a majority
of the outstanding shares of Series C Preferred;
WHEREAS, the Company and the Series D Stockholders desire to amend the
Fourth Purchase Agreement as provided herein to permit the Petra Transaction and
Section 9.4 of the Fourth Purchase Agreement provides that the Fourth Purchase
Agreement may be amended with the written consent of the holders of a majority
of the outstanding shares of Series D Preferred;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged by all parties, it is agreed as follows:
1. AMENDMENT TO CERTIFICATE OF INCORPORATION. (a) Notwithstanding
Section 4.4(v) of the First Purchase Agreement or any other term or condition of
the First Purchase Agreement, each of the undersigned Series A Stockholders
hereby consents to the filing of the Company's Certificate of Amendment to its
Amended and Restated Certificate of Incorporation as set forth in the Company's
Stockholders' Consent Action dated on or about March 23, 1998, with respect to
the Petra Transaction causing no adjustment of the Conversion Price of the
Series A Preferred Stock and the subordination of redemption rights of Series A
Preferred Stock to the repayment of the Petra Loan.
(b) Notwithstanding Section 4.4(v) of the Second Purchase
Agreement or any other term or condition of the Second Purchase Agreement, NRC,
as holder of all the Series B Preferred Stock, hereby consents to the filing of
the Company's Certificate of Amendment to its Amended and Restated Certificate
of Incorporation as set forth in the Company's Stockholders' Consent Action
dated on or about March 23, 1998, with respect to the Petra Transaction causing
no adjustment of the Conversion Price of the Series B Preferred Stock and the
subordination of redemption rights of Series B Preferred Stock to the repayment
of the Petra Loan.
(c) Notwithstanding Section 4.4(v) of the Third Purchase
Agreement or any other term or condition of the Third Purchase Agreement, each
of the undersigned Series C
2
<PAGE>
Stockholders hereby consents to the filing of the Company's Certificate of
Amendment to its Amended and Restated Certificate of Incorporation as set forth
in the Company's Stockholders' Consent Action dated on or about March 23, 1998,
with respect to the Petra Transaction causing no adjustment of the Conversion of
the Price Series C Preferred Stock and the subordination of redemption rights of
Series C Preferred Stock to the repayment of the Petra Loan.
(d) Notwithstanding Section 4.4(v) of the Fourth Purchase
Agreement or any other term or condition of the Fourth Purchase Agreement, each
of the undersigned Series D Stockholders hereby consents to the filing of the
Company's Certificate of Amendment to its Amended and Restated Certificate of
Incorporation as set forth in the Company's Stockholders' Consent Action dated
on or about March 23, 1998, with respect to the Petra Transaction causing no
adjustment of the Conversion Price of the Series D Preferred Stock and the
subordination of redemption rights of Series D Preferred Stock to the repayment
of the Petra Loan.
2. WAIVER OF PRE-EMPTIVE RIGHTS. (a) The Series A Stockholders hereby
waive their rights as set forth in Section 4.5(ii) of the First Purchase
Agreement with respect to the authorization and issuance by the Company of the
Petra Warrant. Without limitation, the Series A Stockholders waive the right to
the 15 day notice period set forth in Section 4.5(ii)(A) of the First Purchase
Agreement.
(b) NRC hereby waives its rights as set forth in Section
4.5(ii) of the Second Purchase Agreement with respect to the authorization and
issuance by the Company of the Petra Warrant. Without limitation, NRC waives its
right to the 15 day notice period set forth in Section 4.5(ii)(A) of the Second
Purchase Agreement.
(c) The Series C Stockholders hereby waive their rights as set
forth in Section 4.5(ii) of the Third Purchase Agreement with respect to the
authorization and issuance by the Company of the Petra Warrant. Without
limitation, the Series C Stockholders waive the right to the 15 day notice
period set forth in Section 4.5(ii)(A) of the Third Purchase Agreement.
(d) The Series D Stockholders hereby waive their rights as set
forth in Section 4.5(ii) of the Fourth Purchase Agreement with respect to the
authorization and issuance by the Company of the Petra Warrant. Without
limitation, the Series D Stockholders waive the right to the 15 day notice
period set forth in Section 4.5(ii)(A) of the Fourth Purchase Agreement.
3. AMENDMENTS TO REGISTRATION AGREEMENTS.
(a) FIRST REGISTRATION AGREEMENT. Pursuant to Section 10(d) thereof,
the parties to the Registration Agreement, dated as of March 16, 1995, between
the Company and David Friend
3
<PAGE>
and William G. Nelson (the "First Registration Agreement") and their permitted
assigns, agree as follows:
(1) The Registration Agreement between the Company and Petra,
dated on or about March 27, 1998 (which is substantially similar to the First
Registration Agreement), (i) is hereby consented to, and (ii) is not a breach of
Section 10(a) of the First Registration Agreement.
(2) Section 9(a) of the First Registration Agreement is hereby
amended by amending and restating clause (i) of Section 9(a) to read as follows:
"(i) any Common Stock issued upon the conversion of any Series
A Preferred, Series B Preferred, Series C Preferred or Series
D Preferred or upon the exercise or conversion of the Stock
Purchase Warrant issued to Petra Capital, LLC on or about
March 27, 1998."
(b) SECOND REGISTRATION AGREEMENT. NRC, as party to the Registration
Agreement, dated as of October 18, 1995, with the Company (the "Second
Registration Agreement") agrees as follows:
(1) The Registration Agreement between the Company and Petra,
dated on or about March 27, 1998 (which is substantially similar to the Second
Registration Agreement), (i) is hereby consented to, and (ii) is not a breach of
Section 10(a) of the Second Registration Agreement.
(2) Section 9(a) of the Second Registration Agreement is
hereby amended by amending and restating clause (i) of Section 9(a) to read as
follows:
"(i) any Common Stock issued upon the conversion of any Series
A Preferred, Series B Preferred, Series C Preferred or Series
D Preferred or upon the exercise or conversion of the Stock
Purchase Warrant issued to Petra Capital, LLC on or about
March 27, 1998."
(c) THIRD REGISTRATION AGREEMENT. Pursuant to Section 10(d) thereof,
the parties to the Registration Agreement, dated as of August 21, 1996, between
the Company and the Series C Stockholders (the "Third Registration Agreement")
agree as follows:
(1) The Registration Agreement between the Company and Petra,
dated on or about March 27, 1998 (which is substantially similar to the Third
Registration Agreement), (i) is hereby consented to, and (ii) is not a breach of
Section 10(a) of the Third Registration Agreement.
(2) Section 9(a) of the Third Registration Agreement is hereby
amended by
4
<PAGE>
amending and restating clause (i) of Section 9(a) to read as follows:
"(i) any Common Stock issued upon conversion of any Series A
Preferred, Series B Preferred, Series C Preferred or Series D
Preferred or upon the exercise or conversion of the Stock
Purchase Warrant issued to Petra Capital, LLC on or about
March 27, 1998."
(d) FOURTH REGISTRATION AGREEMENT. Blackwell, as party to the
Registration Agreement, dated as of December 20, 1996, with the Company (the
"Fourth Registration Agreement") agrees as follows:
(1) The Registration Agreement between the Company and Petra,
dated on or about March 27, 1998 (which is substantially similar to the Fourth
Registration Agreement), (i) is hereby consented to, and (ii) is not a breach of
Section 10(a) of the Fourth Registration Agreement.
(2) Section 9(a) of the Fourth Registration Agreement is
hereby amended by amending and restating clause (i) of Section 9(a) to read as
follows:
"(i) any Common Stock issued upon conversion of any Series A
Preferred, Series B Preferred, Series C Preferred or Series D
Preferred or upon the exercise or conversion of the Stock
Purchase Warrant issued to Petra Capital, LLC on or about
March 27, 1998."
4. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Amendment.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of this
Amendment are inserted for convenience only and do not constitute a part of this
Amendment.
(c) SIGNATURES. Notwithstanding the signature lines set forth
below (i) this Amendment shall become valid and binding upon all Series A
Stockholders pursuant to Section 9.4 of the First Purchase Agreement and
pursuant to Section 10(d) of the First Registration Agreement upon the holders
of a majority of the outstanding shares of Series A Preferred Stock executing
and delivering this Amendment to the Company; and (ii) this Amendment shall
become valid and binding upon all Series C Stockholders pursuant to Section 9.4
of the Third Purchase Agreement and pursuant to Section 10(d) of the Third
Registration Agreement upon the holders of a majority of the outstanding shares
of Series C Preferred Stock executing and delivering this
5
<PAGE>
Amendment to the Company; and (iii) this Amendment shall become valid and
binding upon all Series D Stockholders pursuant to Section 9.4 of the Fourth
Purchase Agreement and pursuant to Section 10(d) of the Fourth Registration
Agreement upon the holders of a majority of the outstanding shares of Series D
Preferred Stock executing and delivering this Amendment to the Company.
(d) DEFINITIONS. Except as otherwise defined or described
herein, capitalized terms used herein as defined in the First Purchase
Agreement.
(e) RATIFICATION. Except as amended by this Amendment, all
terms and conditions of the First Purchase Agreement, the Second Purchase
Agreement, the Third Purchase Agreement and the Fourth Purchase Agreement are
hereby ratified and affirmed.
[SIGNATURES ON NEXT PAGE]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
----------------------------
William S. Reece
President
SERIES A STOCKHOLDERS SERIES A STOCKHOLDERS, CONT.
Account Management Corporation Profit
Sharing Plan
By: /s/ Peter deRoetth
- ------------------------------- ----------------------------
Title: President Patricia T. Schuler
- ------------------------------- ----------------------------
Elisabeth Abbe Christopher T. Schuler
/s/ Tina Blair
- ------------------------------- ----------------------------
Tina Blair, M.D. Mark J. Schuler
/s/ Christopher deRoetth
- ------------------------------- ----------------------------
Christopher deRoetth Langdon B. Wheeler
/s/ Peter deRoetth
- ------------------------------- ----------------------------
Peter deRoetth Robert & Linda Williams
- ------------------------------- SERIES B STOCKHOLDERS
Louisa deRoetth
/s/ David Friend NICHOLS RESEARCH CORPORATION
- -------------------------------
David Friend By: /s/ Chris H. Horgen
----------------------------
Chris H. Horgen
Chief Executive Officer
- -------------------------------
Roger M. Marino
/s/ William G. Nelson
- -------------------------------
William G. Nelson
- -------------------------------
Marsha Paller
- -------------------------------
James K. Schuler
7
<PAGE>
<TABLE>
<S> <C>
SERIES C STOCKHOLDERS SERIES C STOCKHOLDERS, CONT.
NICHOLS RESEARCH CORPORATION
By: /s/ Chris H. Horgen ACCOUNT MANAGEMENT CORP., as
-------------------------------- Attorney-in-Fact for Richard Egan,
Chris H. Horgen Trustee of the 1986 Richard J. Egan Trust
Chief Executive Officer
ACCOUNT MANAGEMENT CORP., as By: /s/ Peter deRoetth
Attorney-in-Fact for Stephen L. --------------------------------------
Brown and Arleen C. Brown Title: President
ACCOUNT MANAGEMENT CORP., as
By: /s/ Peter deRoetth Attorney-in-Fact for Steuart Evans
--------------------------------
Title: President
By: /s/ Peter deRoetth
ACCOUNT MANAGEMENT CORP., as --------------------------------------
Attorney-in-Fact for Peter deRoetth Title: President
ACCOUNT MANAGEMENT CORP., as
By: /s/ Peter deRoetth Attorney-in-Fact for Ray Fambrough
--------------------------------
Title: President
By: /s/ Peter deRoetth
ACCOUNT MANAGEMENT CORP., as --------------------------------------
Attorney-in-Fact for Nicholas DeWolf Title: President
ACCOUNT MANAGEMENT CORP., as
By: /s/ Peter deRoetth Attorney-in-Fact for Donald Foss
--------------------------------
Title: President
By: /s/ Peter deRoetth
ACCOUNT MANAGEMENT CORP., as --------------------------------------
Attorney-in-Fact for Christopher Egan Title: President
ACCOUNT MANAGEMENT CORP., as
By: /s/ Peter deRoetth Attorney-in-Fact for Robert Glenn
--------------------------------
Title: President
By: /s/ Peter deRoetth
ACCOUNT MANAGEMENT CORP., as --------------------------------------
Attorney-in-Fact for Michael J. Egan, Title: President
Trustee of the Michael J. Egan
Revocable Trust ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Roger M. Marino
By: /s/ Peter deRoetth By: /s/ Peter deRoetth
-------------------------------- --------------------------------------
Title: President Title: President
ACCOUNT MANAGEMENT CORP., as
ACCOUNT MANAGEMENT CORP., as Attorney-in-Fact for Ray W. Miller
Attorney-in-Fact for Richard & Maureen
E. Egan, Trustees of the Richard E. & By: /s/ Peter deRoetth
Maureen E. Egan Grandchildrens Trust --------------------------------------
Title: President
By: /s/ Peter deRoetth
--------------------------------
Title: President
</TABLE>
8
<PAGE>
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for William Miller
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Michael J. Ritter
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Shirley J. Ritter
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for James K. Schuler
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert Thurber
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Gerald Turbow
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Jane Westervelt
By: /s/ Peter deRoetth
--------------------------------
Title: President
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert and Linda Williams
By: /s/ Peter deRoetth
--------------------------------
Title: President
9
<PAGE>
SERIES D STOCKHOLDERS
BLACKWELL SCIENCE, LTD.
By: /s/ Jonathan J. G. Conibear
--------------------------------
BLACKWELL WISSENSCHAFTS-VERLAG GmbH
By: /s/ Axel Bedurstig
--------------------------------
10
<PAGE>
Exhibit 4.9
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
BY AND AMONG
HEALTHGATE DATA CORP.
AND
THE STOCKHOLDERS LISTED ON
THE SIGNATURE PAGES HEREOF
DATED AS OF APRIL 7, 1999
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (3/99)
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "AGREEMENT") is
made and entered into as of the 7th day of April, 1999, by and among HealthGate
Data Corp., formerly known as Medical Data Interface Design, Inc., a Delaware
corporation (the "COMPANY"), Barry M. Manuel, William S. Reece and Ricky D.
Lawson (collectively Dr. Manuel, Mr. Reece and Mr. Lawson shall be referred to
herein as the "FOUNDERS"), Nichols Research Corporation ("NRC"), Blackwell
Science Ltd. ("BSL"), GE Capital Equity Investments, Inc., ("GE"), and each
other stockholder and option holder of the Company who executes a counterpart of
this Agreement (the Founders, NRC, BSL, GE and the other stockholders who
execute a copy of this Agreement shall be referred to individually as a
"STOCKHOLDER" and collectively as the "STOCKHOLDERS").
W I T N E S S E T H :
WHEREAS, each of the Existing Stockholders is the owner and holder of
shares of stock of the Company, including, without limitation, Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock or options for the purchase of shares of stock of the
Company;
WHEREAS, each of the Existing Stockholders and the Company are parties
to an Amended and Restated Stockholders Agreement, dated December 1996 (the
"DECEMBER 1996 AGREEMENT");
WHEREAS, pursuant to a Purchase Agreement between the Company, BSL and
GE, dated April 7, 1999 (the "Purchase Agreement"), GE is purchasing from the
Company 436,681 shares of Series E Convertible Redeemable Preferred Stock (the
"SERIES E PREFERRED"), par value $.01 per share, for an aggregate purchase price
of approximately $5,000,000 (collectively with the Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, the "STOCK") and BSL is purchasing 174,672 shares of Series E
Preferred for a purchase price of approximately $2,000,000 payable by
cancellation of the Company's outstanding $2,000,000 Convertible Bridge
Promissory Note to BSL.
WHEREAS, it is a condition to the consummation of the foregoing
transactions that the parties hereto terminate the December 1996 Agreement and
enter into this Agreement;
WHEREAS, in connection with the sale of Series E Preferred to GE and
BSL, the parties hereto desire to terminate the December 1996 Agreement pursuant
to Section 6.2 thereof, and the parties hereto deem it to be in their best
interests to enter into
-1-
<PAGE>
this Agreement establishing and setting forth their agreement with respect to
certain rights and obligations associated with ownership of shares of Stock;
WHEREAS, the Stockholders desire to provide for continuity and
stability of policy and management of the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS.
As used herein, the following terms shall have the following meanings
(capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Purchase Agreement):
"AFFILIATE" has 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.
"BSL" has the meaning assigned to it in the first paragraph hereof.
"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.
"COMMON STOCK EQUIVALENTS" means rights, options, scrip, warrants or
other securities convertible into, or exchangeable or exercisable for, shares of
Common Stock.
"COMPANY" has the meaning assigned to it in the first paragraph hereof.
"DECEMBER 1996 AGREEMENT" has the meaning assigned to it in the third
paragraph hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such successor
Federal statute.
"EXISTING STOCKHOLDERS" means Stockholders other than GE.
"FOUNDERS" has the meaning assigned to it in the first paragraph
hereof.
-2-
<PAGE>
"FULLY DILUTED" 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.
"GE" has the meaning assigned to it in the first paragraph hereof.
"NRC" has the meaning assigned to it in the first paragraph hereof.
"PERMITTED TRANSFER" means any assignment, transfer or other
disposition (i) by an individual Stockholder to such Stockholder's spouse,
child, parent, siblings and descendants, whether natural or adopted
(collectively, "RELATIVES") or to or among a trust of which there are no
principal beneficiaries other than one or more Relatives of such Stockholder;
and (ii) by any Stockholder to any of its Affiliates or partners.
"PERSON" means an individual, a partnership, a corporation, a 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.
"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 holders of Series E Preferred Shares.
"PURCHASE AGREEMENT" has the meaning assigned to it in the fourth
paragraph hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act of 1933, as amended, shall include
reference to the comparable section, if any, of any such successor Federal
statute.
"SELL" means, as to any Stock, to sell, or in any other way directly or
indirectly transfer, assign, distribute, or encumber, or otherwise dispose of
such Stock, either voluntarily or involuntarily; and the terms "SALE" and "SOLD"
have the meanings correlative to the foregoing. A Permitted Transfer shall not
constitute a sale for purposes of this Agreement.
-3-
<PAGE>
"SERIES E PREFERRED" has the meaning assigned to it in the fourth
paragraph hereof.
"STOCK" has the meaning assigned to it in the fourth paragraph hereof.
"STOCKHOLDER" and "STOCKHOLDERS" have the meanings assigned to such
terms in the first paragraph hereof; PROVIDED that any transferee of Stock
pursuant to a Permitted Transfer shall be treated as a Stockholder for purposes
of this Agreement and shall be entitled to the benefits of, and shall be bound
by, the provisions of this Agreement.
2. CORPORATE GOVERNANCE.
2.1. BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD").
(a) MEMBERS. Consistent with the provisions of Section 4.3 of the
Purchase Agreement, each Stockholder in his, her or its capacity as a
Stockholder of the Company, agrees to vote or cause to be voted all shares of
Stock owned by such Stockholder so as to:
(i) fix the number of the directors of the Company (the "DIRECTORS") at
seven, and
(ii) elect as Directors of the Company (v) one person designated by GE
(such person so designated, and any successor thereto, being referred to herein
as the "GE DESIGNEE"), (w) one person designated by BSL (initially Jon Conibear;
Mr. Conibear and any successor thereto, being referred to herein as the "BSL
DESIGNEE"), (x) two persons designated by the Founders (initially, William S.
Reece and Edson D. de Castro; Messrs. Reece and de Castro and any successors
thereto, being referred to herein as the "FOUNDERS DESIGNEES"), (y) two persons
designated by the holders of the Series A Preferred Stock (initially, David
Friend and Tina Blair; Mr. Friend and Ms. Blair and any successors thereto,
being referred to herein as the "SERIES A DESIGNEES"), and (z) one person
designated by the holders of Series B Preferred (initially, Chris H. Horgen; Mr.
Horgen and any successors thereto, being referred to herein as the "SERIES B
DESIGNEE"). Each of the GE Designee, the BSL Designee, the Founders Designees,
the Series A Designees, and the Series B Designee is referred to as a
"Designee". At each annual meeting of the Stockholders of the Company, or at any
meeting of the Stockholders of the Company at which members of the Board of
Directors of the Company are to be elected, or whenever members of the Board of
Directors are to be elected by written consent, the Stockholders shall take such
action as shall be necessary to cause the GE Designee, the BSL Designee, the
Founders Designees, the Series A Designees, and the Series B Designee to be
elected as directors.
-4-
<PAGE>
(b) VACANCIES. Each Designee shall hold office until his death,
resignation or removal or until his successor shall have been duly elected and
qualified. If any Designee shall cease to serve as a Director of the Company for
any reason, the vacancy resulting thereby shall be filled by another person
designated by the holders entitled to designate such Designee. In the event that
at any time there exist vacancies on the Board such that there is no GE
Designee, no action may be taken by the Board until such vacancy is filled,
unless GE elects not to designate a successor Designee within a reasonable time
period not greater than 45 days. If GE chooses not to exercise its right to
elect the GE Designee, then GE will have Board Observer Rights, as set forth in
paragraph (c) below.
(c) BOARD OBSERVER RIGHTS OF GE. In the event that GE does not exercise
its right to elect the GE Designee to the Company's Board, then GE shall have
the right to designate one representative to attend all meetings of the
Company's Board and Committees of the Board in a nonvoting observer capacity,
and, in this respect, the Company shall give GE copies of all notices, minutes,
consents, and other materials that the Company provides to its Directors.
Nothing in this Section 2.1 (c) shall be deemed to abridge GE's rights with
respect to the election of Directors or access to information as provided by
applicable law, the Company's Bylaws or the Purchase Agreement.
(d) COMMITTEES. Each Stockholder in his, her or its capacity as a
Stockholder of the Company agrees to vote or cause to be voted all shares owned
by such Stockholder, and otherwise use his, her or its best efforts so as to:
(i) establish an Executive Committee of the Board,
(ii) fix the number of the members of the Executive Committee of the
Board at three (3), and
(iii) cause the directors of the Company to select as members of the
Executive Committee (x) the GE Designee, (y) one Founders Designee, and (z) one
Series D Designee.
Each Stockholder agrees to cause any Designee designated by it to take
all necessary actions so as to cause the GE Designee to be appointed to and be
at all times a standing member of each of the Board's Audit, Compensation and
Executive Committees, and each of the committees of the Board as may be
requested at any time or from time to time by GE, as the case may be.
-5-
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3. SALE OF STOCK BY STOCKHOLDERS AND RESTRICTIONS ON SALE.
3.1 RIGHT OF FIRST REFUSAL
If any Stockholder shall elect to sell (other than in a Permitted
Transfer) any or all of the Stock now owned or subsequently acquired by him,
such Stockholder shall first offer to sell such shares of Stock to the Company
and GE in writing, at the same price and upon the same terms and conditions
offered to such Stockholder by the prospective purchaser of such Stock. Each of
the Company and GE shall have the option to purchase such shares of Stock, in
whole or in part, for a period of fourteen (14) days following receipt of such
written offer, on the same terms and conditions contained in such offer and, if
the Company and GE each desire to exercise such right so that the number of
shares desired to be purchased by each of them exceeds the number of shares
proposed to be sold, such shares shall be allocated between the Company and GE
pro rata in proportion to the number of shares desired to be purchased by each
of them. Such option may be exercised by written notice of such exercise to the
selling Stockholder. Each of the Company and GE shall have until the later of
(x) thirty (30) days from the date of such notice and (y) ten (10) days after
the receipt of all required governmental and third party consents and approvals
to consummate the purchase of the shares to be purchased by it, upon which date
the closing of the transaction effecting the purchase and sale of Stock shall
occur.
3.2 STOCKHOLDERS' RIGHT OF REFUSAL.
If the Company and GE shall fail to exercise the option described in
Section 3.1 hereof as to all of the shares of Stock to be sold, the selling
Stockholder shall thereupon offer to sell the remaining shares of Stock to each
other Stockholder in writing, in amounts proportionate to their then record
ownership of Stock, at the same price and on the same terms and conditions as
offered to the Company. Each other Stockholder shall have the option to purchase
such shares of Stock for a period of fourteen (14) days following receipt of
such written offer. Such option may be exercised by a Stockholder by giving
written notice of such exercise to the selling Stockholder. Each Stockholder
shall have until the later of (x) thirty (30) days from the date of such notice
and (y) ten (10) days after the receipt of all required governmental and third
party consents and approvals to consummate the purchase of such shares of Stock,
upon which date the closing of the transaction effecting the purchase and sale
of Stock shall occur.
If one or more, but not all, parties to whom Stock has been offered
pursuant to this Section 3.2 shall duly exercise said option, the exercising
parties shall be notified in writing by the offering Stockholder of failure by
other Stockholder(s) to exercise said
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option. The exercising parties shall have the option, for a further period of
fourteen (14) days, to purchase a proportionate share of the offered Stock as to
which options to purchase were not exercised, based upon the aggregate record
ownership of the Stock of the exercising parties. This process shall be repeated
until options to purchase all of the offered Stock shall have been exercised, or
until no party shall exercise an option to purchase the offered Stock.
If every party to whom Stock has been so offered shall fail, within
said fourteen (14) day period, to exercise said option as to any portion of the
offered Stock, the offering Stockholder shall be free, for a period of sixty
(60) days thereafter, to sell such portion of the offered Stock to any purchaser
at the same price and on the same terms and conditions as offered to the parties
hereto, free of the restrictions imposed by this Section; provided that no sale
may be made to any prospective purchaser unless such prospective purchaser
agrees in writing to be bound by the provisions of this Agreement. If at the end
of the sixty (60) day period described in this Section 3.2, the offering
Stockholder has not completed the sale of the offered Stock as aforesaid, all
the restrictions on sale, transfer, or assignment contained in this Section
shall again be in effect with respect to such Stock.
4. INVOLUNTARY TRANSFERS.
4.1. DEATH OF A STOCKHOLDER.
Upon the death of a Stockholder, the Stock held by such Stockholder may
be transferred to any executor or administrator of such Stockholder's estate, to
the beneficiaries under the will of such Stockholder, or to the heirs-at-law of
such Stockholder, if he should die intestate. No transfer of the Stock may
thereafter be made by any of the above persons unless and until the shares of
Stock, which are proposed to be transferred, are first offered in writing by the
proposed transferor to the Company and GE. Each of the Company and GE shall have
the right to accept or reject such offer, in whole or in part, within a period
of ninety (90) days after receipt of such offer. If the Company and GE each
desire to exercise such right so that the number of shares desired to be
purchased by each of them exceeds the number of shares proposed to be
transferred, such shares shall be allocated between the Company and GE pro rata
in proportion to the number of shares desired to be purchased by each of them.
If the Company and/or GE, as the case may be, shall so accept such offer, the
Company and/or GE, as the case may be, shall be obligated to purchase such
shares of Stock, and such shares of Stock shall be sold to the Company and/or
GE, as the case may be, at an appraised value per share to be determined in
accordance with the following procedure. The value for such shares of Stock
shall be determined by three appraisers: one to be designated by the Company
and/or GE, as the case may be, one to be designated by the proposed transferor,
and the third to be designated by the first two. Such designation of appraisers
shall be made as soon as practicable after acceptance by the Company and/or GE
of such offer of sale as
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aforesaid. Within ten (10) days after the report of the appraisers as aforesaid,
the shares of Stock to be so sold to and purchased as aforesaid shall be
tendered to the Company and/or GE, as the case may be by delivery of
certificates representing such shares endorsed in blank and in proper form for
transfer, and the Company and/or GE shall make payment of the purchase price
therefor by certified or bank check, or wire transfer.
4.2. INVOLUNTARY TRANSFERS OTHER THAN UPON THE DEATH OF A
STOCKHOLDER.
The following provisions shall apply with respect to any transfer of
Stock to any guardian or conservator of a Stockholder, to a transfer of Stock
upon the insolvency or bankruptcy of a Stockholder, or to any other transfer of
Stock by operation of law, except as provided in Section 4.1 herein. No such
transfer of Stock may be made unless and until the shares of Stock which are
proposed to be transferred are first offered in writing by the proposed
transferee to the Company and GE. Each of the Company and GE shall have the
right to accept or reject such offer, in whole or in part, within a period of
ninety (90) days after receipt of the offer. If the Company and GE each desire
to exercise such right so that the number of shares desired to be purchased by
each of them exceeds the number of shares proposed to be transferred, such
shares shall be allocated between the Company and GE pro rata in proportion to
the number of shares desired to be purchased by each of them. If the Company
and/or GE, as the case may be, shall so accept such offer, the Company and/or
GE, as the case may be, shall be obligated to purchase such shares of Stock, and
such shares of Stock shall be sold to the Company and/or GE, as the case may be,
all in accordance with the valuation and procedure set forth in Section 4.1 of
this Agreement.
4.3. CONTINUED RESTRICTIONS ON TRANSFER.
For any transfer of Stock effected pursuant to Section 4.1 or Section
4.2 hereof, the transferee shall, at or prior to such transfer, become bound by
the provisions of Sections 3 and 4 of this Agreement with respect to such Stock
by executing an agreement to be so bound, and any subsequent sale or transfer of
such Stock by such transferee shall be subject to the provisions of this
Agreement.
5. PRE-EMPTIVE RIGHTS.
5.1 LIMITATION ON PRE-EMPTIVE RIGHTS.
All Stockholders acknowledge that the holders of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall not have any of the pre-emptive rights described in the following
paragraphs 5.2, 5.3, 5.4, 5.5 and 5.6, so long as any Series E Preferred holder
chooses to exercise its prior rights under Sections 2 and 4.5 of the Purchase
Agreement. To the extent (and only to the extent) that any Series E Preferred
holder chooses not to exercise its rights under the Purchase
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Agreement, the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be able to exercise
their pre-emptive rights described in the following paragraphs 5.2, 5.3, 5.4,
5.5, and 5.6, with respect to new investors; provided that each Stockholder
agrees that each of such pre-emptive rights shall not apply to New Securities
(as defined in the Purchase Agreement) 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, or (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.
5.2. PRE-EMPTIVE RIGHTS OF HOLDERS OF SERIES A PREFERRED STOCK.
All Stockholders acknowledge that the Company has granted certain
holders of Series A Preferred Stock certain pre-emptive rights as set forth in
Section 4.5 of the Purchase Agreement, dated as of March 16, 1995, between the
Company, David Friend and William G. Nelson (the "FIRST PURCHASE AGREEMENT").
5.3. PRE-EMPTIVE RIGHT OF HOLDERS OF SERIES B PREFERRED STOCK.
All Stockholders acknowledge that the Company has granted holders of
Series B Preferred Stock certain pre-emptive rights as set forth in Section 4.5
of the Stock Purchase Agreement, dated on or about October 18, 1995, between the
Company and NRC (the "SECOND PURCHASE AGREEMENT").
5.4. PRE-EMPTIVE RIGHTS OF FOUNDERS.
To conform the Founder's pre-emptive rights with the pre-emptive rights
of certain of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, the Company agrees as
follows:
Except for the Series E Preferred issued pursuant to the Purchase
Agreement, the Company will not authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any equity security of
the Company ("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 each Founder 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
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conditions of such proposed issue, and will be deemed to be an offer to each
Founder to purchase their respective Allotments (as 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 Founder 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 Common Stock held by such
Founder 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 (his "ALLOTMENT");
(C) Each Founder shall inform the Company in writing within 15 days
after receipt of the Equity Notice whether he elects to purchase all or any part
of his Allotment, and shall have until the later of the closing of the sale of
the securities described in the Equity Notice or 30 days after the date of the
Equity Notice to consummate the purchase of such part of his Allotment as he
timely elected to purchase;
The provisions of this Section 5.4 shall not apply to the issuance of
shares of Common Stock (as proportionally adjusted for any stock split, stock
dividend or recapitalization affecting the Common Stock), including options or
warrants to acquire Common Stock, in connection with any employee stock option
or stock ownership plan, any consulting agreement or arrangement or any
restricted stock agreement providing for the issuance of Common Stock to an
employee or employees of the Company at a price equal to the fair market value
of such shares as of the time of issuance as determined by the Company's board
of directors in good faith.
5.5. PRE-EMPTIVE RIGHTS OF HOLDERS OF SERIES C PREFERRED STOCK.
All Stockholders acknowledge that the Company has granted certain
holders of Series C Preferred Stock certain pre-emptive rights as set forth in
Section 4.5 of the Stock Purchase Agreement, dated as of August 21, 1996,
between the Company and the stockholders thereto (the "SERIES C PURCHASE
AGREEMENT").
5.6. PRE-EMPTIVE RIGHT OF HOLDERS OF SERIES D PREFERRED STOCK.
All Stockholders acknowledge that the Company has granted holders of
Series D Preferred Stock certain pre-emptive rights as set forth in Section 4.5
of the Stock Purchase Agreement, dated on or about December 20, 1996, between
the Company and BSL (the "SERIES D PURCHASE AGREEMENT").
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<PAGE>
5.7. PRE-EMPTIVE RIGHT OF HOLDERS OF SERIES E PREFERRED STOCK.
All Stockholders acknowledge that the Company has granted holders of
Series E Preferred Stock certain pre-emptive rights as set forth in Section 4.5
of the Series E Preferred Purchase Agreement.
5.8. NO OTHER PRE-EMPTIVE RIGHTS.
Each Stockholder acknowledges that except as set forth in this
Agreement, no other Stockholder holds any pre-emptive or similar rights with
respect to future issuances of the Company's Stock.
6. TAG-ALONG RIGHTS.
6.1. RIGHT.
In the event that any Existing Stockholder who presently beneficially
owns more than 5% of the Company's Common Stock on a Fully-Diluted basis
("SELLING STOCKHOLDER(S)") shall enter into an agreement to sell or otherwise
propose to sell to any Person (such Person, the "TAG-ALONG TRANSFEREE"), in one
transaction or a series of related transactions, shares of Common Stock or
Common Stock Equivalents of the Company, excluding shares of Common Stock of the
Company owned by Blackwell-Wissenschaft Verlag GmbH, BSL's German subsidiary,
held by such Selling Stockholder (the "TAG-ALONG SALE"), then GE shall have the
right (the "TAG-ALONG RIGHT") to participate in the sale of shares, by selling a
number of shares of Common Stock equal to GE's Proportionate Share, as part of
the Tag-Along Sale by the Selling Stockholders, on the same terms as those
applicable to the Tag-Along Sale (except that, if the Tag-Along Sale involves
Common Stock Equivalents, the economic terms of such Sale shall be appropriately
adjusted to reflect that GE is selling Common Stock). "Proportionate Share"
means a number of shares of Common Stock which bears the same ratio to the
number of shares of Common Stock beneficially owned by GE on a Fully Diluted
basis as the number of shares to be sold or proposed to be sold in the Tag-Along
Sale bears to the number of shares of Common Stock beneficially owned by the
Selling Stockholders on a Fully Diluted basis.
6.2. PROCEDURE.
The Selling Stockholders shall mail written notice of any Tag-Along
Sale (the "TAG-ALONG NOTICE"), first class postage prepaid, to GE, not less than
fifteen (15) days prior to the Tag-Along Sale, notifying GE of the Tag-Along
Sale and setting forth the terms and conditions of the Tag-Along Sale,
including, without limitation, the number
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<PAGE>
of shares proposed to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name(s) and address(es) of the
Tag-Along Transferee(s) of the Stock. GE shall have the right to exercise its
Tag-Along Right within ten (10) days of its receipt of the Tag-Along Notice. The
Tag-Along Right shall be at the same price and upon the same terms and
conditions of the Tag-Along Sale.
6.3. ADDITIONAL RESTRICTIONS.
In no event shall a Selling Stockholder be able to enter into an
agreement to sell or transfer or otherwise propose to sell or transfer to any
Person, in one or more transactions, more than 10% in the aggregate of the
number of shares of Stock beneficially owned by such Selling Stockholder as of
the date of this Agreement on a Fully Diluted basis (with such number of shares
being subject to adjustment for stock splits, stock dividends, reverse stock
splits, reclassifications and similar events), without the prior written consent
of (i) the Company and (ii) the holders of not less than 66 2/3% of the Series E
Preferred Stock outstanding, so long as such holders continue to beneficially
own in the aggregate more than 5% of the Company's Common Stock on a Fully
Diluted basis. Unless earlier terminated pursuant to Section 7 hereof, this
requirement for the written consent of the holders of Series E Preferred Stock
shall expire when GE no longer beneficially owns at least 5% of the Company's
Common Stock on a Fully Diluted Basis.
7. TERM.
7.1. TERM AND EXTENSIONS.
This Agreement shall become effective (and the December 1996 Agreement
shall be terminated) only upon the Company's execution of this Agreement and the
Company's sale of Series E Preferred Stock to GE pursuant to the Purchase
Agreement. This Agreement shall remain in effect until the expiration of GE's
redemption rights under Article FOURTH, Part G (4) of the Certificate of
Amendment of Amended and Restated Certificate of Incorporation of the Company to
be filed with the Secretary of State of the State of Delaware in connection with
the Company's sale of Series E Preferred Stock to GE pursuant to the Purchase
Agreement.
7.2. EARLIER TERMINATION EVENTS.
Notwithstanding Section 7.1, this Agreement shall terminate immediately
upon the occurrence of either of the following events: (i) the closing of a
Public Offering by the Company of its Common Stock, or (ii) Stockholders
representing (1) a majority of the Series A Preferred Stock, (2) a majority of
the Series B Preferred Stock, (3) a majority of the Series D Preferred Stock,
(4) a majority of Series E Preferred Stock, and (5) a majority of Stock held by
the Founders, each elect in writing to terminate this Agreement.
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<PAGE>
8. MISCELLANEOUS.
8.1. NO ASSIGNMENT.
This Agreement is personal to each party hereto, and no such party may
assign his, her or its rights hereunder without the consent in writing of all
other parties hereto, including the Company.
8.2. AMENDMENTS.
This Agreement may be amended only by a writing signed by all parties
hereto.
8.3. GOVERNING LAW.
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
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<PAGE>
TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.4. SUCCESSORS; ASSIGNS.
This Agreement shall, except to the extent otherwise expressly provided
herein, be binding upon and inure to the benefit of the heirs, executors,
administrators and permitted assigns of the parties hereto.
8.5. ADDITION AND DELETION OF SHAREHOLDERS.
The Stockholders hereby agree that this Agreement shall be binding on
all signatories thereto, notwithstanding the existence or possible existence of
a stockholder or stockholders of the Company who have not executed and delivered
to the Company a counterpart of this Agreement. Furthermore, the Stockholders
hereby agree that additional or future stockholders of the Company shall become
a Stockholder pursuant to this Agreement, upon the execution and delivery by
both the Company and such stockholder of an agreement to be bound by the terms
of this Agreement (and such signed agreement between the Company and the new
stockholder shall not require the approval or signature of any other
Stockholder). Furthermore, all rights of each Stockholder under this Agreement
shall terminate when such Stockholder no longer owns any shares of Stock of the
Company.
8.6. SEVERABILITY.
Whenever possible, each provision of this Agreement shall 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 invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained therein.
8.7. FAILURE TO DELIVER SHARES.
If a Stockholder becomes obligated to sell Stock under this Agreement
and fails to deliver certificates representing such Stock in accordance with the
terms of this Agreement, the purchaser of such Shares may, at his option, in
addition to all other remedies he may have, send to the Stockholder by
registered mail, return receipt requested, the purchase price for such Stock as
is herein specified. Thereupon, the Company, upon written notice to the
Stockholder, (i) shall cancel on its books the certificate or certificates
representing the Stock to be sold; and (ii) shall issue, in lieu
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thereof, a new certificate or certificates in the name of the purchaser
representing such Stock; and thereupon all of the Stockholder's rights in and to
such Stock shall terminate.
8.8. GENDER; NUMBER.
Use herein of any gender shall be deemed to include all genders when
appropriate, and use of the singular number shall be deemed to include the
plural when appropriate, and vice versa in each instance.
8.9. NOTICES.
Any notice required to be given pursuant to the terms of this Agreement
shall be in writing and shall be sent by certified mail, postage prepaid, return
receipt requested, as follows:
IF TO THE COMPANY: HealthGate Data Corp.
25 Corporate Drive
Suite 310
Burlington, MA 01803
Attn: President
WITH A COPY TO: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
IF TO A STOCKHOLDER: To the Stockholder's address
on the Company's books and
records
IF TO GE: GE Capital Equity Investments, Inc.
120 Long Ridge Road
Stamford, CT 06927
Attention: General Counsel
WITH A COPY TO: Warren de Wied, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
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8.10 LEGEND.
Each certificate of Stock subject to this Agreement issued subsequent
to the date hereof shall bear a legend stating that the shares represented by
such certificate are subject to restrictions upon transfer and voting and other
provisions set forth in this Agreement. The legend may be in substantially the
form as follows:
"THE VOTING AND TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF MARCH __, 1999, A COPY OF WHICH MAY
BE OBTAINED FROM THE COMPANY UPON WRITTEN REQUEST. THE VOTING RIGHTS AND
TRANSFER OR OTHER DISTRIBUTION OF THE SHARES REPRESENTED HEREBY SHALL NOT BE
VALID OR ENTITLE ANY TRANSFEREE TO ANY RIGHT OF A STOCKHOLDER OF THE COMPANY
UNLESS AND UNTIL THE TERMS OF SUCH AGREEMENT SHALL FIRST HAVE BEEN COMPLIED
WITH."
Each Stockholder agrees to deliver to the Company any previously issued
certificates so that the Company may place the foregoing legend on such
certificate.
8.11. CAPTIONS AND HEADINGS.
The headings, titles and captions of the sections of this Agreement 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, and
they shall not constitute a part hereof or affect the meaning or interpretation
of this Agreement or any part hereof.
8.12. COUNTERPARTS.
This Agreement may be signed in counterparts, each of which, when
executed and delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument.
8.13. REMEDIES.
Each Stockholder shall be entitled to enforce its rights under this
Agreement specifically to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights existing in their
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provision of this Agreement and that each
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance
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and/or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of April 7, 1999.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
-------------------------------
William S. Reece
President
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SERIES E STOCKHOLDERS
GE CAPITAL EQUITY
INVESTMENTS, INC.
By: /s/ Richard Miller
-------------------------------
Name: Richard Miller
Title: Senior Vice President
BLACKWELL SCIENCE, LTD.
By: /s/ Jonathan J. G. Conibear
-------------------------------
Name: Jonathan J. G. Conibear
Title: Executive Director
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COMMON STOCKHOLDERS
/s/ Tina Blair
- -----------------------------------
Tina M. Blair, M.D.
- -----------------------------------
Robert J. Blazewicz
- -----------------------------------
Jeffrey S. Clark
/s/ Edson D. de Castro
- -----------------------------------
Edson de Castro
- -----------------------------------
David Friend
- -----------------------------------
Phyllis Koton
- -----------------------------------
John P. LaFond
/s/ Ricky D. Lawson
- -----------------------------------
Ricky D. Lawson
/s/ Barry M. Manuel
- -----------------------------------
Barry M. Manuel
/s/ Barry M. Manuel
- -----------------------------------
Barry M. Manuel, Trustee u/a 7/5/90
f/b/o Elizabeth A. Manuel and her children
/s/ Barry M. Manuel
- -----------------------------------
Barry M. Manuel, Trustee u/a 7/5/90
f/b/o Jill E. Manuel and her children
/s/ Barry M. Manuel
- -----------------------------------
Barry M. Manuel, Trustee u/a 5/5/91
f/b/o William Manuel and his children
/s/ William G. Nelson
- -----------------------------------
William G. Nelson
NICHOLS RESEARCH CORPORATION
By: /s/ Allen E. Dillard
-------------------------------
Title: Chief Financial Officer
- -----------------------------------
Plenny J.R. Reece & Mary Joan Reece
/s/ William S. Reece
- -----------------------------------
William S. Reece
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SERIES A STOCKHOLDERS
Account Management Corporation Profit
Sharing Plan
By: /s/ Peter deRoetth
-------------------------------
Title: PRESIDENT
----------------------------
- -----------------------------------
Elisabeth Abbe
/s/ Tina Blair
- -----------------------------------
Tina M. Blair, M.D.
- -----------------------------------
Christopher deRoetth
- -----------------------------------
Louisa deRoetth
/s/ Peter deRoetth
- -----------------------------------
Peter deRoetth
/s/ David Friend
- -----------------------------------
David Friend
- -----------------------------------
Roger M. Marino
/s/ William G. Nelson
- -----------------------------------
William G. Nelson
- -----------------------------------
Marsha Paller
- -----------------------------------
Christopher T. Schuler
- -----------------------------------
James K. Schuler
- -----------------------------------
Mark J. Schuler
- -----------------------------------
Patricia T. Schuler
- -----------------------------------
Langdon B. Wheeler
- -----------------------------------
Robert & Linda Williams
-2-
<PAGE>
SERIES B STOCKHOLDERS
NICHOLS RESEARCH CORPORATION
By: /s/ Chris H. Horgen
-------------------------------
Chris H. Horgen
Chief Executive Officer
Stockholders Agreement
-1-
<PAGE>
SERIES C STOCKHOLDERS
NICHOLS RESEARCH CORPORATION
By: /s/ Chris H. Horgen
-------------------------------
Chris H. Horgen
Chief Executive Officer
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Stephen L. Brown
and Arleen C. Brown
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
/s/ Peter deRoetth
- -----------------------------------
Peter deRoetth
ACCOUNT MANAGEMENT CORP.,
as Attorney-in-Fact for Nicholas DeWolf
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Christopher Egan
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Michael J. Egan,
Trustee of the Michael J. Egan Revocable
Trust
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
Stockholders Agreement
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Richard & Maureen
E. Egan, Trustees of the Richard E. &
Maureen E. Egan Grandchildrens Trust
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Richard Egan,
Trustee of the 1986 Richard J. Egan Trust
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Steurart Evans
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Ray Fambrough
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Donald Foss
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
-2-
<PAGE>
[SIGNATURES CONTINUED ON NEXT PAGE]
-3-
<PAGE>
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert Glenn
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Roger M. Marino
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Ray W. Miller
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for William Miller
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Michael J. Ritter
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Shirley J. Ritter
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
Stockholders Agreement
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for James K. Schuler
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert Thurber
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Gerald Turbow
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT COP., as
Attorney-in-Fact for Jane Westervelt
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
ACCOUNT MANAGEMENT CORP., as
Attorney-in-Fact for Robert and Linda
Williams
By: /s/ Peter deRoetth
-------------------------------
Title: President
----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-4-
<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
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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.
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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.
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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.
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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.
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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.
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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.
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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;
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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.
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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.
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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.
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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.
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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
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[EXHIBIT 10.2]
Confidential Information
activePress Journal Hosting and Delivery Agreement
THIS AGREEMENT is effective as of April 20th, 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") and the Society desires to retain HealthGate to develop and
host an on-line web site for Content (as defined herein) related to NEJM;
WHEREAS, HealthGate, among other business activities, hosts and distributes
health and biomedical 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; Development; Implementation Plan. HealthGate shall design, develop,
and mount the Content (as defined in Section 3) on servers and host the
Content on a World Wide Web site with the address of www.nejm.org (the
"Site"). In establishing the Site, HealthGate shall (i) mount the Content
on its Hardware, (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, and (iii) update the Content at least once
a week with updates provided by the Society. All parties will cooperate
with respect to the design and development of the Site. The parties,
through the Project Managers set forth in Section 2, shall meet and
develop an Implementation Plan consistent with this Agreement set forth on
Schedule A attached hereto. The Implementation Plan shall be mutually
agreed upon among all parties hereto and shall contain details, procedures
and specifications for the Site, including HealthGate's policies for
handling error reports.
2. Project Managers. Both parties agree to name a Project Manager, 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 project
implementation.
HealthGate: Paul Harman, General Manager of activePress
The Society: Catherine Cronin
All contact between HealthGate and the Society regarding the Content,
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.
3. Content. The Society shall provide all Content, including text and
graphics, for the Site. The Society, at its expense, shall deliver the
Content, which shall be limited to The New England Journal of Medicine, in
electronic format to HealthGate as specified in the Implementation Plan.
As set forth in Section 17 below, the Society retains all ownership and
copyrights of the Content. The Implementation Plan shall include
specifications for including copyright notices and other notices of right
title and interest to the Content. HealthGate will not make or permit any
changes to the Content without the written consent of the Society.
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Confidential Information
4. Software and Other Features. HealthGate shall develop, license or
otherwise acquire software to operate the Site (collectively the
"Software"). HealthGate, at its cost and expense shall upgrade and
maintain all Software. Notwithstanding the foregoing, the Society shall,
separate from and in addition to those fees described in Section 11 below,
be responsible for all fees and expenses relative to the development of
additional functions or features not described in the Implementation Plan,
but requested by the Society.
5. Content and Software Back-up. HealthGate shall make and maintain back-up
copies of all Content and Software pursuant to a schedule set forth in the
Implementation Plan. HealthGate shall store said back-up materials in a
safe and secure environment, fit for the back-up media, and not located at
the same location as HealthGate's Hardware.
6. Telecommunications Access. HealthGate, at its cost and expense, 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.
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 Site. The Hardware shall be
capable of storing the Content. HealthGate shall replace and upgrade such
Hardware to satisfy the requirements of Section 6 (telecommunications
access). The Hardware shall be located at HealthGate's computer facilities
currently housed at Exodus Communications, Inc. Internet Data Center,
located in Waltham, Massachusetts.
8. Sales of Information. The Site will include functions to facilitate the
sale of information, such as articles, issues, etc. to users of the Site,
via a secure Server to non-subscribers of the Content. The Society shall
establish all fees ("Information Fees") and other terms and conditions for
such sales. HealthGate shall collect the Information Fees established by
the Society. Within 60 days of the end of each calendar month, HealthGate
shall forward to the Society 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(e).
9. Activity Reports. During the time that HealthGate hosts the Site,
HealthGate shall provide to the Society activity reports detailing
performance, access and usage of the Site, including, but not limited to,
the title of each article accessed, the number of times each article is
accessed, the number of articles sold, and other information that shall be
mutually agreed upon from time to time. HealthGate shall provide the
Society with activity reports concerning access to the Site within 30 days
of the end of any month. All information contained in the activity reports
shall be confidential information of the Society and any proprietary
rights therein shall be the sole and exclusive property of the Society.
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 Society and HealthGate and detailed in the
Implementation Plan. HealthGate shall use the activePress advertising
module to host, update, and administer advertising banners on the site.
Fees for these services are detailed in Section 11 (h) below. HealthGate
shall not have the right to sell advertising banners on the Site.
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Confidential Information
11. Fees.
(a) Annual maintenance. The Society shall remit to HealthGate $35,000
annually for site maintenance services outlined in this Agreement.
Payment shall be in made within 30 days of receipt of an invoice.
(b) Conversion. The Society shall remit to HealthGate a one-time $5,000
fee for each year of the Content converted for release via the Site,
provided that such Content is not covered in the Implementation
Plan. Payment shall be in made within 30 days of receipt of an
invoice.
(c) Storage. The Society shall remit to HealthGate an annual fee of
$5,000 for storage of the Content on the Hardware. Payment shall be
in made within 30 days of receipt of an invoice.
(d) Subscriber. The Society shall remit to HealthGate a one time $2.00
fee for each individual subscriber receiving an individual online
subscription to the Content for whom access to the Content on the
Site is granted.
(e) Non-subscriber. The Society shall remit a Processing Fee, as
described In Section 8 above, equal to 25% of each Information Fee
processed by HealthGate. The minimum Processing Fee shall be equal
to $3.00 per sales transaction processed by HealthGate.
(f) Per Page. The Society shall remit to HealthGate a fee of $0.01 (one
cent) per page for each free or Info-barter page of the Site viewed
by a user (except for NEJM subscribers who have registered for
online access) excluding the Site's home page. If the total number
of free and Info-barter pages viewed by all users exceeds 1,000,000
in each of any two consecutive months, both the Society and
HealthGate agree to negotiate in good faith a new Per Page fee
structure.
(g) Institution. The Society shall remit to HealthGate $ 10 or 5% of the
online institutional subscription fee, whichever is greater, for
each subscriber receiving an institutional subscription to the
Content on the Site.
(h) Advertising. The Society shall remit to HealthGate 5% of the gross
banner advertising fee for the administration of banner advertising
on the Site as described in Section 10.
(i) Activity reports. All payments and fees described in Section 11 (d),
(e), (f), (g), and (h) shall be based upon the activity reports
referred to Section 9.
(j) Escrow Account. The Society shall pay all fees associated with the
escrow account described in Section 21(b).
(k) Late Payment. All late payments shall bear interest at a rate equal
to eighteen percent (18%) per annum until paid in full.
12. Exclusivity. The Society shall neither host nor grant to any other party
the right to host the Content on the Internet during the term of this
Agreement. However, nothing contained in this agreement shall restrict the
Society from licensing the Full Text (as defined herein) of the NEJM for
use in connection with any party's online service or other electronic
distribution.
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Confidential Information
13. Distribution Rights. The Society 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.
14. 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").
15. Renewal. After the Initial Term, this Agreement shall renew for additional
consecutive periods of one (1) year subject to termination in accordance
with Section 16. Both parties agree to negotiate, in 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.
16. Termination. 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.
Upon termination by either party, 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.
17. Intellectual Property Rights.
(a) HealthGate Property. HealthGate shall own and retain all right,
title and interest in (i) the Software (as defined in Section 4),
and (ii) the copyrights 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"),
subject only to (x) the Society's right, title and interest in the
Content (as defined in Section 3) contained therein and any
derivative work based upon the Content, (y) the Society's trade
names, trademarks and service marks and (z) any other information of
the Society provided to HealthGate hereunder and (zz) the format,
appearance and presentation of the Site (collectively, "Society's
Property").
(b) Society's Property. The Society shall own and retain all right,
title and interest in the Society's Property.
(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 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
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Confidential Information
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 17(c) shall survive
any termination of this Agreement. The obligations of this Section
17(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 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 17(d) shall survive
any termination of this Agreement. The obligations of this Section
17(d) shall not apply to any information which (a) is generally
known to the pubic, 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 an making such disclosure.
(e) Public Authority Exceptions. The parties' respective obligations
under this Section 17 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.
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Confidential Information
18. 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 the right to grant the license granted herein,
(iii) the HealthGate Property licensed hereunder does 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 HealthGate based upon use of the Software and
that HealthGate will promptly advise the Society of the pendency or
threat of any such suits, claims or proceedings relating to the
software arising during the term of this Agreement.
(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.
19. 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 18 (a) and
18 (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
Society's Content or Properties.
(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 imitation, 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 18(a) and 18(b)
above.
(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
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Confidential Information
its interests to participate on its own behalf and at its
own expense in such matter or its settlement through
counsel of its choosing.
20. 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. IN NO EVENT SHALL HEALTHGATE'S LIABILITY UNDER THIS AGREEMENT
EXCEED THE AMOUNT OF PAYMENTS MADE BY THE SOCIETY TO HEALTHGATE PURSUANT
TO THIS AGREEMENT.
21. Miscellaneous.
(a) License of Software. Notwithstanding any other term or provision of
this Agreement or the Implementation 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 and other
HealthGate Properties (as defined in Section 17(a) hereof). The
Agreement grants to the Society a non-exclusive, non-transferable
license to utilize the Software with respect to the Site during the
Term 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 Society, provided however that upon
expiration or termination of this Agreement, the Society may,
without any obligation to HealthGate, utilize the design, format,
appearance and presentation of the Site in any manner which the
Society 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 Society shall pay all fees associated with the escrow account.
The Society may not access the escrow account except in the case of
HealthGate's bankruptcy.
(c) 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 request
from HealthGate regarding the use of the name or trademarks of the
Society within ten (10) working days of the submission of a request;
however failure by the Society to respond shall not be deemed
approval. If the Society does not respond within these five (5)
working days of a request by HealthGate for such approval, the
Society's approval shall be assumed to be provided. 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.
(d) 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
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Confidential Information
implied, on behalf of or in the name of the other party, or to bind
the other party in any matter or thing whatsoever.
(e) 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.).
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(k) Venue. Except with respect to any dispute subject to arbitration in
accordance with the provisions of Section 21 (l) 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 Massachusetts),
preserving, however, all rights of removal to a federal court under
28 U.S.C. ss.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.
(l) 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
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Confidential Information
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.
(m) 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.
(n) 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.
(o) 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).
(p) Certain terms.
"HTML" means the series of commands for formatting web pages known
as hypertext markup language, and shall include any current
and future extensions thereto.
"Info-barter page" means any page available free to the user, but
which may require user registration for access, exclusive of
pages available only to NEJM subscribers who have registered
for online access.
"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" means all of the web pages that are accessible to a
typical computer user with appropriate access to the Internet
and a web browser.
"Full Text" means the editorial content of the NEJM print edition
"Content" means the editorial content of the NEJM print edition plus
additional features that may be provided in the online
environment.
(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.
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Confidential Information
(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.
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
Massachusetts Medical Society
By: /s/ Marylou Buyse
---------------------------
Name: Marylou Buyse
------------------------
Title: President
------------------------
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Exhibit 10.3
CONFIDENTIAL INFORMATION
CONTENT LICENSE AGREEMENT
THIS CONTENT LICENSE AGREEMENT, dated as of October 1, 1998, is entered into by
and between HealthGate Data Corp., a corporation organized and existing under
the laws of the State of Delaware, with offices at 380 Pleasant Street, Suite
230, Malden, Massachusetts 02148, hereinafter referred to as "LICENSEE," or
"HEALTHGATE," and Clinical Reference Systems, a division of Access Health, Inc.,
with offices at 335 Interlocken Parkway Broomfield, Colorado 80021 hereinafter
referred to as "LICENSOR."
WITNESSETH
WHEREAS, LICENSOR holds the right to license the Information set forth on
EXHIBIT A attached hereto and made a part hereof; and
WHEREAS, LICENSOR wishes to make the Information commercially available for
searching, access, and review by HEALTHGATE's Customers; and
WHEREAS, HEALTHGATE wishes to obtain the non-exclusive rights to provide on-line
interactive searching, access, and review of the Information on the World Wide
Web ("WWW") portion of the Internet and supply the results in electronic form to
HEALTHGATE's Customers;
NOW, THEREFORE, in consideration of the promises and agreements contained
herein, and for other good and valuable consideration, the receipt of which is
acknowledged by each of the parties hereto, the parties agree as follow:
SECTION 1 - GRANT OF LICENSE
1.1 Grant
Subject to the terms and conditions set forth herein, LICENSOR grants to
HEALTHGATE a non-exclusive worldwide license to host the Information on
the WWW, hereinafter reference to as the "License," including, without
limitation the right:
a. To mount the Information on its computer facilities (presently
located in Malden, MA);
b. To provide the Information in the on-line interactive mode for
searching, access, and review and for printing on paper and
displaying on computer terminals the outcome of computer searches
ordered by HEALTHGATE's Customers;
c. To provide on-line access to the Information to HEALTHGATE's
Customers through telecommunication links, including, but not
limited to dial-up, the Internet, and leased lines, to its computer
facilities;
d. To use the name, trademarks, and service marks of LICENSOR,
hereinafter referred to as the "Licensed Marks," in performing this
Agreement.
(i) HealthGate will include on any screens and printouts of the
Information, all patent, trademark, copyright, and other
notices of proprietary rights included by LICENSOR. HealthGate
will display the LICENSOR's copyright which shall read
"Copyright (date) Clinical Reference Systems. All rights
reserved." on the computer screen or a printout when the
Information or a portion of the Information is accessed.
Notwithstanding, HealthGate and its clients may modify the
Information or portions of the Information as long as the
LICENSOR's copyright statement is displayed. If the
Information is modified, HealthGate agrees to include a
message that states
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CONFIDENTIAL INFORMATION
that the displayed information was adapted from LICENSOR's
Information and retain the LICENSOR's copyright statement.
(ii) LICENSOR shall respond within 48 hours of any request by
HealthGate to review the use of the Licensed Marks in sales
and marketing literature. If LICENSOR does not respond within
48 hours of any such request, then approval to use the
Licensed Marks in the manner requested shall be considered
granted.
1.2 Definitions
- "Customers": As used in this Agreement, Customers include, but are
not limited to, individuals, institutions, and other organizations
that access the Web Sites
- "Web Sites": The sites on the WWW located at
http://www.HEALTHGATE.com and at http://bewell.com any other site on
the Internet that is owned, operated, managed, distributed or
authorized to be distributed by or through HEALTHGATE or its
affiliates through which HEALTHGATE elects to offer LICENSOR's
Information.
- "Hits": The access by a Customer of HEALTHGATE of the Information.
- "HTML": The programming language for creating WWW documents,
generally referred to as "hyper text markup language" and any
derivative or successor programming languages for the WWW.
- "Information": As used in this Agreement, Information means all
content and services provided by or through LICENSOR, including, but
not limited to the content set forth on EXHIBIT A attached hereto,
or otherwise provided by LICENSOR, including any modifications,
upgrades, enhancements, and related documentation.
- "Internet": The worldwide network of computers commonly referred to
as the Internet.
- "Link": The mechanism on the WWW by which a user at one WWW site can
automatically move to another WWW site and other sites on the
Internet.
- "Party": Each of HEALTHGATE and LICENSOR.
1.3 Retention of Rights
Except for those rights and interests specifically provided for in the
License, LICENSOR retains all right, title and interest in and to the
Information.
1.4 Sublicensing
Except as otherwise permitted herein, HEALTHGATE shall not grant any
sublicense of any rights under the License, without the prior written
approval of LICENSOR, which shall not be unreasonably withheld provided,
however, HEALTHGATE's transfer of Information to its Customers shall not
be deemed to be a sublicense.
Notwithstanding the foregoing, HEALTHGATE shall be permitted to license or
sell certain of the Information as set forth in EXHIBIT A hereto.
1.5 Bundling
HEALTHGATE may in its discretion bundle all or portions of the Information
with other content available on HEALTHGATE's Web Sites.
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CONFIDENTIAL INFORMATION
SECTION 2 - SUPPLY OF DATA
2.1 The License
Subject to the terms and conditions set forth herein, LICENSOR shall
furnish to HEALTHGATE and HEALTHGATE shall accept from LICENSOR existing
portions of the Information in HTML or ASCII (as requested by HEALTHGATE).
The cost of shipping the media containing the HTML or ASCII will be borne
by LICENSOR.
2.2 Updates
Information provided under Subsection 2.1 will be supplemented to coincide
with the LICENSOR's normal or updating and revising schedule and LICENSOR
shall furnish to HEALTHGATE magnetic tapes or other electronic media in
HTML or ASCII (as requested by HEALTHGATE) containing additional and
supplemental updated and revised Information.
2.3 Replacement of Data
LICENSOR shall promptly replace any copy of all or part of the
Information, in HTML or ASCII (as requested by HEALTHGATE), which is
unreadable or damaged or does not conform with this Agreement, at no
additional charge, provided that HEALTHGATE gives LICENSOR written notice
of the nonconformity.
SECTION 3 - FILE DESIGN
3.1 Cooperation
LICENSOR and HEALTHGATE have previously designed a file structure through
which the Information is made commercially available. Technical experts
from both parties will be available to the other to assist and counsel in
any revisions or enhancements to file design.
3.2 Changes in structure/format
If and when LICENSOR plans to implement any significant changes in the
structure or format of the Information or other material supplied by
LICENSOR under Section 2, LICENSOR shall give written and reasonably
detailed notice thereof to HEALTHGATE three (3) months in advance.
SECTION 4 - FEES AND PAYMENTS
4.1 License Fees
HEALTHGATE shall pay to LICENSOR license fees as specified in EXHIBIT B
attached hereto.
SECTION 5 - OBLIGATIONS OF HEALTHGATE
5.1 Activity Reports
a. HEALTHGATE will provide LICENSOR with quarterly activity reports
regarding the Information no later than thirty (30) days after the
end of each calendar quarter. These activity reports shall include:
i) the number of Hits;
ii) sales or relicensing of complete Advisors, including purchaser
or sublicense and fee received by HEALTHGATE; and
iii) other information as mutually determined by the parties.
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CONFIDENTIAL INFORMATION
b. LICENSOR will hold each record or document required or produced
under this Agreement, including the contents of activity reports, in
confidence and will not disclose such record or document to third
parties.
SECTION 6 - WARRANTY AND INDEMNITY
6.1 Warranty
a. LICENSOR hereby warrants that the Information does not infringe any
copyright or other right of third parties. In the event of a breach
of the foregoing warranty, LICENSOR agrees to indemnify, defend and
hold harmless HEALTHGATE and its Customers from and against any and
all claims, actions, losses, damages, and expenses, including
reasonable attorneys' fees, arising from any claim that any
Information furnished by LICENSOR hereunder constitutes an
infringement of any copyright or other intellectual property right.
b. LICENSOR warrants that the Information, and other materials
furnished under Section 2, are formulated with a reasonable standard
of care and in conformance with professional standards.
c. HEALTHGATE warrants that it has taken commercially reasonable steps
as are customary in the industry concerning notices and disclaimers
to HEALTHGATE's Customers concerning appropriate use of the
Information and prohibition on commercial resales and relicensing by
HEALTHGATE's Customers. In no event shall HEALTHGATE be liable to
any party for unauthorized access to the Information or unauthorized
resales or relicensing of the Information or any portion thereof.
d. BOTH PARTIES AGREE THAT HEALTHGATE HAS NOT AND WILL NOT
INDEPENDENTLY VERIFY ANY OF THE INFORMATION PROVIDED TO IT BY
LICENSOR AND THEREFORE HEALTHGATE IS NOT RESPONSIBLE FOR ANY
INACCURACIES OR OMISSIONS IN SUCH INFORMATION. ACCORDINGLY,
HEALTHGATE, ITS AFFILIATES, AND AGENTS CANNOT AND DO NOT WARRANT THE
ACCURACY, COMPLETENESS, CURRENTNESS, NONINFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY OF THE
INFORMATION AVAILABLE ON ITS WEB SITES OR ANY OTHER INFORMATION
WHICH IS REFERENCED OR LINKED TO THE WEB SITES.
6.2 Indemnity
a. Each party agrees to indemnify, defend and hold harmless the other
party and its successors, officers, directors, employees and assigns
from and against any and all actions, causes of action, claims,
demands, costs, liabilities, expenses (including reasonable
attorneys' fees) and damages ("Liabilities") resulting from the
indemnifying party's material breach of any duty, representation or
warranty of this Agreement except where Liabilities result from the
gross negligence or willful misconduct of the other party.
b. If either party requests indemnification pursuant to this section
("requesting party"), it will give notice to the other party from
which indemnification is requested ("requested party") promptly
after the receipt of any claim that may be indemnifiable hereunder
and afford the requested party the opportunity to control the
defense and approve any compromise, settlement, litigation or other
resolution or other disposition of such claim except that any
settlement shall be subject to the approval of the requesting party
(which approval shall not be unreasonably withheld). The requesting
party agrees to cooperate fully with the requested party at the
requested party's expense in defending or settling any claim.
SECTION 7 - DURATION
7.1 This Agreement shall become effective as of the date first written above
and shall remain in effect for a period of three (3) years ("Initial
Term") unless it is canceled by either party under Section 8. This
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CONFIDENTIAL INFORMATION
Agreement shall be automatically renewed on an annual basis thereafter
unless one party advises the other in writing at the address first
mentioned above by registered mail at least 90 (ninety) days prior to the
end of the Initial Term or any renewal period that it elects not to renew
this Agreement, or wishes to renegotiate the terms of this Agreement.
SECTION 8 - CANCELLATION AND TERMINATION
8.1 Cancellation
Either party shall be entitled to cancel this Agreement for cause by
giving notice in writing by registered mail to the other party that the
other party has failed to meet or is apparently unable or unwilling to
meet one or more of the obligations of this Agreement. In such a case, the
other party will have 30 (thirty) days to meet the stated obligation(s)
and, if it does not do so, this Agreement will be canceled effective the
last day of the 30 (thirty) day period.
8.2 Commercial Feasibility
HEALTHGATE shall at all times, during the term of this agreement, be
entitled to discontinue the availability of the Information through the
Web Sites and terminate this Agreement without any right of LICENSOR to
damages in connection therewith, provided that HEALTHGATE gives at least
90 (ninety) days written notice to LICENSOR.
8.3 Invalid Provision
If replacement of any invalid provision according to Subsection 10.1 is
not made within a reasonable period of time, the party to whose detriment
the invalidity of such provision works shall be entitled to cancel this
Agreement immediately by written notice.
8.4 Post-Termination Activities
Upon termination or cancellation of this Agreement all obligations and
rights under this Agreement will end on the effective date of the
termination or cancellation except that payments required under this
Agreement shall be made, and each party will thereafter abstain from using
facilities or materials supplied to it under the terms of the Agreement
and will return all such facilities and materials to the party, and
HEALTHGATE shall erase from computer magnetic media, and make unsuitable
for the uses licensed under this Agreement, all Information received from
LICENSOR provided, however, both parties shall cooperate to assure that
all obligations to any party purchasing or relicensing the Information
through HEALTHGATE are satisfied.
8.5 Force Majeure
Neither party shall be responsible or liable or deemed to be in default
for delays or failures in performance under this Agreement resulting
directly or indirectly from causes beyond the control of either party.
Such causes shall include Acts of God, lockouts, labor actions, riots,
acts of war, epidemics, government regulations subsequently imposed, fire,
earthquakes, or other natural disasters.
SECTION 9 - ENTIRE AGREEMENT, AMENDMENT, NO ASSIGNMENT, WAIVER
9.1 This Agreement sets forth the entire understanding of the parties on the
subject matter hereof, and supersedes all previous oral or written
representations or agreements relating to the rights and duties provided
for herein, and this Agreement may not be modified or amended except by
written agreement of the parties.
9.2 Neither party may assign this Agreement without the prior written consent
of the other, except that either Party may, without the other's prior
written consent, assign this entire Agreement to any entity that owns that
Party in whole or in part, or is owned by that Party in whole or in party,
provided, however that party agrees to remain bound by its duties and
obligations hereunder. Any consent to assign this Agreement shall not be
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CONFIDENTIAL INFORMATION
unreasonably withheld. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties and their permitted
successors and assigns.
9.3 The failure of either party to enforce or exercise, at any time or for any
period of time, any term of this Agreement does not constitute, and shall
not be construed as, a waiver of such term and shall in no way effect that
party's later right to enforce it.
SECTION 10 - GENERAL
10.1 Invalidity
The invalidity of individual terms and conditions within this Agreement
shall not result in the invalidity of the whole Agreement. The parities
hereto agree to replace any invalid provision by some other, being as
similar as possible in its economic and/or technical effects as the
original provision.
10.2 Data in Confidence
Both LICENSOR and HEALTHGATE agree not to disclose this Agreement or
copies thereof, nor the terms of this Agreement, to third parties, except
to their respective accountants, attorneys or to others as required by
law.
10.3 Independent Contractors
The relationship of the parties is that of independent contractors, and no
agency, employment, partnership, joint venture, or any other relationship
is created by this Agreement.
10.4 Captions
The captions of the Sections throughout this Agreement are for convenience
only and are not material with respect to the interpretation of this
Agreement.
10.5 Notices
Any notice or other communication required or allowed under this Agreement
shall be in writing and delivered by registered mail or by facsimile.
Mailed or transmitted notices shall be sent to the parties at the
addresses set forth above, or to such other address as the parties may
designate by notice given pursuant to this Subsection.
10.6 Entire Agreement This Agreement (including the Exhibits) constitutes the
entire agreement among the parties and supersedes any prior
understandings, agreements, or representations by or among the parties,
written or oral (including without limitation the Standard Distribution
Agreement dated December 30, 1996, the Itemized Agreement Points dated
July 17, 1998, and the three letter agreements dated July 24, 1998 to the
extent they have related in any way to the subject matter hereof.
SECTION 11- GOVERNING LAW AND JURISDICTION
11.1 This AGREEMENT shall be governed by and interpreted in accordance with the
substantive laws of the Commonwealth of Massachusetts. Each party hereto
hereby irrevocably agrees that any legal action or proceeding against it
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 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
Massachusetts).
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CONFIDENTIAL INFORMATION
IN WITNESS WHEREOF, LICENSOR AND HEALTHGATE have caused this Agreement to be
executed and delivered by their duly authorized officers.
HEALTHGATE Data Corp. Clinical Reference Systems,
a division of Access health
By: /s/ Rick Lawson By: /s/ Richard Thompson
----------------------------------- --------------------------------
Name: Rick Lawson Name: Richard Thompson
------------------------------
Title: Vice President, Content Title: Vice President
-----------------------------
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CONFIDENTIAL INFORMATION
EXHIBIT A
CONTENT TO BE LICENSED TO HEALTHGATE DATA CORP.:
1. CRS ADVISORS
The Information subject to this Agreement includes all Licensor's
"Advisors," including, but not limited to, the following and all updates,
revisions, new features and enhancements added thereto:
Adult Health Advisor - English
Adult Health Advisor - Spanish
Behavioral Health Advisor - Adult
Behavioral Health Advisor - Pediatric
Medication Advisor
Pediatric Advisor - Spanish
Pediatric Advisor - English
Senior Health Advisor
Sports Medicine Advisor
Women's Health Advisor - English
Women's Health Advisor - Spanish
Other Advisors that may be developed from time to time.
2. RESALES AND RELICENSING BY HEALTHGATE
1. HEALTHGATE may resell or relicense an entire Advisor or sets of
Advisors accessible through the Internet for a term not to exceed the scheduled
expiration date of this Agreement for fees as determined by HEALTHGATE. All
proceeds of such resale and relicensing shall be property of HEALTHGATE and no
additional fee shall be due Licensor.
2. HEALTHGATE may provide access to up to 40% of each Advisor on its
Web Sites for HEALTHGATE Customers at no charge. Such access may, without
limitation, be in connection with bundling of other content from other sources.
3. HEALTHGATE may resell, re-license or provide up to 40% of each
Advisor to other sites, such re-sales and re-licensing may, without limitation,
be in connection with bundling of other content from other sources. All proceeds
of such resale and re-licensing shall be property of HEALTHGATE and no
additional fee shall be due Licensor.
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Ex 10.4
ELECTRONIC MEDIA LICENSE AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into as of this 16 day of June,
1998 by and between HealthGate Data Corp., a Delaware corporation, ("Licensee")
whose principal office is located at 380 Pleasant Street, Suite 230, Malden,
Massachusetts 02148, and Western Adventist Health Services, a California
corporation, doing business as Cinahl Information Systems ("Cinahl"), carrying
on business at 1509 Wilson Terrace, Glendale, California 91206.
1 DEFINITIONS
1.1 "Confidential Information" means
(a) Either (i) confidential or business sensitive information,
recorded electronically and/or on paper and marked "confidential" or "business
sensitive" or "trade secret";
Or (ii) information, recorded electronically and/or on paper,
that is a trade secret under California law;
(b) All Licensee's confidential and/or proprietary information, if
any, presently in Cinahl's possession under prior license agreement/s between
the parties;
(c) All Cinahl's confidential and/or proprietary information, if
any, presently in Licensee's possession under prior license agreement/s between
the parties.
However, "Confidential Information" shall not include information that:
(i) was in the possession of the receiving party free of any
obligation of confidence or was in the public domain, at the time the furnishing
party communicated it to the receiving party at no fault of the receiving party;
(ii) entered the public domain subsequent to the time the furnishing
party communicated it to the receiving party at no fault of the receiving party;
(iii) is disclosed to a third party by the receiving party with the
written consent of the furnishing party provided that the consent shall be
effective only in the particular instance given;
(iv) is developed by the receiving party independently of the
information disclosed by the furnishing party;
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(v) is lawfully in possession of the receiving party after any
disclosure is obtained from a third party that is under no duty to maintain the
information on a confidential basis; or
(vi) is disclosed pursuant to a judicial or other lawful government
order but only to the extent that such order provides, and only after notice to
the owner of the information.
Licensee's lists of past, present or prospective Subscribers shall be deemed to
be Confidential Information. The provisions of this subsection shall not affect
any copyright or anti-misappropriation right held by either of the parties
hereto or by any third party.
1.2 "Database": means the CINAHL(R) electronic database consisting of
proprietary text, licensed text, and a compilation of data and information
relating to nursing, medicine, and allied health as updated, augmented, and
changed from time to time.
1.3 "Web" means the World Wide Web on the internet.
1.4 "Subscription Agreement" means a written license agreement (a form of
which is attached hereto as Exhibit B), between Licensee and a third party to
access and use the Database on the Web, subject to the terms and conditions set
forth therein, as determined by Licensee but consistent with the provisions of
this Agreement.
1.5 "Subscriber" means an individual or entity that enters into a
Subscription Agreement with Licensee to access and use the Database on the Web.
1.6 "User" means any individual who accesses and uses the Database on the
Web under the authority of a Subscription Agreement.
1.7 "Net Subscriber Fees" means the gross Subscriber fees actually charged
by Licensee to Subscribers less:
(i) Sales and use taxes billed to Subscribers and actually paid by Licensee to
taxing authorities;
(ii) Credits allowed or refunds paid by Licensee to Subscribers for premature
cancellation of Subscription Agreements;
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(iii) Those portions of Subscriber fees written off as bad debts pursuant to
this Agreement.
However the deductions set forth in (i) to (iii) inclusive shall be added back
to Net Subscriber Fees if later paid or credited to Licensee.
1.8 "Long Record" means a Short Record plus one or more of the following:
An abstract, full text, description of the work of authorship, list of cited
references, and image (pdf file).
1.9 "Local Area Network" means a network of computer terminals connected
to the same server, all located on the same campus.
1.10 "Consortium" means two or more Local Area Networks on different
campuses. The campuses can belong to the same institution or different
institutions.
1.11 "four calendar quarters", "four quarters", "calendar quarter", and
"quarter" shall, where applicable, include an additional portion of a quarter at
the commencement of this Agreement as set forth in section 3.
2 LICENSE
2.1 This Agreement replaces the existing agreement/s, if any, between
Cinahl and Licensee relating to the Database. The existing agreement/s shall
terminate the day before this Agreement commences. There shall be no
interruption between the termination of the existing agreement/s and the
commencement of this Agreement. If this Agreement commences during a calendar
quarter accounting period, Licensee's royalty report for that quarter shall
clearly differentiate the royalties for the previous agreement/s and the
royalties payable under this Agreement.
2.2 Cinahl grants to Licensee a worldwide, non-exclusive license to:
(a) Enter into Subscription Agreements with Subscribers giving them the
right to display, download and print portions of the Database on the Web using
Licensee's search and retrieval software but subject to the restrictions set
forth in section 9.1 and also consistent with all the provisions of this
Agreement;
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(b) Transmit Licensee's search and retrieval software, and the Database
from Cinahl's magnetic tape with the Database in complete form without any
additions, deletions or changes, to Subscribers on the Web for display on local
and remote terminals and computers. Cinahl shall first approve the format,
presentation, layout, and content of the Database that Licensee transmits;
(c) Display, download, and print portions of the Database on Licensee's
own system solely in the course of exercising its other rights under this
Agreement;
(d) Use and distribute related print material to Subscribers so as to
facilitate their use of the Database;
(e) Use Cinahl's trademarks and service marks solely in the course of
exercising its rights set forth in this subsection, and subject to the further
terms of this Agreement.
2.3 Nothing in this Agreement shall be construed as granting by
implication, estoppel, waiver or otherwise, any right to permit Subscribers to
sublicense the Database, or any other license or right to:
(a) exercise any of the exclusive rights of a copyright owner of the
Database;
(b) use the Database;
(c) sublicense the Database;
(d) use Cinahl's trademarks and service marks.
2.4 Licensee shall not change nor permit any other party to change the
contents or arrangement of the Database in any way either by adding or deleting
material or in any other manner or form whatsoever. To ensure that the Database
retains its own unique identity at all times it shall be accessed and searched
separately from all other databases. Licensee may not sublicense or load the
Database in such a way that it can be accessed or searched in conjunction with
any other database/s.
2.5 Licensee shall ensure that its Web service and its related services
are of high quality at all times. Licensee shall comply with Cinahl's reasonable
requests in connection with maintaining high quality standards.
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3. TERM
The term of this Agreement shall commence on the date set forth above and shall
automatically expire on the date which is two years after the end of the
calendar quarter during which this Agreement commenced but subject to earlier
termination as herein provided. Notwithstanding anything to the contrary set
forth herein, no party shall have the right or obligation to extend this
Agreement beyond the term hereof without the prior written consent of the other
party which consent shall be in such party's sole and absolute discretion.
4 TERMINATION
4.1 Except as otherwise specified herein, this Agreement may be
immediately terminated by either party on written notice of termination:
(a) Upon material breach hereunder by the other party, if the party in
breach fails to cure the breach within thirty days after prior written notice
thereof is given to the breaching party;
(b) Without prior notice, if an order for relief (or similar adjudication
under applicable law) in any bankruptcy or reorganization proceeding is entered
against the other party, a receiver and/or assignee for the benefit of creditors
is appointed for all or substantially all of the assets of the other party, the
other party is dissolved or liquidated other than in connection with a sale or
disposition of all or substantially all of its assets, or the other party
completely discontinues its business activities other than in connection with a
sale or disposition of all or substantially all of its assets.
4.2 Cinahl may terminate this Agreement without liability on thirty days
notice if Cinahl ceases to make the Database commercially available.
4.3 The right of termination by either party shall be in addition to and
not to the exclusion of any other remedies available at law.
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4.4 Upon the termination or expiration of this Agreement, each party shall
promptly return to the other all Confidential Information that is then in the
possession or control of such party.
4.5 Termination or expiration of this Agreement shall not affect Cinahl's
right to payment under this Agreement.
4.6 Effective immediately upon termination or expiration of this
Agreement, Licensee shall not enter into any new Subscription Agreements, nor
extend the term of any existing Subscription Agreement. Licensee shall transmit
and display the Database on the Web and distribute related materials only to the
extent of its existing obligations and in any event for not longer than one year
after termination or expiration of this Agreement. Cinahl shall continue to
provide Licensee with updated magnetic tapes and related documentation to cover
the said period. As soon as possible after termination or expiration Licensee
shall return to Cinahl or destroy all magnetic tapes containing the Database as
well as all other materials distributed to Licensee. Licensee shall certify in
writing to Cinahl as soon as possible that the Database and related materials
have been erased from Licensee's computer hard disc files, or, where applicable,
certify that said files are part of a backup file/s and access is impracticable,
and that no future use, transmission or display of the Database shall be made
except as permitted in this Agreement.
5 ROYALTIES
5.1 In consideration of the license granted to Licensee hereunder,
Licensee shall pay Cinahl within forty-five days after the end of each calendar
quarter the royalties specified in Exhibit A hereto with respect to each
Subscription Agreement and relating to the previous calendar quarter. Calendar
quarters shall end on the last days of March, June, September, and December.
5.2 Each royalty payment shall be accompanied by a written report for the
applicable calendar quarter giving detailed information setting forth how the
royalties are calculated as well as the following information: 1. Period covered
by the report; 2. Number and type of current Subscription Agreements; 3. Number
and type of new Subscription Agreements made
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since the last report; 4. Number and type of Subscription Agreements that
expired/terminated since the last report; 5. The following information with
respect to each current Subscriber to whom connect-hour pricing is applicable
(see Exhibit A): Name, address, number of connect hours, number of Long Records
displayed, downloaded or printed, gross Subscriber fees, deductions from gross
Subscriber fees, Net Subscriber Fees; The following information with respect to
each current Subscriber to whom document based pricing is applicable (see
Exhibit A): Name, address, number of Long Records displayed, downloaded or
printed, gross Subscriber fees, deductions from gross Subscriber fees, Net
Subscriber Fees; The following information with respect to each current
Subscriber to whom subscription based pricing is applicable (see Exhibit A):
Name, address, number of authorized Users, full details of discounts and types
of discounts (if any), gross Subscriber fees, deductions from gross Subscriber
fees, Net Subscriber Fees; 6. Amount of royalty payable; 7. Royalty shortfall
(if applicable) for the applicable quarter; 8. Accumulated royalty shortfall (if
applicable) for the current four-quarter cycle; 9. Dollar amounts and names,
addresses, telephone and fax numbers of all Subscribers whose fees have been
written off as bad debts, or recovered after being written off as bad debts.
5.3 Discounts on Subscriber fees other than as provided in this Agreement
shall be subject to Cinahl's prior written approval.
5.4 Cinahl may increase royalty rates and/or minimum royalties on ninety
days written notice to Licensee once in any calendar year by no more than ten
percent of the previous year's royalties and may decrease royalties at any time
on seven days notice to Licensee. With the exception of volume discounts (if
any) these increases (decreases) in royalties shall apply to all vendors equally
and the increases (decreases) shall all come into effect at the same time.
5.5 After exercising its best efforts to collect unpaid Subscriber fees,
Licensee may write off as bad debts any fees that prove to Cinahl's satisfaction
to be uncollectible after expiration of one hundred and eighty days from due
date and Licensee may deduct amounts in its royalty statement that it previously
paid to Cinahl as royalties for the corresponding Subscriber fees.
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5.6 Before writing off a debt, Licensee shall notify Cinahl of its
intention and furnish Cinahl with full information in order to justify the need
for a write-off, and Cinahl shall be entitled, at its option, to initiate
collection attempts, receive payment, deduct costs of collection, and account to
Licensee.
5.7 Licensee shall pay no royalties to Cinahl for amounts paid by
Subscribers for major enhancements to its search and retrieval software used in
conjunction with the Database.
5.8 Licensee shall continue to pay royalties and furnish royalty
statements to Cinahl after termination or expiration of this Agreement until all
royalties are paid in full.
6 DELIVERY OF DATABASE AND UPDATES
6.1 If not already delivered to Licensee, Cinahl shall, within thirty days
of the date hereof, deliver to Licensee at Cinahl's expense a complete copy of
the Database on 8mm. Exabyte tape (subject to section 7), plus related
documentation.
6.2 Cinahl shall at its own expense deliver to Licensee annual reloads and
monthly updates of the Database on 8mm. Exabyte tape but subject to section 7.
Licensee may change the medium on sixty days written notice to Cinahl.
6.3 If any tape/s are defective or damaged before reaching Licensee's
facility, and Licensee gives Cinahl written notice thereof within sixty days of
receipt, Cinahl shall promptly deliver replacement/s at its own expense.
Licensee shall provide sufficient details in its written notice to enable Cinahl
to remedy the defect/s.
6.4 In circumstances other than those set forth above in this section,
Cinahl shall provide replacement tape/s at Licensee's written request, for the
cost of the tapes plus cost of shipment. Licensee shall state in its request
what happened to the original tape/s.
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7 CHANGE OF FORMAT
Cinahl shall give Licensee sixty days written notice of any proposed changes in
the magnetic tape or Database format that shall affect technical aspects
relating to transmission and display on the Web. Cinahl shall consider all
Licensee's written suggestions made within thirty days after receipt of said
notice, but shall be entitled to make any changes in its sole discretion.
8 OWNERSHIP OF COPYRIGHT AND TRADEMARKS
8.1 Copyright and other rights in the Database and all separate parts
thereof, whether in electronic or hard copy form, and wheresoever located,
together with all Cinahl's manuals and promotional materials are and shall
remain Cinahl's sole and exclusive property. Licensee's rights shall be strictly
circumscribed by this Agreement and shall not extend beyond it. Licensee shall
not do or permit anything that compromises, prejudices or infringes Cinahl's
copyrights or other rights.
8.2 The first screen of the Database shall bear the following copyright
and trademark notice:
Database Copyright (C) 1983-1999, [or most current applicable year] Cinahl
Information Systems. CINAHL(R) is the registered trademark and service mark of
Cinahl Information Systems.
Unauthorized copying or downloading of this Database is strictly prohibited. All
rights reserved.
8.3 Licensee shall ensure insofar as it is able to do so, that all
electronic and hard copy extracts of the Database contain the copyright notice:
Copyright (C) 1982-1999, [or most current applicable year] Cinahl Information
Systems. All rights reserved.
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8.4 The registered CINAHL(R) trademark/service mark, the CUMULATIVE INDEX
TO NURSING & ALLIED HEALTH LITERATURE(R) trademark, the CINAHL logo trademark,
and Cinahl's distinctive scarlet color trademark as used on covers of Cinahl's
print indexes to nursing, medical, and health literature and audiovisuals, are
Cinahl's sole and exclusive property. Licensee shall use said marks, where
appropriate, in conjunction with the exercise of its licensed rights hereunder
to identify at all times the source of Cinahl's products/services. Licensee
shall not use said marks and/or any confusingly similar marks, or permit them to
be used in any manner that shall compromise or prejudice Cinahl's rights
therein, and wherever practicable Licensee shall ensure that the (R) notice
appears as indicated above.
9 SUBSCRIPTION AGREEMENTS AND NOTICES TO USERS
9.1 Licensee shall give the following or substantially similar notices to
Users:
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. 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
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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
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SERVICE, SHALL NOT EXCEED THE AMOUNT YOU PAID TO HEALTHGATE DATA CORP. FOR USE
OF THE SERVICE.
9.5 Licensee shall be responsible for obtaining renewals of Subscription
Agreements.
9.6 Subscription Agreements shall be in substantially the same form as
Exhibit B attached hereto.
9.7 Each Subscription Agreement of more than a year's duration shall
contain a provision that Licensee may terminate it without penalty effective one
year after Licensee receives a notice from Cinahl Information Systems
terminating Licensee's license to distribute the Database.
10 MARKETING
10.1 Licensee and Cinahl shall, at their own expense, market, advertise,
and promote the Database to the best of their ability. Each shall share in the
other's marketing, advertising, and promotion costs as agreed from time to time.
Each shall cooperate with the other to the best of their ability to market,
advertise, and promote the Database jointly or otherwise at all conventions and
trade shows that they respectively attend. Licensee shall market the Database at
least to the same extent as it markets, advertises, and promotes other databases
it distributes or publishes..
10.2 The CINAHL(R) trademark and as far as possible the CINAHL logo
trademark shall be used at all times on the first screen of the Database. No
corruption of the CINAHL trademark shall be used.
10.3 Licensee shall give Cinahl for prior review a standard description of
Cinahl Information Systems and the CINAHL(R) Database to be used in Licensee's
marketing, advertising, promotional, and informational materials. Licensee shall
cooperate with Cinahl to remove inaccuracies therein.
10.4 Licensee may provide a "trial subscription" only to institutions and
not to individuals. Trial subscriptions shall be at no charge and for not longer
than thirty days, and shall not be repeated. Licensee shall ensure to
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the best of its ability that potential Subscribers use trial subscriptions in
good faith.
11 BOOKS AND RECORDS/AUDIT
11.1 Licensee shall keep such financial records as are required to
establish the value and volume of Subscription Agreements, and all amounts due
to Cinahl under this Agreement.
11.2 Cinahl may from time to time audit, examine, and copy ("audit")
Licensee's financial and other records as they pertain to the Database only, on
thirty days prior written notice to Licensee to verify any of Licensee's royalty
statements. Notice of the audit may be given at any time during the term of this
Agreement and up to ninety days after Cinahl has received Licensee's final
royalty statement on termination/expiration of this Agreement.
11.3 The audit shall be conducted during normal business hours by an
independent firm of certified public accountants chosen by Cinahl. Cinahl's
auditors shall not unreasonably interfere with Licensee's business operations
during the audit. Licensee shall cooperate fully with the auditors.
11.4 If the audit reveals that any of Licensee's royalty payments are
deficient, Licensee shall immediately pay said deficiency to Cinahl on
production of the auditor's certificate to that effect.
11.5 If the audit reveals that any of Licensee's royalty payments are
deficient by five percent or more, Licensee shall in addition immediately pay to
Cinahl the full cost of the audit as established by the auditor's invoice/s.
11.6 Cinahl shall be permitted a maximum of two audits each calendar year.
However, any audit that reveals a deficiency in royalty payments shall not be
counted as one of those two audits.
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11.7 Licensee's Confidential Information obtained by the auditors shall
not be revealed to Cinahl unless this becomes necessary for example in
connection with a shortfall in payment of royalties, and then only to the extent
necessary.
12 MAINTENANCE AND CUSTOMER SUPPORT
12.1 Licensee shall maintain and support its search and retrieval software
for Subscribers and shall make updates and new releases available to Subscribers
at such fees (if any) as Licensee may determine. Licensee shall not charge
Subscribers for minor enhancements and elimination of bugs in the software but
shall have the right to charge Subscribers for major enhancements. Cinahl may
suggest enhancements and Licensee shall consider such suggestions in good faith,
subject to Licensee's final decision. Licensee shall notify Cinahl in writing
sixty days in advance of any update, major enhancement, or new release of or for
the software
12.2 Cinahl shall maintain and support the Database and all updates.
Cinahl shall take steps to remedy defects in the Database or problems with the
magnetic tapes delivered by Cinahl. Any costs associated with remedying the
Database not caused directly or indirectly by Licensee shall be borne by Cinahl.
Cinahl shall prepare and maintain User documentation for the Database. This
shall include a quick reference support card and Database-specific examples for
an online tutorial. Licensee shall assist in preparation of the documentation
and it may not be distributed before Licensee has reasonably approved it.
12.3 Licensee shall maintain a telephone support line during normal
business hours providing Subscriber assistance for questions relating to
hardware and to Licensee's search and retrieval software. Cinahl shall maintain
a telephone support line during normal business hours providing Subscriber
assistance for questions relating to the Database. The parties shall refer
appropriate questions to each other. Licensee and Cinahl shall mutually
cooperate regarding the solution of Subscriber problems relating to hardware,
the search and retrieval software, and the Database.
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12.4 At the same time that it ships to Subscribers, Licensee shall ship to
Cinahl for its own internal use free of charge and free of shipping charges,
four copies, as applicable, of: (a) all Database service-related print materials
and (b) all updates and new issues thereof.
12.5 Licensee shall also give Cinahl access free of charge to its Web
service at all times for two simultaneous users for purposes of monitoring,
testing, and evaluation.
12.6 Cinahl shall bear no responsibility for servicing any hardware
supplied by Licensee.
13 FORCE MAJEURE
13.1 Neither party shall be deemed to be in breach hereunder to the extent
that performance of its obligations or attempts to cure any breach are delayed
or prevented by reason of any act of God, fire, earthquake, natural disaster,
accident, act of government, labor difficulty, sabotage, failure of suppliers or
subcontractors or unavailability of material or supplies, or any other cause
beyond the control of such party ("force majeure"), provided that such party
gives the other party written notice thereof as soon as it is reasonably able to
do so, having regard to the nature of said force majeure.
13.2 The time allowed for performance/cure shall be extended for a period
equal to the duration of the force majeure but in any event not exceeding six
months. During said period the affected party shall furnish status reports at
reasonable intervals.
14 LIMITATION OF LIABILITY AND INJUNCTION
14.1 Neither party shall be liable to the other for special or incidental
damages, lost profits or other types of consequential damages, punitive or
exemplary damages, arising out of or incidental to this Agreement, or the
termination thereof, and whether claimed under tort or contract, even if the
party held to be liable has been warned of the possibility of such damages, and
all remedies, if any, shall be cumulative and not exclusive.
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14.2 The parties agree that infringement of the other's intellectual
property rights and/or unauthorized disclosure of Confidential Information may
cause irreparable injury to the party concerned, and that damages shall be an
inadequate remedy. Therefore either party shall be entitled to seek injunctive
relief against any such threatened infringement/disclosure.
14.3 Neither party may obtain injunctive relief arising out of an
assignment of this Agreement in compliance with the provisions of section 18
hereof, in the absence of infringement of intellectual property rights and/or
unauthorized disclosure of Confidential Information.
15 LICENSEE'S REPRESENTATIONS AND WARRANTIES
Licensee represents and warrants that to the best of its knowledge and belief:
15.1 It has the sole and exclusive right to license and deal with all
rights in and to its search and retrieval software, the technology used in
exercising its rights under this Agreement, and documentation provided by it,
including all copyrights, trade secrets, trademarks and all other proprietary
interests therein free and clear of liens, adverse claims, encumbrances and
interests of any person or entity including, without limitation, Licensee's past
and present employees, agents, and contractors.
15.2 Licensee's search and retrieval software, said technology, and
documentation provided by Licensee and their licensing and use in accordance
with the terms hereof shall not infringe, violate, or misappropriate any United
States or foreign patent, copyright, trade secret, trademark, contract, or other
right or interest of any third party;
15.3 There is presently no litigation pending or threatened against
Licensee with respect to rights in Licensee's search and retrieval software
and/or the said technology.
16 CINAHL'S REPRESENTATIONS AND WARRANTIES
Cinahl represents and warrants that to the best of its knowledge and belief:
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16.1 It has the sole and exclusive right to license and deal with all
rights in and to the Database and documentation provided by it, including all
copyrights, trade secrets, trademarks and all other proprietary interests
therein free and clear of liens, adverse claims, encumbrances and interests of
any person or entity, including, without limitation, Cinahl's past and present
employees, agents, and contractors.
16.2 The Database and documentation provided by Cinahl and their licensing
and use in accordance with the terms hereof shall not infringe, violate, or
misappropriate any United States or foreign patent, copyright, trade secret,
trademark, contract, or other right or interest of any third party;
16.3 There is presently no litigation pending or threatened against Cinahl
with respect to right/s in the Database.
17 INDEMNIFICATION
17.1 Licensee shall defend, indemnify, and hold Cinahl harmless from and
against any and all liability, damage, loss, attorney fees, legal costs or
expense including penalties of any kind arising out of third party claims made
or suits brought in connection with Licensee's exercise or purported exercise of
its rights under this Agreement except in connection with the subject matter of
the warranties set forth in section 16 hereof relating to the Database or where
arising from the fault of Cinahl, its officers, employees or agents. Cinahl
shall give Licensee immediate detailed written notice of any demand, claim or
lawsuit for which defense and/or indemnity shall be required under this section.
Cinahl shall thereafter comply with any reasonable written request for documents
and/or information relating thereto and shall generally cooperate with Licensee
to facilitate Licensee's performance of its obligations hereunder. Licensee
shall be entitled to select competent attorney/s to represent Cinahl in
connection therewith. Licensee shall control the conduct of litigation and
settlement negotiations and shall be entitled to settle any claims and lawsuits
without Cinahl's consent except to the extent that such settlement prejudices
Cinahl's rights.
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17.2 Cinahl shall defend, indemnify, and hold Licensee harmless from and
against any and all liability, damage, loss, attorney fees, legal costs or
expense including penalties of any kind arising out of third party claims made
or suits brought in connection with the warranties set forth in section 16
hereof relating to the Database except where arising from the fault of Licensee,
its officers, employees, or agents. Licensee shall give Cinahl immediate
detailed written notice of any demand, claim or lawsuit for which defense and/or
indemnity shall be required under this section. Licensee shall thereafter comply
with any reasonable written request for documents and/or information relating
thereto and shall generally cooperate with Cinahl to facilitate Cinahl's
performance of its obligations hereunder. Cinahl shall be entitled to select
competent attorney/s to represent Licensee in connection therewith. Cinahl shall
control the conduct of litigation and settlement negotiations and shall be
entitled to settle any claims and lawsuits without Licensee's consent except to
the extent that such settlement prejudices Licensee's rights.
18 ASSIGNMENT
Either party may, without the other's consent, assign this Agreement to any
person or entity ("assignee") that succeeds to that party's business to which
this Agreement relates, provided assignee agrees in writing to be bound by all
of the assigning party's obligations hereunder. Thereafter, assignee shall be
bound by this Agreement and receive the benefit thereof, and the assigning party
shall be released from all obligations and liability under this Agreement except
for surviving obligations. The provisions of this section shall continue to
apply to all subsequent assignees and non-assigning parties.
19 THIRD PARTY INFRINGEMENT
Each party shall promptly notify the other of evidence or indication of
infringement of copyright, anti-misappropriation rights, trademark, patent or
other intellectual property rights in the Database, search and retrieval
software, or Licensee's technology that comes to said party's notice. The owner
(Cinahl or Licensee) of the rights infringed shall have exclusive right to file
any suit but the other party shall assist as far as it can. The party filing
suit shall bear all costs and attorney fees and shall receive all the
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benefit of said suit. If the parties agree to jointly file suit, the parties
shall agree on the method of sharing of expenses, attorney fees, and recoveries.
20 CONFIDENTIAL INFORMATION
Except in connection with the audit referred to above, and except where
necessary for the effective performance of either party's obligations under this
Agreement, neither party shall be obliged to provide the other with Confidential
Information. To the extent that either party is in possession of or obtains the
other's Confidential Information, and except as may be required pursuant to an
assignment permitted under this Agreement, Confidential Information may not be
disclosed to any third party without the prior written consent of the owner of
the Confidential Information, whether before or after the termination/expiration
of this Agreement. If any Confidential Information is required to be disclosed
to a permitted assignee, the assigning party shall give the non-assigning party
details thereof thirty days before disclosing the Confidential Information.
21 NO RESTRAINT
21.1 Subject to the law of unfair competition and other laws, Licensee
shall be entitled to license, publish, distribute, market, or otherwise deal
with other databases and its other properties in any medium and for any purpose
whatsoever even in competition with Cinahl.
21.2 This is a non-exclusive license and, subject to the law of unfair
competition and other laws, Cinahl shall be entitled to license, publish,
distribute, market or otherwise deal with its trademarks/service marks, the
Database, other databases, and its other properties in any medium and for any
purpose whatsoever even in competition with Licensee.
22 INDEPENDENT CONTRACTORS
22.1 Licensee is an independent contractor, and neither party is a
partner, joint venturer, agent or employee of the other.
22.2 Neither party has the right, power, or authority to act or create any
obligation, express or implied, on behalf of the other party.
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23 NOTICES
All communications hereunder shall be deemed received by the addressee within
seven days of mailing if sent by certified mail postage prepaid to the following
addresses:
TO: Cinahl Information Systems
Glendale Adventist Medical Center
Attention: Mr. David R. Igler, Vice President
P.O. Box 871
1509 Wilson Terrace
Glendale, CA 91209-0871
TO: HealthGate Data Corp.
Attention: Rick Lawson
380 Pleasant Street, Suite 230
Malden, MA 02148-8123.
24 GOVERNING LAW
The law governing the interpretation of this Agreement and the relationship of
the parties shall be the law of the State of California notwithstanding said
State's choice of law rules.
25 ATTORNEY FEES AND COSTS
If any action at law or in equity is brought to enforce the terms of this
Agreement, or arising out of the breach thereof, the prevailing party shall be
entitled to reasonable attorney fees and costs, in addition to any other relief
to which that party may be entitled. This provision shall be construed as
applicable to the entire Agreement.
26 CONSTRUCTION
26.1 Any provision of this Agreement held to be invalid shall be
ineffective only to the extent of such provision and shall not affect the
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remaining provisions of this Agreement which shall be fully effective as if said
invalidity did not exist.
26.2 Waiver of any right hereunder shall be effective only in the instance
given and shall not operate as, or imply a waiver of, any similar right on any
subsequent occasion. No term or provision of this Agreement shall be deemed
waived, and no breach consented to, unless such waiver or consent is in writing
and signed by the party concerned.
26.3 This writing and attached exhibits and schedules (if any) constitute
the entire agreement between the parties and supersedes all prior and
contemporaneous agreements, negotiations, and understandings, oral or written.
26.4 This Agreement may be modified only by an instrument or instruments
in writing duly executed by the parties.
26.5 The captions to the sections of this Agreement and attached exhibits
and schedules (if any) are for convenience only and are not a part of this
Agreement, and shall not be of any force or effect whatsoever in construing or
interpreting this Agreement.
26.6 All the provisions of this Agreement relating to payment of
royalties, representations and warranties, confidentiality, third party
infringement, and "no restraint" shall survive the termination or expiration of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their duly authorized representatives as of the date first
above written.
Western Adventist Health Services
dba Cinahl Information Systems
By: /s/ David R. Igler
-------------------------
Name: DAVID R. IGLER
-------------------------
Title: Vice President
-------------------------
HealthGate Data Corp.
Licensee
By: /s/ Rick Lawson
-------------------------
Name: RICK LAWSON
-------------------------
Title: VICE PRESIDENT, CONTENT
-------------------------
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Exhibit 10.5
AGREEMENT
This Agreement is made as of the 31st day of January, 1997 between
HealthGate Data Corp. ("HealthGate") a Delaware Corporation having its principal
place of business at 380 Pleasant Street, Suite 230, Malden, Massachusetts
02148-8123 and Physicians World Communications Group ("PW") a New Jersey
Partnership having its principal place of business at 4 Plaza Drive, Secaucus,
NJ 07094 (collectively referred to as "the Parties").
WHEREAS:
HEALTHGATE is an experienced provider of quality healthcare and medical
information through the Internet and World Wide Web.
HEALTHGATE has and will continue to develop an extensive base of
Physicians seeking information by computer access.
HEALTHGATE wishes to maintain special relationships with its major
commercial supporters.
HEALTHGATE is seeking a partner to develop and manage the expansion of
continuing medical education ("CME") activities, services and products
on the HEALTHGATE Network.
AND WHEREAS;
The Professional Postgraduate Services Division of PW ("PPS") is an
accredited provider of CME.
PW maintains an account management and sales organization in frequent
contact with the pharmaceutical, biotechnology and medical device
industries.
PW has extensive experience in creating, developing, implementing and
managing a wide range of CME formats.
PW has worked successfully with many leading medical schools, teaching
hospitals and thought leader physicians in the creation and
implementation of successful CME programs.
PPS has formed and maintains an independent board of CME and medical
experts to guide program development and assure independent, objective,
balanced and scientific rigorous program content.
PW is recognized as a leader in the CME Community.
PW is seeking new low cost methods of conducting CME activities and PW
is seeking a partner to make available its CME programs on-line through
the Internet and World Wide
<PAGE>
Web.
NOW THEREFORE: THE PARTIES AGREE TO PURSUE THE DEVELOPMENT AND EXPANSION OF CME
ON HEALTHGATE AS FOLLOWS:
Pursuant to the terms and conditions set forth herein, (i) HEALTHGATE
hereby agrees to utilize PW as the exclusive (subject to the
limitations described below) CME provider for physician education
programs to be carried on the HEALTHGATE network, (ii) PW hereby agrees
to utilize HEALTHGATE as the exclusive (subject to the limitations set
forth below) distributor of CME programs through the Internet and World
Wide Web. PW and HEALTHGATE agree to review, on a non-binding basis,
additional areas for PW representation, such as nurse practitioner,
technologist, hospital administrator, pharmacist, physician assistant
and patient education programs based on the initial success of
physician education programs.
Notwithstanding HEALTHGATE's agreement to utilize PW as the exclusive
CME provider for the HEALTHGATE network (i) HEALTHGATE may continue to
offer CME programs created, developed or implemented by or in
conjunction with Boston University School of Medicine; (ii) such
exclusivity shall not apply to acquisitions of CME programs acquired by
HEALTHGATE as described in the Non-Competition and Non-Solicitation
Section below; (iii) such exclusivity shall not apply to distribution
of physician education or CME programs with gross revenues to
HEALTHGATE in excess of $250,000; and (iv) such exclusivity shall
terminate upon written notice of HEALTHGATE to PW if the gross payments
received and retained by HEALTHGATE for the PW CME programs do not
exceed the annual minimum gross revenue amounts set forth in the
Business Plan (as defined below) for the years 1997 through 2001.
Notwithstanding PW's agreement to utilize HEALTHGATE as the exclusive
on-line distributor for PW's CME programs, PW may offer CME programs on line as
described in the Non-Competition and Non-Solicitation Section below.
DEVELOPMENT OF A BUSINESS PLAN:
Within three (3) months after execution of this Agreement the Parties
will develop a detailed written business plan for CME on the HEALTHGATE
network (the "Business Plan"). HEALTHGATE will develop a plan to
provide network background and network marketing sections including its
plans for expanding service. PW will develop a plan to identify and
secure companies to provide grants for physician education programming,
a sales call plan, a plan for operation of an educational advisory
board, a plan to solicit programs and participation from medical
schools and teaching hospitals, and other activities necessary for the
marketing of physician education programs. The Business Plan will
include a schedule of the annual minimum CME gross revenues to be
attained by PW for HEALTHGATE for the years 1997 through 2001 that will
be required for PW to maintain the exclusivity provided hereunder. Each
party will provide the other with
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appropriate background material and research on its past activities to
enable each party to properly plan its activities. Such materials shall
be subject to the Confidentiality Section, below. The Business Plan
shall include more detailed descriptions of the responsibilities of the
parties, compensation and commissions, and collections and payments as
outlined below. The Business Plan may be updated, reviewed, revised and
approved annually. The initial Business Plan and annual revisions
thereto shall be subject to the written approval of both parties.
RESPONSIBILITIES OF PW:
(a) PW will utilize its sales force, unless and until the Business Plan
provide otherwise, to call on the healthcare industry to solicit grants
for physician education programs on HEALTHGATE network.
(b) PW will solicit from and/or co-develop with leading medical
schools, teaching hospitals, publishers and others, CME content for
HEALTHGATE distribution.
(c) PW will explore the establishment of a comprehensive Postgraduate
Medical curriculum "PPS University" with HEALTHGATE.
(d) PW will, whenever appropriate, recommend CME on the HEALTHGATE
network as a distribution channel or secondary distribution channel for
all existing and selected 1995/1996 CME Programs.
(e) PPS will be responsible for quality assurance review of its CME and
physician education programming on the HEALTHGATE network. This may be
done by a sub-set of the existing PW Education Advisory Board.
Alternately the sponsored education programming offered on the
HEALTHGATE network will be vetted through a new third-party review
board established by PW for this purpose. Notwithstanding the
foregoing, all content on HEALTHGATE's network remains subject to
review and approval by HEALTHGATE's Physician Advisory Panel as long as
such review meets the standards and regulations of the Accreditation
Council for Continuing Medical Education ("ACCME").
(f) PPS will provide CME credit on programs properly developed and
suitable for such designation. New CME programming will be created in
compliance with guidelines, standards and regulations so as to allow
CME credit to be awarded.
(g) PW will handle all proposal development, invoicing and collections
required, using methods and reports acceptable to HEALTHGATE.
(h) PW will provide HEALTHGATE with such notice of programming
requirements as to allow HEALTHGATE adequate time to incorporate new
activities on the network.
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(i) PW will hold and maintain copyright for all its physician CME
programs.
RESPONSIBILITIES OF HEALTHGATE:
(a) HEALTHGATE will be responsible for the installation, maintenance,
operation and technology of the network and for obtaining enrollment of
new subscribers.
(b) HEALTHGATE agrees to provide messages on the HEALTHGATE network in
support of physician education activities.
(c) HEALTHGATE will be responsible for assuring that its network will
have sufficient capacity to accommodate the CME programming secured by
PW for HEALTHGATE.
(d) HEALTHGATE shall be responsible for collection of fees from
physicians and others participants accessing the CME programs through
HEALTHGATE's network.
(e) HEALTHGATE will provide to PPS all information required to be
maintained by PPS in accordance with the standards and regulations of
ACCME. This information will include, but will not be limited to,
course topic, enrollment by physicians, credit hours issued and
accrediting body.
JOINT RESPONSIBILITIES:
(a) The Parties will work together to develop a customer base with
managed care organizations based on the combined services of both
partners.
(b) The Parties will work together to assure that the speed of access,
graphic and content quality of the CME products offered are among the
best available in on-line services.
COORDINATION OF ACTIVITIES:
The parties agree to hold monthly meetings in person or by phone to
update and discuss activities being conducted under this Agreement.
These meetings will include senior management of PW, for example,
Martin E. Cearnal, Robert Anderson, Philip Dombrowski and other PW
employees involved in activities supporting CME on HEALTHGATE where
appropriate, and senior management of HEALTHGATE including William
Reece and Rick Lawson and others, where appropriate.
In addition, quarterly or semi-annual senior management meetings will
be held to discuss longer range plans and resolve other issues.
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NON-COMPETITION AND NON-SOLICITATION:
(a) PW will not contract with any other on-line service for the
distribution of physician education or CME programs except as required
by its large clients so long as this Agreement is in force. A large
client is defined as contracting with PW for fee revenue in excess of
$250,000 in any calendar year.
(b) If HEALTHGATE or any of its affiliates or subsidiaries acquires or
obtains control of any other computer network system which includes
physician education or CME programs. HEALTHGATE shall negotiate with PW
for PW to become the CME representative of such acquired network. If a
mutually agreeable arrangement can not be negotiated, HEALTHGATE may
independently offer such physician education or CME program on its
network. If PW believes, in its reasonable judgment, that the addition
of such CME programs on the HEALTHGATE network will negatively impact
PW's reputation and image within the CME community, PW will give
HEALTHGATE written notice of its concerns and the deficiencies it
believes exist in such CME programs, and HealthGate shall have a 60-day
period after receiving such notice to cure the deficiencies specified
therein. If such deficiencies are not cured within such 60-day period,
PW may terminate this Agreement in accordance with the termination
provisions set forth herein.
(c) HEALTHGATE will not contract with any other medical education
company or CME provider other than PW and PPS, except as provided by
the exceptions to exclusivity described in this Agreement.
(d) Both parties agree to refrain from soliciting for employment or
hiring employees of the other party during the term of this Agreement
and for a period of two (2) years following the expiration of the
Agreement.
COMPENSATION AND COMMISSIONS PAYABLE TO PW AND HEALTHGATE:
(a) Physician Education Programs
Physician education programs to be offered on the HEALTHGATE network
usually will be derived from one of three sources, (1) PW with funding
from grants or self generated CME programs, (2) commercial
organizations with or without grant funding and (3) non-profit
organizations with or without grant funding. Regardless of the source
of the program HEALTHGATE will be compensated for its charges for
network services and PW will be compensated for its charges for
selling, creating quality assurance, invoicing, collections and,
certification fees, all in accordance with the rates set forth in the
Business Plan. Such rates will not be changed without the mutual
agreement of the Parties. Actual rates incorporating HEALTHGATE and PW
fees will be combined into a single amount
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and published from time to time.
The Parties may agree to forego all charges to distribute a program
from a non-profit foundation, but neither has the ability to commit the
other to waive its normal charges.
(b) The Parties envision a monthly space charge to third parties for
commercially supported CME educational offerings. HEALTHGATE and PW
will agree the division of these charges during the development of the
business plan. The space charge may be waived for non-commercial
offerings by agreement of both Parties.
(c) For programs where there is a per participant fee, the fee will be
shared between PW and HEALTHGATE as defined in the business plan.
(d) Sales Generation Fee payable to HEALTHGATE
During the term hereof, in the event that HEALTHGATE generates a lead
for PW with respect to a specific program and communicates the lead in
writing in advance of PW's contact with the prospective client with
respect to such program and the lead results in a sale by PW,
HEALTHGATE shall be entitled to compensation in the amount of 1% of the
net fee revenue received by PW, to a maximum fee of $1,000 for such
lead.
(e) Sales Generation Fee Payable to PW:
During the term hereof, in the event that PW generates a lead for
HEALTHGATE in areas outside the scope of PW's responsibilities
hereunder and communicates the lead in writing in advance of
HEALTHGATE's contact with the prospective client with respect to such
program and the lead resulted in a sale by HEALTHGATE, PW shall be
entitled to compensation in the amount of 1% of the net fee revenue
received by HEALTHGATE, to a maximum fee of $1,000 for such lead.
COLLECTION AND PAYMENT PROCEDURES:
(a) PW shall bill for the programs and services for which PW or PPS is
the representative under this Agreement. PW will be responsible for
normal collection and follow-up. Should any payment from a client be
overdue more than forty five (45) days, PW shall notify HEALTHGATE and
the parties will jointly determine the next course of action.
(b) PW shall pay HEALTHGATE space charges and other costs allocated to
HEALTHGATE pursuant to the Business Plan within ten (10) days of PW's
receipt of such funds from the program sponsor.
(c) HEALTHGATE shall pay PW its allocation of participants' fees within
ten (10) days of HEALTHGATE's receipt of such funds from the
participants.
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TERMS AND TERMINATION:
This Agreement shall commence as of the date hereof and shall remain in
effect for a five year period. The Agreement will automatically renew
for successive three (3) year terms, unless written notice is given by
either party not less than six months prior to the expiration date of
the Agreement. Notwithstanding the termination of this Agreement, each
party shall satisfy any obligation incurred pursuant hereto which
remains unfulfilled as of the expiration date.
Notwithstanding the foregoing, either party may terminate this
Agreement upon written notice to the other if the initial Business Plan
is not approved in writing by both parties within six months of the
date of the Agreement.
In the event the Agreement is terminated by HEALTHGATE all rights to
educational content developed by or secured by PW shall revert to PW.
The parties may agree terms under which all or some of this material
remains available on the HEALTHGATE network.
CONFIDENTIALITY:
(a) PW and HEALTHGATE each acknowledges and agrees that any information
that HEALTHGATE provides to PW relating to its operations and
technology, as well as any other plans, performance or data relating to
its services, or that any information that PW provides to HEALTHGATE
relating to its operations and methods of soliciting grants, arranging
for accreditation of programs, confidential information from grantors,
and plans for physician education programs, or any other data relating
to PW's operations shall be maintained in the confidence normally
accorded PW's or HEALTHGATE's own internal confidential material and
shall not be used during the term of this Agreement or for a period of
two (2) years thereafter, except for the purposes contemplated by this
Agreement and except for information which:
(1) is in or comes into the public domain (provided, however, that such
information does not come into the public domain as a result of any act
by PW or HEALTHGATE, as the case may be) or
(2) as shown by written records, was independently known to PW or
HEALTHGATE, as the case may be, at or prior to the time of disclosure;
or
(3) becomes known to PW or HEALTHGATE, as the case may be, through a
third party not under an obligation of confidentiality to HEALTHGATE or
PW.
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(b) It is understood that any and all property rights to the
confidential information disclosed to PW or to HEALTHGATE shall be and
remain in the disclosing party. At any time, upon written request, PW
or HEALTHGATE shall return to the other any and all written copies of
confidential information disclosed to it by the other which is then in
its possession. Each employee or consultant of PW or HEALTHGATE granted
access to all or any part of the confidential information received from
HEALTHGATE or PW shall be advised or this agreement not to disclose
such information except as provided herein.
NO ASSIGNMENT OF AGREEMENT:
Neither HEALTHGATE nor PW shall assign its rights or delegate the
performance of its duties under this Agreement without the prior
written consent of the other, except that PW or HEALTHGATE may assign
its rights or delegate the performance of its duties to a subsidiary or
affiliate, and except for an assignment in connection with the sale of
all or substantially all the business of HEALTHGATE or PW.
INDEMNIFICATION:
(a) HEALTHGATE agrees to defend, indemnify and hold harmless PW from
and any and all losses, costs, claims, demands, judgements and
liability (including reasonable attorneys' fees) resulting from PW's
performance under this Agreement, except to the extent that such
losses, costs, claims, demands, judgments or liabilities are due to the
negligence or wrongful act(s) of PW.
(b) PW agrees to defend, indemnify and hold harmless HEALTHGATE from
any and all losses, costs, claims, demands, judgments and liability
(including reasonable attorneys' fees) resulting from HEALTHGATE's
performance under this Agreement, except to the extent that such
losses, costs, claims, demands, judgments or liabilities are due to the
negligence or wrongful act(s) of HEALTHGATE.
BANKRUPTCY:
Should either of the Parties make an assignment for the benefit of
creditors, file a voluntary petition in bankruptcy, be adjudicated
bankrupt or insolvent in a court of law, the other party may in its
sole discretion terminate this Agreement without notice.
ENTIRE AGREEMENT:
(a) This Agreement contains the entire understanding between the
Parties concerning the subject matter hereof, and no representations,
inducement, promises, or agreements or otherwise, between the Parties
with respect thereto shall be of any force or effect.
(b) Nothing contained in this Agreement is intended or shall be deemed
to constitute
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HEALTHGATE or PW joint venturers or partners, the relationship or the
Parties being limited to the performance of the activities contemplated
herein in accordance with the terms of this Agreement.
CONSTRUCTION:
This Agreement shall be construed under the laws of the State of New
Jersey USA, applicable to contracts to be performed fully therein,
without giving effect to any statutes or principles of conflict of law.
Headings and titles of paragraphs herein are for convenience only and
should not be construed in any interpretation hereof.
The Parties acknowledge that HEALTHGATE provides healthcare and medical
information to physicians and others. Notwithstanding any other term or
condition of this Agreement or the Business Plan, HEALTHGATE's
obligations to PW relate solely to physicians' CME and this Agreement
does not limit or cover HEALTHGATE's operations which provide general
education or medical information to physicians via other content (i.e.,
MEDLINE, journals, monographs, databases, etc).
COUNTERPARTS:
This agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above indicated.
PHYSICIANS WORLD COMMUNICATIONS GROUP
By: /s/ Martin Cearnal
------------------
Title: CEO
---------------
Date: January 31, 1997
----------------
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
Title: CEO
-----------------
Date: January 29, 1997
----------------
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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
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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
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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
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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.
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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
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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.
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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
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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.
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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
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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
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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.
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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.
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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
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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.
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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.
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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
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Exhibit 10.8
EXODUS COMMUNICATIONS, INC.
INTERNET DATA CENTER SERVICES AGREEMENT
THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made
effective as of the Submission Date December 30, 1998 indicated in the initial
Internet Data Center Services Order Form accepted by Exodus, by and between
Exodus Communications, Inc. ("Exodus") and the customer identified below
("Customer").
PARTIES.
CUSTOMER NAME: HEALTHGATE DATA CORP.
------------------------
ADDRESS: 25 Corporate Drive
------------------------
Suite 310
------------------------
Burlington MA 01803
------------------------
PHONE: 781 685-4000
------------------------
FAX: 781 685-4050
------------------------
EXODUS COMMUNICATIONS, INC
2831 Mission College Blvd.
Santa Clara, CA 95055-1838
Phone: (408) 346-2200
Fax: (408) 346-2420
1. INTERNET DATA CENTER SERVICES.
Subject to the terms and conditions of the Agreement, during the terms of this
Agreement, Exodus will provide to Customer the services described in the
Internet Data Center Services order Form(s) ("IDC Services Order Form(s)")
accepted by Exodus, or substantially similar services if such substantially
similar services would provide Customer with substantially similar benefits
("Internet Data Center Services"). All IDC Services Order Forms accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.
2. FEES AND BILLING.
2.1 Fees. Customer will pay all fees due according to the IDC Services
Order Form(s).
2.2 Billing Commencement. Billing for Internet Data Center Services, other
than Setup Fees, indicated in the initial IDC Services Order Form shall commence
on the earlier to occur of (i) the "Installation Date" indicated in the initial
IDC Services Order Form, regardless of whether Customer has commenced use of the
Internet Data Center Services, unless Customer is unable to install the Customer
Equipment and/or use the Internet Data Center Services by the Installation Date
due to the fault of Exodus, then billing will not begin until the date Exodus
has remedied such fault and (ii) the date the "Customer Equipment" (Customer's
computer hardware and other tangible equipment, as identified in the Customer
Equipment List which is incorporated herein by this reference) is placed by
Customer in the "Customer Area" (the portion(s) of the Internet Data Centers, as
defined in Section 3.1 below, made available to Customer hereunder for the
placement of Customer Equipment) and is operational. All Setup Fees will be
billed upon receipt of a Customer signed IDC Services Order Form. In the event
that Customer orders additional Internet Data Center Services, billing for such
services shall commence on the date Exodus first provides such additional
Internet Data Center Services to Customer or is otherwise agreed to by Customer
and Exodus.
2.3 Billing and Payment Terms. Customer will be billed monthly in advance
of the provision of Internet Data Center Services, and payment of such fees will
be due within thirty (30) days of the date of each Exodus invoice. All payments
will be made in U.S. dollars. Late payments hereunder will accrue interest at a
rate of one and one-half percent (1 1/2%) per month, or the highest rate allowed
by applicable law, whichever is lower. If Customer is delinquent in its
payments, Exodus may, upon written notice to Customer, modify the payment terms
to require full payment before the provision of Internet Data Center Services or
other assurances to secure Customer's payment obligations hereunder.
2.4 Taxes. All payments required by this Agreement are exclusive of all
national, state, municipal or other governmental excise, sales, value-added,
use, personal property, and occupational taxes, [ILLEGIBLE], withholding taxes
and obligations and other levies now in force or enacted in the future, all of
which Customer will be responsible for and will pay in full, except for taxes
based on Exodus' net income.
3. CUSTOMER OBLIGATIONS.
3.1 Compliance with Law and Rules and Regulations. Customer agrees that
Customer will comply at all times with all applicable laws and regulations and
Exodus' general rules and regulations relating to its provision of Internet Data
Center Services, as updated by Exodus from time to time ("Rules and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the source of the information passing through its sites concerning the
Customers Area and equipment and facilities used by Exodus to provide Internet
Data Center Services ("Internet Data Centers"), and that it is the sole
responsibility of Customer to ensure that the information it [ILLEGIBLE] and
receives complies with all applicable laws and regulations.
3.2 Customer's Costs. Customer agrees that it will be solely responsible,
and at Exodus' request will reimburse Exodus, for all costs and expenses (other
than those included as part of the Internet Data Center Services and except as
otherwise expressly provided herein) it incurs in connection with this
Agreement, provided that such costs and expenses are approved by Customer.
3.3 Access and Security. Customer will be fully responsible for any
charges, costs, expenses (other than those included in the Internet Data
Center Services), and third party claims that may result from its use of, or
access to, the Internet Data Centers and/or the Customer Area including but not
limited to any unauthorized use of any access devices provided by Exodus
hereunder. Except with the advanced written consent of Exodus, Customer's access
to the Internet Data Centers will be limited solely to the individuals
identified and authorized by Customer to have access to the Internet Data
Centers and the Customer Area in accordance with this Agreement, as identified
in the Customer Registration Form, as amended from time to time, which is hereby
incorporated by this reference ("Representations").
3.4 No Competitive Services. Customer may not resell Exodus' Internet Data
Center Services without Exodus' prior written approval. In the event that Exodus
permits Customer to connect Customer Equipment directly to any other network,
fixtures or equipment, Exodus will require Customer to pay Exodus recurring and
non-recurring connection fees.
3.5 Insurance.
(a) Minimum Limits. Customer will keep in full force and effect during the
term of this Agreement (i) comprehensive general liability insurance in an
amount not less than $5 million per occurrence for bodily injury and property
damage; (ii) employer's liability insurance in an amount not less than $1
million per occurrence, and (iii) workers' compensation insurance in an amount
not less than that required by applicable law. Customer also agrees that it
will, and will be solely responsible for ensuring that its agents (including
contractors and subcontractors) maintain, other insurance at levels no less than
those required by applicable law and customary at Customer's and its agents'
industries.
(b) Certificates of Insurance. Prior to installation of any Customer
Equipment in the Customer Area, Customer will furnish Exodus with certificates
of insurance which evidence the minimum levels of insurance set forth above.
(c) Naming Exodus as an Additional Insured. Customer agrees that prior to
the installation of any Customer Equipment, Customer will cause its insurance
provider(s) to name Exodus as an additional insured and notify Exodus in writing
of the effective date thereof.
4. CONFIDENTIAL INFORMATION.
4.1 Confidential Information. Each party acknowledges that it will have
access to certain confidential information of the other party concerning the
other party's business, plans, customers, [ILLEGIBLE], and products, including
the terms and conditions of this Agreement ("Confidential Information").
Confidential information will include, but no be limited to, each party's
proprietary software and customer information. Each party agrees that it will
not use in any way, for its own account or the account of any third party,
except as expressly permitted by this Agreement, nor disclose to any third party
(except as required by law or to that party's attorneys, accountants and other
advisors as reasonably necessary), any of the other party's Confidential
Information and will take reasonable precautions to protect the confidentiality
of such information.
4.2 Exceptions. Information will not be deemed Confidential information
hereunder if such information: (i) is known to the receiving party prior to
receipt from the disclosing party directly or indirectly from a source other
than one having an obligation of confidentiality to the disclosing party; (ii)
becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation of confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party.
5. REPRESENTATIONS AND WARRANTIES.
5.1 Warranties by Customer.
(a) Customer Equipment. Customer represents and warrants that it owns or
has the legal right and authority, and will continue to own or maintain the
legal right and authority during the term of this Agreement, to place and use
the Customer Equipment as contemplated by this Agreement. Customer further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the Internet Data Centers complies with the Customer Equipment
Manufacturer's environmental and other specifications.
(b) Customer's Business. Customer represents and warrants that Customer's
services, products, materials, data, information and Customer Equipment used by
Customer in connection with this Agreement as well as Customer's and its
permitted customers' and users' use of the Internet Data Center Services
(collectively, "Customer's Business") does not as of the Installation Date, and
will not during the term of this Agreement operate in any manner that would
violate any applicable law or regulation.
(c) Rules and Regulations. Customer has read the Rules and Regulations and
represents and warrants that Customer and Customer's Business are currently in
full compliance with the Rules and Regulations, and will remain so at all times
during the term of this Agreement.
(d) Breach of Warranties. In the event of any breach, or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity, Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its
business.
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5.2 Warranties and Disclaimers by Exodus.
5.2(a) Service Level Warranty. In the event Customer experiences any
of the following and Exodus determines in its reasonable judgment that such
liability was caused by Exodus' failure to provide Internet Data Center Services
for reasons within Exodus' reasonable control and not as a result of any actions
or inactions of Customer or any third parties (including Customer Equipment and
third party equipment), Exodus will, upon Customer's request in accordance with
paragraph (iii) below, credit Customer's account as described below.
(i) Inability to Access the Internet (Downtime). If Customer is
unable to transmit and receive information from Exodus' Internet Data Centers
(i.e., Exodus' LAN and WAN) to other portions of the Internet because Exodus
failed to provide the Internet Data Center Services for more than fifteen (15)
consecutive minutes, Exodus will credit Customer's account the pro-rata
connectivity charges (i.e., all bandwidth related charges) for one (1) day of
service, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one (1) calendar month. Exodus' scheduled maintenance of
the Internet Data Centers and Internet Data Center Services, as described in the
Rules and Regulations, shall not be deemed to be a failure of Exodus to provide
Internet Data Center Services. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained packet loss in excess of 50% based on
Exodus' measurements.
(ii) Packet Loss and Latency. Exodus does not proactively monitor
the packet loss or transmission latency of specific customers. Exodus does,
however, proactively monitor the aggregate packet loss and transmission latency
within its LAN and WAN. In the event that Exodus discovers (either from its own
efforts or after being notified by Customer) that Customer is experiencing
packet loss in excess of one percent (1%) ("Excess Packet Loss") or transmission
latency in excess of 120 milliseconds round trip time (based on Exodus'
measurements) between any two Internet Data Centers within Exodus' U.S. network
(collectively, "Excess Latency", and with Excess Packet Loss "Excess Packet
Loss/Latency"), and Customer notifies Exodus or confirms that Exodus has
notified Customer), Exodus will take all actions necessary to determine the
source of the Excess Packet Loss/Latency.
(A) Time to Discover Source of Excess Packet Loss/Latency:
Notification of Customer. Within two (2) hours of discovering the existence of
Excess Packet Loss/Latency, Exodus will determine whether the source of the
Excess Packet Loss/Latency is limited to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to Exodus' LAN ("Customer Specific
Packet Loss/Latency"). If the Excess Packet Loss/Latency is not a Customer
Specific Packet Loss/Latency, Exodus will determine the source of the Excess
Packet Loss/Latency within two (2) hours after determining that it is not a
Customer Specific Packet Loss/Latency. In any event, Exodus will notify Customer
of the source of the Excess Packet Loss/Latency within sixty (60) minutes after
identifying the source.
(B) Remedy of Excess Packet Loss/Latency. If the Excess Packet
Loss/Latency [ILLEGIBLE] is within the sole control of Exodus, Exodus will
remedy the Excess Packet Loss/Latency within two (2) hours of determining the
source of the Excess Packet Loss/Latency. If the Excess Packet Loss/Latency is
caused from outside of the Exodus LAN or WAN, Exodus will notify Customer and
will use commercially reasonable efforts to notify the party(ies) responsible
for the source and cooperate with it(them) to resolve the problem as soon as
possible.
(C) Failure to Determine Source and/or Resolve Problem. In the
event that Exodus is unable to determine the source of and remedy the Excess
Packet Loss/Latency within the time periods described above (where Exodus was
solely in control of the source), Exodus will credit Customer's account the
pro-rata connectivity charges for one (1) day of service for every two (2) hours
after the time periods described above that it takes Exodus to resolve the
problem, up to an aggregate maximum credit of connectivity charges for seven (7)
days of service in any one (1) month.
(iii) Customer Must Request Credit: To receive any of the credits
described in this section 5.2(a), Customer must notify Exodus within three (3)
business days from the time Customer becomes eligible to receive a credit.
Failure to comply with this requirement will forfeit Customer's right to receive
a credit.
(iv) Remedies Shall Not Be Cumulative: Maximum Credit. In the event
that Customer is entitled to multiple credits hereunder [ILLEGIBLE] the same
event, such credits shall not be cumulative and Customer shall be entitled to
receive only the maximum single credit available for such event. In no event
will Exodus be required to credit Customer in any one (1) calendar month
connectivity charges in excess of seven (7) days of service. A credit shall be
applied only in the month in which there was the incident that resulted in the
credit. Customer shall not be eligible to receive any credit for periods in
which Customer received any Internet Data Center Services free of charge.
(v) Termination Option for Chronic Problems: If, in any single
calendar month, Customer would be able to receive credits totaling fifteen (15)
or more days (but for the [ILLEGIBLE] in paragraph (iv) above) resulting from
three (3) or more events during such calendar month or, if any single event
entitling customer to credits under paragraph 5.2(a)(i) exists for a period of
eight (8) consecutive hours, then Customer may terminate this Agreement for
cause and without penalty by notifying Exodus within five (5) days following the
end of such calendar month. Such termination will be effective thirty (30) days
after receipt of such notice by Exodus.
THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION [ILLEGIBLE] FOR SUCH
PRODUCTS). THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
ANY FAILURE BY EXODUS TO PROVIDE INTERNET CENTER DATA SERVICES.
(b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN
SUBSECTION (a) ABOVE, THE INTERNET DATA SERVICES ARE PROVIDED ON AN "AS IS"
BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS
AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICES.
EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.
(C) Disclaimer of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN
LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR
PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE
COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO
SUCH EVENTS.
6. LIMITATIONS OF LIABILITY.
6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING
THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS' NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO
SUCH PERSONS DURING A VISIT.
6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO LIABILITY
FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING FROM ANY
CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED TO
CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT.
6.3 Exclusions. EXCEPT AS EXECUTED IN SECTIONS 6.1 AND 6.2, IN NO EVENT
WILL EXODUS BE LIABLE TO ANY CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY
FOR ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER EQUIPMENT,
CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE
OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, EXODUS' MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.
6.5 Customer's Insurance. Customer agrees that it will not pursue any
claims against Exodus for any liability Exodus may have under or relating to
this Agreement until Customer first makes claims against Customer's insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.
6.6 Basis of the Bargain: Failure of Essential Purpose. Customer
acknowledges that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein, and that the same form an essential basis of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
7. INDEMNIFICATION.
7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and
hold Customer harmless from and against any and all costs, liabilities, losses,
and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively, "Losses") resulting from any claim, suit, motion, or proceeding
(each, an "Action") brought against Customer alleging (i) the infringement of
any third party registered U.S. copyright or issued U.S. patent resulting from
the provision of Internet Data Center Services pursuant to this Agreement (but
excluding any infringement contributorily caused by Customer's Business or
Customer's Equipment(s) and (ii) personal injury to Customer's Representatives
from Exodus's gross negligence or willful misconduct.
7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend
and hold Exodus, its affiliates and successors harmless from and against any and
all Losses resulting from or arising out of any Action brought by or against
Exodus, its affiliates or customers alleging: (a) with respect to the Customer's
Business: (i) infringement or misappropriation of any intellectual property
rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of
the rights of privacy or publicity; or (iii) spamming, or any other offensive,
harassing or illegal conduct or violation of the Rules and regulations; (b) any
damage or
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destruction to the Customer Area, the Internet Data Center or the equipment of
Exodus or any other customer by Customer or Representative(s) or Customer's
designatees or (c) any other damages ensuing from the Customer Equipment or
Customer's Business.
7.3 Notice. Each party will provide the other party prompt written notice
upon of the occurrence of any such event of which it becomes aware, and an
opportunity to participate in the dense thereof.
8. Term and Termination.
8.1 Term. This Agreement will be effective for a period of one (1) year
from the Installation Date, unless earlier permitted [ILLEGIBLE] in the
provisions of this Section 8. The Agreement will automatically renew for
additional terms of one (1) year each.
8.2 Termination.
(a) For Convenience.
(i) By Customer During First Thirty Days. Customer may terminate this
Agreement for convenience by providing written notice to Exodus at any time
during the thirty (30) day period beginning on the Installation Date.
(ii) By Either Party. Either party may terminate this Agreement for
convenience at any time effective after the first (1st) anniversary of the
Installation Date by providing ninety (90) days prior written notice to the
other party at any time thereafter.
(b) For Cause. Either party will have the right to terminate this
Agreement if (i) the other party breaches any material term or condition of this
Agreement and fails to cure such breach within thirty (30) days after receipt of
written notice of the same, except in the case of failure to pay fees, which
must be cured within five (5) days after receipt of written notice from Exodus;
(ii) the other party becomes the subject of a voluntary petition in bankruptcy
or any voluntary proceeding relating to insolvency, receivership, liquidation,
or composition for the benefit of creditor, or (iii) the other party becomes the
subject of an involuntary petition in bankruptcy or any involuntary proceeding
relating to insolvency, receivership, liquidation or composition for the benefit
of creditors, if such petition or proceeding is not dismissed within sixty (60)
days of filing.
8.3 No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
8.4 Effect of Termination. Upon the effective date of expiration or
termination of the Agreement: (a) Exodus will immediately [ILLEGIBLE] providing
the Internet Data Center Services; (b) any and all payment obligations of
Customer under this Agreement will become due immediately; (c) within thirty
(30) days after such expiration or termination, each party will return all
Confidential Information of the other party in its possession at the time of
expiration or termination and will not make or retain any copies of such
Confidential Information except as required to comply with any applicable legal
or accounting record keeping requirement; and (d) Customer will remove from the
Internet Data Center all Customer Equipment and any of its other property within
the Internet Data Centers within five (5) days of such expiration or termination
and return the Customer Area to Exodus in the same condition as it was on the
Installation Date, normal wear and tear excepted. If Customer does not remove
such property within such five-day period, Exodus will have the option to (i)
move any and all such property to secure storage and charge Customer for the
cost of such removal and storage, and/or (ii) liquidate the property in any
reasonable manner.
Intentionally deleted.
8.5 Survival. The following provision will survive any expiration or
termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9
9. MISCELLANEOUS PROVISIONS
9.1 Force Majeure Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this Agreement
due to any cause beyond its reasonable control, including act of war, acts of
God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that, the delayed party:
(a) gives the other party prompt notice of such cause, and (b) uses its
reasonable commercial efforts to correct promptly such failure or delay in
performance.
9.2 No Lease This Agreement is a service Agreement and is not intended to
and will not constitute a lease of any real or personal property. Customer
acknowledges and agrees that (i) it has been granted only a license to occupy
the Customer Space and use the Internet Data Centers and any equipment provided
by Exodus in accordance with this Agreement, (ii) Customer has not been granted
any real property interest in the Customer Space or Internet Data Centers, and
(iii) Customer has no rights as a tenant or otherwise under any real property or
landlord/tenant laws, regulations, or ordinances. For good cause Exodus may
suspend the right of any Representative or other person to visit the Internet
Data Centers.
9.3 Marketing. Customer agrees that Exodus may refer to Customer by
trade name and trademark, and may briefly describe Customer's Business, in
Exodus' marketing commercials and web site. Customer hereby grants Exodus a
[ILLEGIBLE] to use any Customer [ILLEGIBLE] names and trademarks solely in
connection with the rights granted to Exodus pursuant to this Section 9.3. Prior
to any sentence description of use of license, Exodus shall permit Customer to
review and [ILLEGIBLE], description, description and use of license.
Notwithstanding the above, Customer agrees that Exodus may list Customer in a
generalized list of customers.
9.4 Government Regulations. Customer will not export, re-export, transfer,
or make available whether directly or indirectly, any replaced item or
information to anyone outside the U.S. in connection with this Agreement without
first complying with all export material laws and regulations which may be
imposed by the U.S. Government and any country or organization of [ILLEGIBLE]
within whose jurisdiction Customer operates or does business.
9.5 Non-Solicitation. During that period beginning on the Installation
Date and ending on the first anniversary of the termination or expiration of
this Agreement in accordance with its terms, Exodus and Customer agree that they
will not, and will ensure that their affiliates do not, directly or indirectly,
solicit or attempt to solicit for employment any persons employed by the other
party during such period.
9.6 Governing Law; Dispute Resolution, Severability; Waiver. This
Agreement is made under and will be governed by and construed in accordance with
the laws of the State of California (except that body of law controlling
conflicts of law) and specifically excluding from application to this Agreement
that law known as the United Nations Convention on the International Sale of
Goods. Any dispute relating to the terms, interpretation or performance of this
Agreement (other than claims for preliminary injunctive relief or order
[ILLEGIBLE] will be resolved at the request of either party through binding
arbitration. Arbitration will be conducted under the rules and procedures of the
Judicial Arbitration and Mediation Society ("JAMS"). The parties will request
that JAMS appoint a single arbitrator possessing knowledge of online services
agreements; however the arbitration will proceed even if such a person is
unavailable. In the event any provision of this Agreement is held by a
[ILLEGIBLE] of competent jurisdiction to be contrary to the law, the remaining
provisions of this Agreement will remain in full force and effect. In the event
of a dispute, the party bringing action agrees to submit to the jurisdiction of
the other party. The waiver of any breach or default of this Agreement will not
constitute a waiver of any subsequent breach or default, and will not act to
suspend or [ILLEGIBLE] the rights or the waiving party.
9.7 Assignment; Notices. Customer may not assign its rights or delegate
its duties under this Agreement either in whole or in part without the prior
written consent of Exodus, except that Customer may assign this Agreement in
whole as part of a corporate reorganization, consolidation, merger, or sale of
substantially all of its assets. Any attempted assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or in part.
This Agreement will bind and inure to the benefit of each party's successors and
[ILLEGIBLE] assigns. Any notice or communication required or permitted to be
given, hereunder may be delivered by hand, deposited with an overnight courier,
sent by confirmed facsimile, or mailed by registered or certified mail, return
receipt requested, postage prepaid, in each case to the address of the receiving
party indicated on the signature page hereof, or at such other address as may
hereafter be furnished in writing by either party hereto to the other. Such
notice will be deemed to have been given as of the date it is delivered, mailed
or sent, whichever is earlier.
9.8 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise provided herein.
9.9 Entire Agreement; Counterparts. This Agreement, including all
documents incorporated herein by reference, constitutes the complete and
existing agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
Customer's and Exodus' authorized representatives have read the foregoing
and all documents incorporated therein and agree and accept such terms effective
as of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC.
Signature: /s/ Mark A. Israel Signature: /s/ Sue Irvine
------------------------------ ------------------------
Print Name: Mark A. Israel Print Name: Sue Irvine
----------------------------- -----------------------
Title: CTO Title: Contracts Mgr.
---------------------------------- ----------------------------
Nonstandard HealthGate Data Corp.
2/9/99
EXODUS COMMUNICATIONS, INC CONFIDENTIAL AND PROPRIETARY (rev 6/98) Page 3
<PAGE>
Exhibit 10.9
MEDICAL DATA INTERFACE DESIGN, INC.
1994 STOCK OPTION PLAN
<PAGE>
MEDICAL DATA INTERFACE DESIGN, INC.
1994 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. Medical Data Interface Design, Inc., a
Delaware corporation (the "Company"), wishes to advance its interests by
encouraging and enabling eligible employees of the Company and other persons
affiliated with the Company to acquire stock in the Company, and believes that
the granting of stock options, including both "Incentive Stock Options" and
"non-ISOs" will stimulate the efforts of such persons, strengthen their desire
to remain with the Company, provide them with a more direct interest in its
welfare and assure a closer identification between them and the Company. In
order to provide for the granting of stock options, the Company has adopted this
1994 Stock Option Plan (the "Plan") in furtherance of its objectives with
respect to its employees and other persons affiliated with the Company. As used
herein, an "Incentive Stock Option" shall mean an option described in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); and, a
"non-ISO" shall mean an option (i) in which the fair market value of the stock
which may be acquired upon exercise of such option exceeds the limitation for
Incentive Stock Options set forth in Section 6 hereof, (ii) which for some other
reason does not satisfy the requirements of the Code applicable to Incentive
Stock Options; or (iii) which was granted after December 31, 1986, and contains
terms that provide that it will not be treated as an Incentive Stock Option. As
used herein, "Stock Options" shall include both Incentive Stock Options and
non-ISOs.
2. AMOUNT OF STOCK SUBJECT TO THE PLAN. The total number of shares of
Common Stock, par value $0.01 per share, of the Company which may be sold
pursuant to Stock Options granted under the Plan shall not exceed 4000
(post-split) shares. The shares sold under the Plan may be either authorized and
unissued shares or issued shares reacquired by the Company. In the event that
any Stock Options granted under the Plan shall terminate or expire for any
reason without having been exercised in full, the shares not purchased under
such Stock Options shall be again available for Stock Options which may be
granted pursuant to the Plan.
3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board"). The Board shall have the authority, in
its discretion, to grant an Incentive Stock Option to any eligible employee and
a non-ISO to any person. All Stock Options shall be evidenced by written
instruments (which need not be uniform).
The Board shall have authority in its discretion to determine the
individuals to
<PAGE>
whom Stock Options shall be granted, the times when they shall receive them, the
option price of each Stock Option, the period during which and terms and
conditions under which each Stock Option may be exercised, and the number of
shares to be subject to each Stock Option.
The Board shall also have authority to construe the respective Stock
Options and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions not specified in or
incorporated with the Plan to be included in the respective Stock Options (which
need not be uniform) and to make all other determinations necessary or advisable
for administering the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Stock Option in
the manner and to the extent that it shall deem expedient to carry into effect,
and it shall be the sole and final judge of such expediency. All actions or
determinations of the Board shall be by majority vote of its members and the
determination of the Board on the matters referred to in this section shall be
conclusive.
Notwithstanding the foregoing, the Board's authority as set forth in
this Section 3 with respect to matters involving Incentive Stock Options is
subject to the express provisions and limitations of this Plan and subject to
Section 422 of the Code.
4. ELIGIBILITY. Only employees of the Company shall be eligible to
receive Incentive Stock Options hereunder. A director of the Company who is not
also an employee of the Company shall not be eligible to receive Incentive Stock
Options hereunder. Employees, directors, consultants and other persons
affiliated with the Company are eligible to receive non-ISO's hereunder.
5. RESTRICTIONS ON INCENTIVE STOCK OPTIONS. An Incentive Stock Option
shall not be granted to any employee, who, at the time the Incentive Stock
Option is granted, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporation, provided, however, that the prohibition of
granting Incentive Stock Options to employees owning more than ten percent (10%)
of the voting power of the Company or its parent or subsidiary corporation shall
not apply if at the time such Incentive Stock Option is granted the price of
Incentive Stock Option is at least 110% of the fair market value of the stock
subject to the Incentive Stock Option and such Incentive Stock Option by its
terms is not exercisable after the expiration of five (5) years from the date
such Incentive Stock Option is granted. For the purposes of the preceding
sentence, an individual is
2
<PAGE>
considered to own the stock directly or indirectly by or for his brothers,
sisters, spouse, ancestors and lineal descendants.
Notwithstanding any provisions of this Plan, any Incentive Stock
Option granted hereunder shall contain all provisions required to be included in
the terms of an Incentive Stock Option under Section 422 of the Code.
6. OPTION EXERCISE PRICE AND PAYMENT. The purchase price of Common
Stock provided under each Stock Option granted pursuant to the Plan shall be set
by the Board and in the case of Incentive Stock Options shall equal or exceed
the fair market value of the stock on the date of the granting of the Incentive
Stock Option, as determined by the Board. The purchase price (plus the amount of
any applicable withholding taxes) shall be paid in full upon each exercise of a
Stock Option. The Board may, in its discretion, provide that the purchase price
of Common Stock provided under either an Incentive Stock Option (granted
pursuant to the Plan) or non-ISO may be payable with stock of the Company;
provided, however, that in any event the purchase price of the Common Stock
provided under each Incentive Stock Option shall equal or exceed the fair market
value of the stock on the date of granting of the Incentive Stock Option, and
such purchase price shall equal or exceed the par value per share of the Common
Stock.
The proceeds of the sale of stock subject to the Stock Options are to
be added to the general funds of the Company and used for its corporate
purposes.
7. PERIOD OF INCENTIVE STOCK OPTIONS AND CERTAIN LIMITATIONS ON RIGHTS
TO EXERCISE INCENTIVE STOCK OPTIONS. Each Incentive Stock Option shall expire no
later than ten (10) years from the date of grant of the Incentive Stock Option;
provided, however, that except as provided in Sections 9 and 10 hereof, no
holder of an Incentive Stock Option may exercise his Incentive Stock Option
unless at the time of exercise the holder has been continuously in the employ of
the Company since the grant of his Incentive Stock Option.
Incentive Stock Options granted hereunder may also include provisions
(which need not be uniform) designed to prevent violations of the Securities Act
of 1933, and the rules and regulations thereunder, upon the exercise of an
Incentive Stock Option or the sale or other disposition of the shares of Common
Stock purchased on exercise of an Incentive Stock Option.
No holder of any Incentive Stock Option or such holder's legal
representatives, legatees or distributees, as the case may be, will be or will
be deemed to be a holder of any shares
3
<PAGE>
covered by the Incentive Stock Option unless and until the holder has exercised
the Incentive Stock Option as to such shares, paid for such shares in full and
received certificates representing such shares.
8. NON-TRANSFERABILITY OF INCENTIVE STOCK OPTIONS. No Incentive Stock
Option granted under the Plan shall be transferable otherwise than by will or by
the laws of descent and distribution, and an Incentive Stock Option may be
exercised during the lifetime of the employee to whom it is granted only by the
employee.
9. TERMINATION OF EMPLOYMENT. If the employment of an employee to whom
an Incentive Stock Option has been granted terminates for any reason other than
by death, the Incentive Stock Option holder may exercise the Incentive Stock
Option (to the extent the employee was entitled to do so at the termination of
his employment) only at any time and from time to time within three (3) months
after such termination, but in no event after the expiration of his Incentive
Stock Option; provided, however, that if the employment of an employee to whom
an Incentive Stock Option has been granted terminates due to the permanent and
total disability of such employee, such employee may exercise the Incentive
Stock Option (to the extent the employee was entitled to do so at the
termination of employment) only at any time and from time to time within twelve
(12) months after such termination, but in no event after the expiration of his
Incentive Stock Option. Incentive Stock Options granted under the Plan shall not
be affected by any change of employment so long as the holder continues to be an
employee of the Company. Nothing in the Plan or in any Stock Option granted
under it shall confer any right to continue in the employ of the Company or
interfere in any way with the right of the Company to terminate any employment
at any time.
10. DEATH OF HOLDER OF INCENTIVE STOCK OPTION. In the event of the
death of the holder of an Incentive Stock Option under the Plan while the holder
is employed by the Company or a subsidiary of the Company, the Incentive Stock
Option theretofore granted to the holder may be exercised (to the extent the
deceased was entitled to do so at the date of death) at any time and from time
to time within a period of three (3) months after the holder's death by the
person or persons to whom the holder's rights under said Incentive Stock Option
shall pass by will or the laws of descent and distribution, but in no event may
such person or persons exercise the Incentive Stock Option after its expiration.
For non-ISO's, the three (3) month period in the preceding
4
<PAGE>
sentence shall be twelve (12) months.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock of the Company by reason of a stock dividend, recapitalization,
merger, consolidation, split-up, combination or exchange of shares, or the like,
the aggregate number and class of shares available under the Plan and the number
and class of shares subject to each outstanding Stock Option and the Stock
Option prices shall be appropriately adjusted by the Board, whose determination
shall be conclusive.
12. AMENDMENT AND TERMINATION. Unless the Plan shall have been
terminated as hereinafter provided, the Plan shall terminate ten years from
adoption and no Stock Option under it shall be granted thereafter. The Board at
any time prior to that date may terminate the Plan, or make such changes in it
and additions or amendments to it as the Board shall deem advisable; provided,
however, that any change in or addition or amendment to the Plan which shall
(a) increase the aggregate number of shares of Common Stock of
the Company which may be issued and sold upon the exercise
of Incentive Stock Options granted pursuant to the Plan, or
(b) reduce the minimum purchase price per share of Common Stock
purchasable under any Incentive Stock Option granted
pursuant to the Plan, shall be subject to approval by the
stockholders of the Company within twelve (12) months after
its adoption or the same shall become null and void.
No termination or amendment of the Plan may, without the consent of
the holder of any Stock Option then outstanding, adversely affect the rights of
such holder under the Stock Option.
13. EFFECTIVENESS OF THE PLAN. The Plan shall become effective upon
adoption thereof by the vote in person or by proxy of the holders of a majority
of the outstanding shares of Common Stock of the Company and shall remain
effective until terminated as provided in Section 12 hereof.
Any Incentive Stock Option granted pursuant to the Plan prior to the
approval thereof by the stockholders of the Company shall be granted subject to
such approval, and if such
5
<PAGE>
approval is not obtained within one (1) year after the date of grant, such
Incentive Stock Option shall become null and void.
Any Incentive Stock Option granted pursuant to the Plan after the
adoption by the Board of any amendment to the Plan which is required by the
provisions of Section 12 above to be approved by the stockholders of the Company
and which could not have been granted but for such amendment shall, if granted
before such approval is obtained, be granted subject to the obtaining of such
approval, and if such approval is not obtained within one (1) year after the
adoption of such amendment by the Board, such Incentive Stock Option shall
become null and void.
14. LIMITATIONS ON NON-ISOS. At the discretion of the Board of
Directors, non-ISOs granted hereunder may contain some, all or none of the
limitations described in Sections 5, 7, 8, 9 and 10, or other limitations.
15. CAPTIONS; GENDER.
(a) The heading, titles or captions of the sections of this Plan
are inserted only to facilitate reference, and they shall not define, limit,
extend or describe the scope or intent of the Plan or any provision hereof, and
they shall not constitute a part hereof or affect the meaning or interpretation
of this Plan or any part hereof.
(b) Use herein of any gender shall be deemed to include all
genders when appropriate, and use of the singular number shall be deemed to
include the plural when appropriate, and vice versa in each instance.
MEDICAL DATA INTERFACE
DESIGN, INC.
[Corporate Seal] By:/s/ Barry M. Manuel
-------------------
Barry M. Manuel
Chairman
Dated: ______, 1994
6
<PAGE>
STOCKHOLDER APPROVAL
In accordance with Section 13 hereof, this 1994 Stock Option Plan was
approved by the stockholders of Medical Data Interface Design, Inc. on June 24,
1994.
7
<PAGE>
Exhibit 10.10
HEALTHGATE DATA CORP.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT is entered into by and
between HealthGate Data Corp., a Delaware corporation (the "Company"), and
[______________] (Optionee").
W I T N E S S E T H:
WHEREAS, the Company has a Stock Option Plan pursuant to which
Incentive Stock Options (as defined in Section 422 of the Internal Revenue Code)
may be granted (the "Stock Option Plan"); and
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of Incentive Stock Options to Optionee,
pursuant to the Stock Option Plan and Section 422 of the Internal Revenue Code
of 1986;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. SHARES; PRICE; VESTING; TERM. As of January 22, 1999 (the "Grant
Date"), the Company grants Optionee an option to purchase [_______] post-split
shares of its Common Stock, par value $0.01 per share (the "Option Shares"), at
a price of $3.50 per share (which price is at least equal to the fair market
value of the stock on the Grant Date, as determined in good faith by the Board
of Directors), pursuant to the Company's Stock Option Plan, which shall be
exercisable according to the following schedule:
<TABLE>
<CAPTION>
Number of First Date of Last Date
Shares Exercise of Exercise
--------- ------------- -----------
<S> <C> <C>
___ January 22, 2000 January 22, 2004
___ January 22, 2001 January 22, 2004
___ January 22, 2002 January 22, 2004
---------
TOTAL:
</TABLE>
Subject to earlier termination described herein, the Option shall
terminate entirely at the close of business on January 22, 2004.
2. ACCELERATED VESTING. Notwithstanding the foregoing, this Option
shall immediately become exercisable as to all Option Shares then subject hereto
in the event of a
<PAGE>
"Change in Control" (as hereinafter defined) of the Company.
As used herein, a "Change in Control" of the Company shall be deemed to
have occurred if:
(i) there is a merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation;
(ii) the Company sells substantially all its assets to a single
purchaser or to a group of associated purchasers;
(iii) at least two-thirds of the outstanding common stock of the
Company is sold, exchanged or otherwise disposed of in one
transaction or in a series of related transactions;
(iv) any person or entity (other than any stockholder presently
owning more than 10%) becomes directly or indirectly the owner
or beneficial owner of 50% or more of the Company's
outstanding common stock;
(v) the Board of Directors of the Company determines in its sole
and absolute discretion that there has been a change in
control of the Company.
3. EXERCISE. Optionee may exercise this Incentive Stock Option from
time to time as hereinabove provided, by delivery to the Company, as to each
such exercise, at its principal office of (a) written notice of exercise of this
Incentive Stock Option, stating the number of shares then being purchased
hereunder; (b) a check or cash in the amount of the full purchase price of such
shares; (c) a check or cash in the amount of federal, state and local
withholding taxes, if any, required to be withheld and paid by the Company as a
result of such exercise; (d) agreement(s) referred to in Section 7 of this Stock
Option Agreement; and (e) such other documents or instruments as may be required
by any then applicable federal or state laws or regulations, or regulatory
agencies pertaining to this Incentive Stock Option, any exercise thereof and/or
any offer, issue, sale or purchase of any shares covered by this Incentive Stock
Option. Not less than one share may be purchased at one time. After the Company
shall have received all of the foregoing, the Company shall proceed with
reasonable promptness to issue the shares so purchased upon such exercise of the
Incentive Stock Option; provided, however, that Optionee or any person or
persons entitled to exercise this Option under Section 5 hereof shall not be or
be deemed to be the record or beneficial owner of any such shares purchased upon
any exercise of this Incentive Stock Option until and unless the stock
certificate or certificates evidencing such shares actually shall have been
issued. Except as provided in
<PAGE>
Sections 4 and 5 hereof, Optionee may exercise this Incentive Stock Option only
if, on the date of exercise, Optionee has been continuously in the employ of the
Company since the Grant Date.
4. TERMINATION OF EMPLOYMENT. Notwithstanding the provisions of Section
3 hereof, if Optionee shall cease to be employed by the Company for any reason
other than Optionee's death, Optionee may exercise this Incentive Stock Option
(to the extent he or she was entitled to do so at the termination of employment)
at any time and from time to time within three (3) months after such
termination, but in no event after the expiration of this Incentive Stock
Option; provided, however, that if the employment of Optionee terminates due to
the permanent and total disability of Optionee, Optionee may exercise this
Incentive Stock Option (to the extent Optionee was entitled to do so at the
termination of Optionee's employment) only at any time and from time to time
within twelve (12) months after such termination, but in no event after the
expiration of this Incentive Stock Option. No provision of the Stock Option Plan
or this Incentive Stock Option shall confer any right to continue in the employ
of the Company or interfere in any way with the right of the Company to
terminate any employment at any time.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. This Incentive Stock Option shall
not be assignable or transferable except by will or by the laws of descent and
distribution and shall be exercisable during Optionee's lifetime only by
Optionee. If Optionee shall die while in the employ of the Company, Optionee's
personal representative or the person entitled to succeed to his or her rights
hereunder shall have the right, at any time and from time to time within three
(3) months after the date of Optionee's death, and prior to the expiration or
termination of this Incentive Stock Option pursuant to Section 1 hereof, to
exercise this Incentive Stock Option to the extent that Optionee was entitled to
exercise this Incentive Stock Option at the date of Optionee's death.
6. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Common Stock covered by this Incentive Stock
Option until the date of the issuance of a stock certificate or stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date (or if there is no record date established,
then the date established for the distribution of such dividend or right) is
prior to the date such stock certificates are issued.
<PAGE>
7. CONDITIONS OF RESALE. Optionee agrees to comply with all applicable
federal and state securities laws and rules and regulations thereunder in
connection with the resale of any shares of Common Stock which shall have been
received upon exercise of this Option, and Optionee further agrees to comply
with all requirements of the Company with respect to the timing of such resale
which may be reasonably imposed by the Company as conditions of such resale.
Optionee will, as a condition to exercise of the Option, enter into an agreement
with the Company pursuant to which the Company shall have a right of first
refusal with respect to the transfer of the Option Shares. Such agreement shall
be in the form acceptable to the Company and may include other provisions
concerning transfer or voting of the Option Shares which are applicable to some
or all other stockholders of the Company. The Company may, in its discretion,
place a legend on stock certificates issued in connection with the exercise of
this Stock Option in order to insure compliance with the Securities Act of 1933,
as amended and the Stockholders' Agreement.
8. ADJUSTMENTS FOR STOCK SPLITS, ETC. In the event of any change in the
outstanding Common Stock of the Company by reason of a stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange of
shares, or the like, the number and class of shares available under this
Agreement and the Stock Option prices shall be appropriately adjusted by the
Board of Directors of the Company, whose determination shall be conclusive.
9. THIS AGREEMENT SUBJECT TO STOCK OPTION PLAN. This Agreement is made
pursuant to all of the provisions of the Stock Option Plan, and is intended, and
shall be interpreted in a manner, to comply therewith. Any provision hereof
inconsistent with the Stock Option Plan shall be superseded and governed by the
Stock Option Plan.
10. MISCELLANEOUS. Section and other headings are included herein for
reference purposes only and shall not be construed or interpreted as part of
this Agreement.
Wherever and whenever the context of this Agreement shall so require,
the masculine, feminine and neuter gender of any noun or pronoun shall include
any or all of the other genders and the singular shall include the plural and
the plural shall include the singular.
This Agreement may be executed in several counterparts, all of which
shall constitute one and the same instrument.
Optionee understands that in order to receive "Incentive Stock Option"
treatment pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended, Optionee may not
<PAGE>
dispose of the Common Stock which may be purchased hereunder within two years
after the Grant Date, and must hold said Common Stock for at least one year
after the date of exercise of the Incentive Stock Option described herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of January 22, 1999.
HEALTHGATE DATA CORP.
By:
-------------------------
William S. Reece
President
Optionee
----------------------------
[Name]
<PAGE>
EXHIBIT 10.11
THIS OPTION IS NOT, AND SHALL NOT BE TREATED AS AN INCENTIVE STOCK
OPTION, AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.
HEALTHGATE DATA CORP.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is entered into by and between HealthGate
Data Corp., a Delaware corporation (the "Company"), and [__________]
("Optionee").
W I T N E S S E T H:
WHEREAS, the Company has a Stock Option Plan pursuant to which stock
options may be granted (the "Stock Option Plan"); and
WHEREAS, in lieu of other compensation to non-employee directors, the
Optionee and the Company desire to grant stock options to the non-employee
directors of the Company;
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of stock options to Optionee, pursuant to
the Stock Option Plan;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. SHARES; PRICE; VESTING; TERM. As of January 22, 1999 (the "Grant
Date"), the Company grants Optionee an option to purchase [________] post-split
shares of its Common Stock, par value $0.01 per share (the "Option Shares"), at
a price of $3.50 per share (which price is at least equal to the fair market
value of the stock on the Grant Date, as determined in good faith by the Board
of Directors), pursuant to the Company's Stock Option Plan, which shall be
exercisable according to the following schedule:
<TABLE>
<CAPTION>
Number of First Date of Last Date
Shares Exercise Of Exercise
------ -------- -----------
<S> <C> <C> <C>
-- January 1, 1999 January 22, 2004
-- January 1, 2000 January 22, 2004
-- January 1, 2001 January 22, 2004
---------
TOTAL:
</TABLE>
Subject to earlier termination described herein, the Option shall
terminate entirely at the close of business on January 22, 2004.
2. ACCELERATED VESTING. Notwithstanding the foregoing, this Option shall
<PAGE>
immediately become exercisable as to all Option Shares then subject hereto in
the event of a "Change in Control" (as hereinafter defined) of the Company.
As used herein, a "Change in Control" of the Company shall be deemed to
have occurred if:
(i) there is a merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation;
(ii) the Company sells substantially all its assets to a single
purchaser or to a group of associated purchasers;
(iii) at least two-thirds of the outstanding common stock of the Company
is sold, exchanged or otherwise disposed of in one transaction or
in a series of related transactions;
(iv) any person or entity (other than any stockholder presently owning
more than 10%) becomes directly or indirectly the owner or
beneficial owner of 50% or more of the Company's outstanding
common stock;
(v) the Board of Directors of the Company determines in its sole and
absolute discretion that there has been a change in control of the
Company.
3. EXERCISE. Optionee may exercise this Stock Option from time to time as
hereinabove provided, by delivery to the Company, as to each such exercise, at
its principal office of (a) written notice of exercise of this Stock Option,
stating the number of shares then being purchased hereunder; (b) a check or cash
in the amount of the full purchase price of such shares; (c) a check or cash in
the amount of federal, state and local withholding taxes, if any, required to be
withheld and paid by the Company as a result of such exercise; and (d) such
other documents or instruments as may be required by any then applicable federal
or state laws or regulations, or regulatory agencies pertaining to this Stock
Option, any exercise thereof and/or any offer, issue, sale or purchase of any
shares covered by this Stock Option. Not less than one share may be purchased at
one time. After the Company shall have received all of the foregoing, the
Company shall proceed with reasonable promptness to issue the shares so
purchased upon such exercise of the Stock Option; provided, however, that
Optionee or any person or persons entitled to exercise this Option under Section
5 hereof shall not be or be deemed to be the record or beneficial owner of any
such shares purchased upon any exercise of this Stock Option until
<PAGE>
and unless the stock certificate or certificates evidencing such shares
actually shall have been issued. Except as provided in Sections 4 and 5 hereof,
Optionee may exercise this Stock Option only if, on the date of exercise,
Optionee has been continuously a Director of the Company since the Grant Date.
4. TERMINATION OF SERVICE AS A DIRECTOR. Notwithstanding the provisions
of Section 3 hereof, if Optionee shall cease to be a Director of the Company for
any reason other than Optionee's death, Optionee may exercise this Stock Option
(to the extent he or she was entitled to do so at the termination of service) at
any time and from time to time within three (3) months after such termination,
but in no event after the expiration of this Stock Option; provided, however,
that if the service as a Director terminates due to the permanent and total
disability of Optionee, Optionee may exercise this Stock Option (to the extent
Optionee was entitled to do so at the termination of Optionee's service as a
Director) only at any time and from time to time within twelve (12) months after
such termination, but in no event after the expiration of this Stock Option. No
provision of the Stock Option Plan or this Stock Option shall confer any right
to continue as a Director of the Company or interfere in any way with the right
of the Company to terminate service as a Director at any time.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. This Stock Option shall not be
assignable or transferable except by will or by the laws of descent and
distribution and shall be exercisable during Optionee's lifetime only by
Optionee. If Optionee shall die while serving as a director of the Company,
Optionee's personal representative or the person entitled to succeed to his or
her rights hereunder shall have the right, at any time and from time to time
within three (3) months after the date of Optionee's death, and prior to the
expiration or termination of this Stock Option pursuant to Section 1 hereof, to
exercise this Stock Option to the extent that Optionee was entitled to exercise
this Stock Option at the date of Optionee's death.
6. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Common Stock covered by this Stock Option until
the date of the issuance of a stock certificate or stock certificates to
Optionee. No adjustment will be made for dividends or other rights for which the
record date (or if there is no record date established, then the date
established for the distribution of such dividend or right) is prior to the date
such stock
<PAGE>
certificates are issued.
7. CONDITIONS OF RESALE. Optionee agrees to comply with all applicable
federal and state securities laws and rules and regulations thereunder in
connection with the resale of any shares of Common Stock which shall have been
received upon exercise of this Option, and Optionee further agrees to comply
with all requirements of the Company with respect to the timing of such resale
which may be reasonably imposed by the Company as conditions of such resale.
Optionee will, as a condition to exercise of the Option, enter into an agreement
with the Company pursuant to which the Company shall have a right of first
refusal with respect to the transfer of the Option Shares. Such agreement shall
be in the form acceptable to the Company and may include other provisions
concerning transfer or voting of the Option Shares which are applicable to other
stockholders of the Company. The Company may, in its discretion, place a legend
on stock certificates issued in connection with the exercise of this Stock
Option in order to insure compliance with the Securities Act of 1933, as amended
and the Stockholders' Agreement.
8. ADJUSTMENTS FOR STOCK SPLITS, ETC. In the event of any change in the
outstanding Common Stock of the Company by reason of a stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange of
shares, or the like, the number and class of shares available under this
Agreement and the Stock Option prices shall be appropriately adjusted by the
Board of Directors of the Company, whose determination shall be conclusive.
9. THIS AGREEMENT SUBJECT TO STOCK OPTION PLAN. This Agreement is made
pursuant to all of the provisions of the Stock Option Plan, and is intended, and
shall be interpreted in a manner, to comply therewith. Any provision hereof
inconsistent with the Stock Option Plan shall be superseded and governed by the
Stock Option Plan.
10. MISCELLANEOUS. Section and other headings are included herein for
reference purposes only and shall not be construed or interpreted as part of
this Agreement.
Wherever and whenever the context of this Agreement shall so require, the
masculine, feminine and neuter gender of any noun or pronoun shall include any
or all of the other genders and the singular shall include the plural and the
plural shall include the singular.
Optionee understands that this Stock Option thus will not be treated as an
"Incentive
<PAGE>
Stock Option" pursuant to Section 422 of the Internal Revenue Code of 1986.
This Agreement may be executed in several counterparts, all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective January 22, 1999.
HEALTHGATE DATA CORP.
By:
-------------------------------
William S. Reece
President
Optionee
----------------------------------
Name
<PAGE>
Exhibit 10.12
THIS OPTION IS NOT, AND SHALL NOT BE TREATED AS AN INCENTIVE
STOCK OPTION, AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
HEALTHGATE DATA CORP.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is entered into by and between
HealthGate Data Corp., a Delaware corporation (the "Company"), and Edson de
Castro ("Optionee").
WITNESSETH:
WHEREAS, the Company has a Stock Option Plan pursuant to which stock
options may be granted (the "Stock Option Plan"); and
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of stock options to Optionee, pursuant to
the Stock Option Plan;
NOW, THEREFORE, in consideration of the covenants herein set forth,
the parties agree as follows:
1. SHARES: PRICE; VESTING; TERM. As of December 9, 1996 (the "Grant
Date"), the Company grants Optionee an option to purchase 150 shares of its
Common Stock, par value $0.01 per share (the "Option Shares"), at a price of
$231.00 per share (which price is at least equal to the fair market value of the
stock on the Grant Date, as determined in good faith by the Board of Directors).
Subject to earlier termination described herein, the Option
shall terminate entirely at the close of business on December 9, 2001.
2. VESTING. The options granted hereunder are contingent upon the
Optionee performing services for the Company as a consultant. Options for the
purchase of 50 shares shall vest upon each completion of 25 hours of consulting
services rendered by Optionee between the Grant Date and March 31, 1997.
<TABLE>
<CAPTION>
Hours of Consulting Services Prior to 3/31/97 Options Vested
---------------------------------------------
<S> <C>
0-24 0
25-49 50
50-74 100
75 or more 150
</TABLE>
Upon vesting the options will be immediately exercisable.
<PAGE>
3. EXERCISE. Optionee may exercise this Stock Option from time to time
as hereinabove provided, by delivery to the Company, as to each such exercise,
at its principal office of (a) written notice of exercise of this Stock Option,
stating the number of shares then being purchased hereunder; (b) a check or cash
in the amount of the full purchase price of such shares; (c) a check or cash in
the amount of federal, state and local withholding taxes, if any, required to be
withheld and paid by the Company as a result of such exercise; and (d) such
other documents or instruments as may be required by any then applicable federal
or state laws or regulations, or regulatory agencies pertaining to this Stock
Option, any exercise thereof and/or any offer, issue, sale or purchase of any
shares covered by this Stock Option. Not less than one share may be purchased at
one time. After the Company shall have received all of the foregoing, the
Company shall proceed with reasonable promptness to issue the shares so
purchased upon such exercise of the Stock Option; provided, however, that
Optionee or any person or persons entitled to exercise this Option under Section
5 hereof shall not be or be deemed to be the record or beneficial owner of any
such shares purchased upon any exercise of this Stock Option until and unless
the stock certificate or certificates evidencing such shares actually shall have
been issued. Except as provided in Sections 4 and 5 hereof, Optionee may
exercise this Stock Option only if, on the date of exercise, Optionee has been
continuously a consultant or a Director of the Company since the Grant Date.
4. TERMINATION OF SERVICES. Notwithstanding the provisions of Section
3 hereof, if Optionee shall cease to render services to the Company (whether as
a Director or consultant) for any reason other than Optionee's death, Optionee
may exercise this Stock Option (to the extent he or she was entitled to do so at
the termination of services) at any time and from time to time within three (3)
months after such termination, but in no event after the expiration of this
Stock Option; provided, however, that if the optionee's services terminate due
to the permanent and total disability of Optionee, Optionee may exercise this
Stock Option (to the extent Optionee was entitled to do so at the termination of
Optionee's services) only at any time and from time to time within twelve (12)
months after such termination, but in no event after the expiration of this
Stock Option. No provision of the Stock Option Plan or this Stock Option shall
confer any right to continue as a Director or consultant of the Company or
interfere in any way with the right of the Company to terminate services at any
time.
2
<PAGE>
5. DEATH OF OPTIONEE; NO ASSIGNMENT. This Stock Option shall not be
assignable or transferable except by will or by the laws of descent and
distribution and shall be exercisable during Optionee's lifetime only by
Optionee. If Optionee shall die while serving as a director or consultant to the
Company, Optionee's personal representative or the person entitled to succeed to
his or her rights hereunder shall have the right, at any time and from time to
time within three (3) months after the date of Optionee's death, and prior to
the expiration or termination of this Stock Option pursuant to Section 1 hereof,
to exercise this Stock Option to the extent that Optionee was entitled to
exercise this Stock Option at the date of Optionee's death.
6. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Common Stock covered by this Stock_ Option until
the date of the issuance of a stock certificate or stock certificates to
Optionee. No adjustment will be made for dividends or other rights for which the
record date (or if there is no record date established, then the date
established for the distribution of such dividend or right) is prior to the date
such stock certificates are issued.
7. CONDITIONS OF RESALE. Optionee agrees to comply with all applicable
federal and state securities laws and rules and regulations thereunder in
connection with the resale of any shares of Common Stock which shall have been
received upon exercise of this Option, and Optionee further agrees to comply
with all requirements of the Company with respect to the timing of such resale
which may be reasonably imposed by the Company as conditions of such resale.
Optionee will, as a condition to exercise of the Option, enter into an agreement
with the Company pursuant to which the Company shall have a right of first
refusal with respect to the transfer of the Option Shares. Such agreement shall
be in the form acceptable to the Company and may include other provisions
concerning transfer or voting of the Option Shares which are applicable to other
stockholders of the Company. The Company may, in its discretion, place a legend
on stock certificates issued in connection with the exercise, of this Stock
Option in order to insure compliance with the Securities Act of 1933, as amended
and the Stockholders' Agreement.
8. ADJUSTMENTS FOR STOCK SPLITS, ETC. In the event of any change in the
outstanding Common Stock of the Company by reason of a stock dividend,
recapitalization, merger,
3
<PAGE>
consolidation, stock split, combination or exchange of shares, or the like, the
number and class of shares available under this Agreement and the Stock Option
prices shall be appropriately adjusted by the Board of Directors of the Company,
whose determination shall be conclusive.
9. THIS AGREEMENT SUBJECT TO STOCK OPTION PLAN. This Agreement is made
pursuant to all of the provisions of the Stock Option Plan, and is intended, and
shall be interpreted in a manner, to comply therewith. Any provision hereof
inconsistent with the Stock Option Plan shall be superseded and governed by the
Stock Option Plan.
10. MISCELLANEOUS. Section and other headings are included herein for
reference purposes only and shall not be construed or interpreted as part of
this Agreement.
Wherever and whenever the context of this Agreement shall so require,
the masculine, feminine and neuter gender of any noun or pronoun shau include
any or all of the other genders and the singular shall include the plural and
the plural shall include the singular.
Optionee understands that this Stock Option thus will not be treated
as an "Incentive Stock Option" pursuant to Section 422 of the Internal Revenue
Code of 1986.
This Agreement may be executed in several counterparts, all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective December 9, 1996.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece
President
Optionee
/s/ Edson De Castro
- -------------------
Edson de Castro
4
<PAGE>
Exhibit 10.13
THIS OPTION IS NOT, AND SHALL NOT BE TREATED AS AN INCENTIVE
STOCK OPTION, AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
HEALTHGATE DATA CORP.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is entered into by and between
HealthGate Data Corp., a Delaware corporation (the "Company"), and Edson de
Castro ("Optionee").
W I T N E S S E T H:
WHEREAS, the Company has a Stock Option Plan pursuant to which stock
options may be granted (the "Stock Option Plan"); and
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of stock options to Optionee, pursuant to
the Stock Option Plan;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. SHARES; PRICE; VESTING; TERM. As of November 12, 1997 (the "Grant
Date"), the Company grants Optionee an option to purchase 50 shares of its
Common Stock, par value $0.01 per share (the "Option Shares"), at a price of
$97.00 per share (which price is at least equal to the fair market value of the
stock on the Grant Date, as determined in good faith by the Board of Directors).
Subject to earlier termination described herein, the Option
shall terminate entirely at the close of business on November 12, 2002.
2. VESTING. The options granted hereunder are based upon the Optionee
performing services for the Company as a consultant. Options for the purchase of
25 shares are vested immediately upon this Grant Date. Options for an additional
25 shares shall vest upon completion of an additional 25 hours of consulting
services rendered by Optionee between the Grant Date and December 31, 1998.
<TABLE>
<CAPTION>
Hours of Consulting Services Prior to 12/31/98 Options Vested
---------------------------------------------- --------------
<S> <C>
0-24 25
25 or more 50
</TABLE>
Upon vesting the options will be immediately exercisable.
<PAGE>
3. EXERCISE. Optionee may exercise this Stock Option from time to time
as hereinabove provided, by delivery to the Company, as to each such exercise,
at its principal office of (a) written notice of exercise of this Stock Option,
stating the number of shares then being purchased hereunder; (b) a check or cash
in the amount of the full purchase price of such shares; (c) a check or cash in
the amount of federal, state and local withholding taxes, if any, required to be
withheld and paid by the Company as a result of such exercise; and (d) such
other documents or instruments as may be required by any then applicable federal
or state laws or regulations, or regulatory agencies pertaining to this Stock
Option, any exercise thereof and/or any offer, issue, sale or purchase of any
shares covered by this Stock Option. Not less than one share may be purchased at
one time. After the Company shall have received all of the foregoing, the
Company shall proceed with reasonable promptness to issue the shares so
purchased upon such exercise of the Stock Option; provided, however, that
Optionee or any person or persons entitled to exercise this Option under Section
5 hereof shall not be or be deemed to be the record or beneficial owner of any
such shares purchased upon any exercise of this Stock Option until and unless
the stock certificate or certificates evidencing such shares actually shall have
been issued. Except as provided in Sections 4 and 5 hereof, Optionee may
exercise this Stock Option only if, on the date of exercise, Optionee has been
continuously a consultant or a Director of the Company since the Grant Date.
4. TERMINATION OF SERVICES. Notwithstanding the provisions of Section 3
hereof, if Optionee shall cease to render services to the Company (whether as a
Director or consultant) for any reason other than Optionee's death, Optionee may
exercise this Stock Option (to the extent he or she was entitled to do so at the
termination of services) at any time and from time to time within three (3)
months after such termination, but in no event after the expiration of this
Stock Option; provided, however, that if the optionee's services terminate due
to the permanent and total disability of Optionee, Optionee may exercise this
Stock Option (to the extent Optionee was entitled to do so at the termination of
Optionee's services) only at any time and from time to time within twelve (12)
months after such termination, but in no event after the expiration of this
Stock Option. No provision of the Stock Option Plan or this Stock Option shall
confer any right
2
<PAGE>
to continue as a Director or consultant of the Company or interfere in any way
with the right of the Company to terminate services at any time.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. This Stock Option shall not be
assignable or transferable except by will or by the laws of descent and
distribution and shall be exercisable during Optionee's lifetime only by
Optionee. If Optionee shall die while serving as a director or consultant to the
Company, Optionee's personal representative or the person entitled to succeed to
his or her rights hereunder shall have the right, at any time and from time to
time within three (3) months after the date of Optionee's death, and prior to
the expiration or termination of this Stock Option pursuant to Section 1 hereof,
to exercise this Stock Option to the extent that Optionee was entitled to
exercise this Stock Option at the date of Optionee's death.
6. NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to the Common Stock covered by this Stock Option until
the date of the issuance of a stock certificate or stock certificates to
Optionee. No adjustment will be made for dividends or other rights for which the
record date (or if there is no record date established, then the date
established for the distribution of such dividend or right) is prior to the date
such stock certificates are issued.
7. CONDITIONS OF RESALE. Optionee agrees to comply with all applicable
federal and state securities laws and rules and regulations thereunder in
connection with the resale of any shares of Common Stock which shall have been
received upon exercise of this Option, and Optionee further agrees to comply
with all requirements of the Company with respect to the timing of such resale
which may be reasonably imposed by the Company as conditions of such resale.
Optionee will, as a condition to exercise of the Option, enter into an agreement
with the Company pursuant to which the Company shall have a right of first
refusal with respect to the transfer of the Option Shares. Such agreement shall
be in the form acceptable to the Company and may include other provisions
concerning transfer or voting of the Option Shares which are applicable to other
stockholders of the Company. The Company may, in its discretion, place a legend
on stock certificates issued in connection with the exercise of this Stock
Option in order to insure compliance with the Securities Act of 1933, as amended
and the Stockholders' Agreement.
3
<PAGE>
8. ADJUSTMENTS FOR STOCK SPLITS, ETC. In the event of any change in the
outstanding Common Stock of the Company by reason of a stock dividend,
recapitalization, merger, consolidation, stock split, combination or exchange of
shares, or the like, the number and class of shares available under this
Agreement and the Stock Option prices shall be appropriately adjusted by the
Board of Directors of the Company, whose determination shall be conclusive.
9. THIS AGREEMENT SUBJECT TO STOCK OPTION PLAN. This Agreement is made
pursuant to all of the provisions of the Stock Option Plan, and is intended, and
shall be interpreted in a manner, to comply therewith. Any provision hereof
inconsistent with the Stock Option Plan shall be superseded and governed by the
Stock Option Plan.
10. MISCELLANEOUS. Section and other headings are included herein for
reference purposes only and shall not be construed or interpreted as part of
this Agreement.
Wherever and whenever the context of this Agreement shall so require,
the masculine, feminine and neuter gender of any noun or pronoun shall include
any or all of the other genders and the singular shall include the plural and
the plural shall include the singular.
Optionee understands that this Stock Option thus will not be treated
as an "Incentive Stock Option" pursuant to Section 422 of the Internal Revenue
Code of 1986.
This Agreement may be executed in several counterparts, all of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective November 12, 1997.
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
--------------------
William S. Reece
President
Optionee
/s/ Edson De Castro
- -------------------
Edson de Castro
4
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
(William S. Reece)
THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into as of the
first day of October, 1995, by and between HealthGate Data Corp., a Delaware
corporation (the "Company"), and William S. Reece ("Reece").
W I T N E S S E T H
WHEREAS, the Company wishes to retain the services of Reece in
connection with the conduct of the business affairs of the Company, for a period
of three (3) years; and
WHEREAS, Reece is willing to provide such services to the Company, for
a three (3) year period;
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. EMPLOYMENT. The Company shall employ Reece, and Reece shall
serve the Company as Chairman of the Board, President and Chief Executive
Officer upon the terms and conditions provided herein. Reece shall, in the
performance of his duties hereunder, report to and be directed only by the Board
of Directors of the Company (the "Board of Directors"). Reece shall devote such
of his business time as is reasonably necessary and appropriate in serving in
such positions.
2. TERM. The term of Reece's employment hereunder shall be for
the period beginning October 1, 1995, and ending September 30, 1998 (the
"Term"). Each twelve-month period of the Term commencing on October 1 and ending
on the following September 30 is referred to herein as a "Contract Year." On
October 1, 1996, and on each October 1 thereafter (each such date being
hereinafter referred to as a "Renewal Date"), the remaining term of Reece's
employment hereunder shall automatically be extended for an additional one (1)
year period unless either party hereto notifies the other in writing at least
thirty (30) days prior to the applicable Renewal Date that such party does not
wish to extend this Agreement beyond the expiration of the term or extended term
hereof, as the case may be, in which event this Agreement shall terminate on the
date three years following such applicable Renewal Date. Without limiting the
generality of the foregoing, the term of this Agreement shall be subject to
earlier termination as set forth in Section 4 hereof.
3. COMPENSATION. As compensation in full for the services to be
rendered by Reece hereunder, Reece shall be paid compensation and receive
benefits from the Company during the term of this Agreement as follows:
(a) Reece shall be paid a minimum base salary of $110,000 per
annum. Such salary shall be reviewed from time to time, but at least
annually, by the Board of
<PAGE>
Directors, and shall be adjusted for inflation in accordance with the
Consumers Price Index - Boston Metropolitan Region, and to reflect the
Company's revenues and profitability.
(b) The Company shall pay bonuses to Reece, based upon a bonus
program to be adopted by the Company as a result of good faith
negotiation among the parties, and shall also pay such other bonuses
to Reece as may be granted by the Board of Directors in its
discretion.
(c) The Company shall grant stock options to Reece, based upon
such option plans or policies as may be adopted by the Company from
time to time.
(d) Reece shall be entitled to such individual and family health
and disability insurance benefits and such other fringe benefits as
the Company shall from time to time make available to its employees of
an equivalent or lower status during the term of this Agreement.
(e) Reece shall be reimbursed by the Company for business and
travel expenses incurred by Reece and approved in accordance with the
Company's expense reimbursement policies as in effect from time to
time.
4. TERMINATION; SEVERANCE AND OTHER PAYMENTS.
(a) The Company shall have the right to terminate Reece's
employment hereunder at any time, upon written notice, for Cause. For
the purposes of this Agreement, "Cause" is defined as (i) conviction
for a felony involving the Company, or (ii) the determination of the
Board of Directors, adopted by the affirmative vote of not less than
seventy-five percent (75%) of the entire membership of the Board of
Directors at a meeting of the Board of Directors called and held for
such purpose, that Reece's employment should be terminated for
malfeasance, nonfeasance or breach hereof or hereunder. In the event
that Reece's employment is terminated pursuant to clause (i) of this
Section 4(a), Reece shall not be entitled to any further compensation
under this Agreement, except as may be required by applicable law. In
the event that Reece's employment is terminated pursuant to clause
(ii) of this Section 4(a), Reece shall be entitled to a lump sum
severance payment in an amount equal to (i) twelve (12) months'
compensation at his then-current base salary, (ii) the amount of the
bonus paid to Reece by the Company in the previous Contract Year plus
(iii) any accrued bonus through the date of such termination; in
addition, the Company shall continue to provide Reece with the
benefits described in Section 3(d) hereof for a period of twelve (12)
months following the date of termination.
(b) Upon the termination of this Agreement at the end of the
initial three-year term or of any extended term, except as otherwise
set forth in this Agreement, Reece (or
2
<PAGE>
his estate in the event of his death) shall be entitled to receive:
i. UNPAID SALARY. Unpaid salary to the date of
termination, accrued on a daily basis, payable forthwith.
ii. UNPAID BONUS. Unpaid bonus with respect to the
Contract Year immediately prior to the year of termination,
payable no later than the date provided in the bonus program to
be adopted pursuant to Section 3(b) of this Agreement, or
forthwith if termination is after such date.
iii. PRO RATA BONUS. Unless Reece is terminated for Cause
pursuant to Section 4(a)(i) of this Agreement, payment PRO RATA
for any bonus due with respect to the year of termination,
payable no later than the date the bonus with respect to such
year would otherwise have been payable.
(d) This Agreement shall be terminated by the death of Reece.
(e) Reece may elect to terminate this Agreement at any time for
Good Reason or following a Change in Control. In the event of such an
election, Reece shall be entitled to a lump sum severance payment in
an amount equal to (i) twelve (12) months' compensation at his
then-current base salary plus (ii) any accrued bonus through the date
of such election; in addition, the Company shall continue to provide
Reece with the benefits described in Section 3(d) hereof for a period
of twelve (12) months following the termination of Reece's employment.
For the purposes of this Agreement, "Good Reason" is defined as (i) a
material breach of this Agreement by the Company that the Company
fails to cure with thirty (30) days after receipt of written notice
thereof, (ii) the removal of Reece from any of the offices of Chairman
of the Board, President or Chief Executive Officer, or the assignment
of duties inconsistent with the offices or status of Chairman of the
Board, President or Chief Executive Officer, except in each case as
pursuant to Section 4(a)(ii) of this Agreement and (iii) the creation
of any office of the Company, the holder of which is assigned
supervisory duties over or with respect to Reece. For the purposes of
this Agreement, "Change in Control" is defined as (i) the merger or
consolidation of the Company in which the Company is not the
continuing or surviving corporation, (ii) the sale by the Company of
substantially all of its assets to a single purchaser or to a group of
associated purchasers, (iii) the sale, exchange or other disposition
of at least two-thirds of the outstanding common stock of the Company
in one transaction or in a series of related transactions, (iv) any
person or entity becoming directly or indirectly the owner or
beneficial owner of fifty percent (50%) or more of the Company's
outstanding common stock, (v) the individuals who at the date hereof
constitute the Board of Directors ceasing to constitute a majority
thereof, and (vi) the determination by the Board of Directors, in its
sole discretion, that there has been a Change in Control of the
Company.
3
<PAGE>
5. PLACE OF PERFORMANCE. The services to be rendered by Reece
hereunder shall be rendered at the Company's offices located within a twenty
(20) mile radius of Boston, Massachusetts, or at such other place as Reece and
the Company deem appropriate; provided however, that Reece may be required, on
behalf of the Company and in furtherance of his duties hereunder, to take such
reasonable number of business trips away from such place as the Company may
reasonably request and which are in accordance with his duties hereunder.
6. VACATION. Reece shall be entitled to a vacation period of four (4)
weeks in any calendar year without loss of compensation. Reece shall not be
entitled to carry previously allotted vacation time over to the following
calendar year beyond a maximum of six (6) weeks without the approval of the
Board of Directors.
7. CONFIDENTIAL INFORMATION. The parties acknowledge that they have
entered into that certain Confidentiality and Noncompetition Agreement, dated as
of February 9, 1994. The parties acknowledge that such Confidentiality and
Noncompetition Agreement remains binding on the parties hereto with the same
force and effect as if entered into as of the date hereof, notwithstanding any
change in the position or title held or duties performed by Reece.
8. INJUNCTIVE RELIEF. In the event of any violation of the provisions
of Section 7 of this Agreement, the Company shall be entitled, in addition to
any other rights or remedies which it may have, to maintain an action for
damages, and to obtain temporary and permanent injunctive relief. The parties
agree that the Company shall be entitled to such temporary and permanent
injunctive relief because the Company would sustain substantial and irreparable
damage upon any such violation, which damage is impossible to ascertain in
advance.
9. INDEMNIFICATION. The Company shall indemnify Reece in the event
that Reece becomes a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company) by reason of Reece's service
as an officer of the Company or his agreement to serve at the request of the
Company as a director, officer, employee or trustee of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually incurred by Reece or on Reece's behalf in connection with
such action, suit or proceeding and any appeal therefrom, if Reece acted in good
faith and in a manner that Reece reasonably believed to be, or not opposed to,
the best interests of the Company, and, with respect to any criminal action or
proceeding, did not have reasonable cause to believe that his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent shall
not, of itself, create a presumption that Reece did not act in good faith and in
a manner which he reasonably believed to be in, or not opposed to, the best
interests of the Company and, with respect to any criminal action or proceeding,
did not have reasonable cause to believe that his conduct was unlawful.
4
<PAGE>
10. CONSTRUCTION; HEADINGS. This Agreement shall be construed in
accordance with and be governed by the laws of the Commonwealth of
Massachusetts. The headings contained in this Agreement are for reference only
and shall not limit or otherwise affect the meaning of any provision of this
Agreement.
11. NOTICES. All notices and communications hereunder shall be given
in writing by registered or certified mail and shall be addressed as follows,
unless the addressee shall have previously notified the other party hereto by
registered or certified mail of a different address, in which event such
different address shall be substituted for said address hereunder. All such
notices or communications shall be deemed to have been given when deposited,
properly addressed, postage pre-paid, in the United States mail.
If to the Company: HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, Massachusetts 02148
With a copy to: Stephen M. Kane, Esq.
Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, Massachusetts 02108
If to Reece: William S. Reece
HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, Massachusetts 02148
12. ASSIGNMENT. Any attempt to assign this Agreement shall be void;
provided, however, that, subject to the provisions of Section 4(e) hereof, if
the Company shall be merged or consolidated with any other corporation or
entity, or if substantially all of the assets of the Company shall be
transferred to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
resulting from such merger or consolidation.
13. SEPARABILITY. In the event that any one or more provisions of this
Agreement shall be held to be invalid, the remainder of this Agreement shall
continue in full force and effect.
14. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon Reece and the Company and their permitted successors and
assigns.
15. ARBITRATION. Any controversy or claim arising under or relating to
this Agreement, or breach thereof, shall be settled by arbitration conducted in
Boston, Massachusetts in accordance with the commercial rules of the American
Arbitration Association as in effect from time to time. Judgment upon the award
rendered may be entered in any court having
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jurisdiction thereof.
16. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes
the entire Agreement between the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as are specifically set forth
herein. Except as otherwise provided by this Agreement, no supplement,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HEALTHGATE DATA CORP.
By:/s/ Maria D. Pace By: /s/ Ricky D. Lawson
- ---------------------------------- -----------------------------------
Witness Rick D. Lawson
By:/s/ Stephen M. Kane By: /s/ William S. Reece
- ---------------------------------- -----------------------------------
Witness William S. Reece
6
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Ex 10.15
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement"), dated as of the
26th day of March, 1998 is made and entered into on the terms and conditions
hereinafter set forth, by and between HEALTHGATE DATA CORP., a Delaware
corporation ("Borrower"), and PETRA CAPITAL, LLC, a Georgia limited liability
company ("Lender").
RECITALS:
Borrower has requested that Lender make available to Borrower a loan
in the amount of Two Million and No/100 Dollars ($2,000,000.00), upon the terms
and conditions hereinafter set forth, and for the purposes hereinafter set forth
(the "Loan")
NOW, THEREFORE, in consideration of the agreement of Lender to make
the Loan, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE 1 - THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the
terms and conditions set forth herein, Lender hereby agrees to make the Loan to
Borrower. The Loan shall be evidenced by a Secured Promissory Note substantially
in the form attached hereto as Exhibit A (the "Note"), executed by Borrower in
favor of Lender. The Loan shall be in the original principal amount indicated in
the Note, shall be payable in accordance with the terms of the Note, and shall
be prepayable at any time without penalty or premium. The proceeds of the Loan
shall be disbursed by Lender on the date hereof (the "Closing Date") by wire
transfer of immediately available funds in accordance with the written
instructions of Borrower.
1.2 Processing Fee. In connection with the making of the Loan,
Borrower shall pay to Lender a processing fee in the amount of $40,000 (the
"Processing Fee"), and Borrower hereby authorizes and directs Lender to deduct
and retain for its account the sum of $40,000 as payment of the Processing Fee.
<PAGE>
1.3 Stock Purchase Warrants. In consideration for Lender's entering
into this Agreement and for making the Loan contemplated herein, Borrower shall
deliver to Lender a Stock Purchase Warrant substantially in the form attached
hereto as Exhibit B (the "Warrant"), executed by Borrower in favor of Lender.
1.4 Investment Representations. Lender represents and warrants that
it is purchasing the Warrant and any shares of common stock issuable upon
exercise of the Warrant for its own account, for investment purposes and not
with a view to the distribution thereof. The foregoing representations and
warranties shall not be construed as imposing any limitation on Lender's right
to transfer the Warrant or any of the shares of common stock issuable upon the
exercise of the Warrant that is not otherwise expressly set forth herein or in
the Warrant or required under applicable law.
1.5 Subordination. The obligations evidenced by the Note shall be
subordinate to Senior Debt (as defined herein). For purposes of this agreement,
"Senior Debt" shall mean the principal of and interest on any Debt incurred
under one or more credit or loan agreements by and between the Borrower and one
or more lenders designated by the Borrower as a "Senior Lender" by writen notice
to Lender (collectively, the "Senior Lender"), together with all replacements,
renewals, extensions, refinancings and refundings thereof; provided that the
outstanding principal amount of all Senior Debt shall not exceed the greater of
(i) 3 times EBITDA for the twelve-month period ending on the last day of the
most recently ended month prior to the date that such Debt is incurred, or (ii)
$1,000,000; provided further, that Senior Debt shall not bear interest at a rate
that exceeds the Prime Rate plus three percent (3%); and provided further, that
no Debt shall constitute Senior Debt to the extent such Debt is incurred in
violation of the terms of this Agreement. For purposes of determining whether
any Debt is incurred in violation of the terms of this Agreement, Senior Lender
may, in the absence of actual knowledge otherwise, conclusively rely upon the
certificate of the Borrower to that effect. For purposes of this Agreement,
"Debt" of any person means, without duplication, (a) all obligations of such
person for borrowed money and all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are
customarily paid, (b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such person, (c) all capitalized lease
obligations of such person (to the extent required by GAAP to be included on the
balance sheet of such person) and (d) all obligations of such person (contingent
or otherwise) to guarantee, purchase or otherwise acquire, or otherwise assure a
creditor against loss in respect of, Debt of another person. For purposes of
this Agreement, "EBITDA" means, for any period, an amount equal to the net
income (or loss) for such period, determined in accordance with GAAP, but
excluding extraordinary gains or losses for such period ("Net Income") plus (to
the extent deducted in determining Net Income) interest expense, provisions for
income taxes, depreciation and amortization of intangible assets. For purposes
of this Agreement, "Prime Rate" means the rate which First Union National Bank,
or its successors, publicly announces from time to time to be its prime lending
rate, as in effect from time to time.
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<PAGE>
ARTICLE 2 - SECURITY
2.1 Security. As security for the Secured Obligations (as defined in
Section 2.2), Borrower hereby grants to Lender a security interest in the
following described property, and any and all proceeds and products thereof
(collectively, the "Collateral"):
(a) Equipment. All machinery and equipment, all data
processing and office equipment, all computer equipment, hardware, firmware and
software, all furniture, fixtures, appliances and all other goods of every type
and description, whether now owned or hereafter acquired and wherever located,
together with all parts, accessories and attachments and all replacements
thereof and additions thereto; and
(b) Inventory. All inventory and goods, whether held for
lease, sale or furnishing under contracts of service, all agreements for lease
of same and rentals therefrom, whether now in existence or owned or hereafter
acquired and wherever located; and
(c) General Intangibles. All rights, interests, choses in
action, causes of action, claims and all other intangible property of every kind
and nature, in each instance whether now owned or hereafter acquired but not
limited to, all corporate and business records; all loans, royalties, and other
obligations receivable; all trade secrets, inventions, designs, patents, patent
applications, registered or unregistered service marks, trade names, trademarks,
copyrights and the goodwill associated therewith and incorporated therein, and
all registrations and applications for registration related thereto; all
goodwill, licenses, permits, franchises, customer lists and credit files; all
customer and supplier contracts, firm sale orders, rights under license and
franchise agreements, and other contracts and contract rights; all right, title
and interest under leases, subleases, licenses and concessions and other
agreements relating to real or personal property and any security agreements
relating thereto; all rights to indemnification; all proceeds of insurance of
which Borrower is beneficiary; all letters of credit, guarantees, liens,
security interests and other security held by or granted to Borrower; and all
other intangible property, whether or not similar to the foregoing; and
(d) Accounts. Chattel Paper. Instruments and Documents. All
accounts, accounts receivable, chattel paper, instruments and documents, whether
now in existence or owned or hereafter acquired, entered into, created or
arising, and wherever located; and
(e) Other Property. All other personal property or interests
in property now owned or hereafter acquired.
2.2 Secured Obligations. Without limiting any of the provisions
thereof, the Security Instruments (as defined in Section 2.3) shall secure the
following indebtedness and other obligations (the "Secured Obligations"):
3
<PAGE>
(a) the full and timely payment of the indebtedness evidenced
by the Note, together with interest thereon, and any extensions,
modifications, consolidations or renewals thereof, and any notes
given in payment thereof;
(b) the full and prompt performance of all of the obligations
of Borrower to Lender under the Loan Documents (as defined in
Section 2.3) to which Borrower is a party;
(c) the full and prompt payment of all court costs and other
costs and expenses of whatever kind incident to the collection of
the indebtedness evidenced by the Note, the enforcement or
protection of the security interests of the Security Instruments or
the exercise of any rights or remedies of Lender with respect to the
indebtedness evidenced by the Note, including without limitation the
reasonable attorney and paralegal fees and costs incurred by Lender,
all of which Borrower agrees to pay to Lender upon demand; and
(d) the full and prompt payment and performance of any and all
other indebtedness and other obligations of Borrower to Lender
(other than obligations arising under the Warrant), direct or
contingent, however evidenced or denominated, and however and
whenever incurred, including but not limited to indebtedness
incurred pursuant to any present or future commitment of Lender to
Borrower, together with interest thereon, and any extensions,
modifications, consolidations and/or renewals thereof and any notes
given in payment thereof.
2.3 Security Instruments. The Secured Obligations shall be further
secured by the Trademark and Patent Security Agreement in substantially the form
attached hereto as Exhibit D (the "Trademark and Patent Security Agreement").
This Agreement, the Trademark and Patent Security Agreement, and any other
instruments, documents or agreements now or hereafter securing the Secured
Obligations are herein collectively referred to as the "Security Instruments".
The Security Instruments, together with the Note and any other instruments and
documents now or hereafter evidencing, securing or in any way related to the
indebtedness evidenced by the Note are herein individually referred to as a
"Loan Document" and collectively referred to as the "Loan Documents".
4
<PAGE>
2.4 Subordination of Security Interests. Lender's security interests
in the Collateral shall be subordinate to the security interests of Senior
Lender in the Collateral granted by Borrower after the date hereof as security
for Senior Debt.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender as follows:
3.1 Corporate Status.
(a) Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
corporate power to own and operate its properties, to carry on its business as
now conducted and to enter into and to perform its obligations under this
Agreement and the other Loan Documents to which it is a party. Borrower is duly
qualified to do business and is in good standing in each state or other
jurisdiction in which a failure to be so qualified could give rise to a Material
Adverse Event, as hereinafter defined. The states or other jurisdictions in
which Borrower is so qualified are set forth on Schedule 3.1(a). For purposes of
this Agreement, "Material Adverse Event" means any event or circumstance, or set
of events or circumstances, individually or collectively, that reasonably could
be expected to result in (i,) an adverse effect upon the validity or
enforceability of any Loan Document or (ii) a material and adverse effect on the
condition (financial or otherwise), business, operations, properties or
prospects of Borrower.
(b) Borrower does not own, directly or indirectly, any capital
stock or other equity interest of any corporation, partnership, joint venture,
limited liability company or other business organization in which Borrower holds
or owns, directly or indirectly, 50% or more of the outstanding shares of
capital stock or other equity interest having ordinary voting power for the
election of directors (or others performing similar functions) or, in the case
of a partnership, joint venture, limited liability company or similar entity,
which has the power, directly or indirectly, to effect the management or
policies thereof (any such corporation, partnership, joint venture, limited
liability company or other business organization, a "Subsidiary").
(c) The authorized capital stock of Borrower is set forth in
Schedule 3.1(c). In addition, there are 5,087 shares of such common stock
reserved for issuance upon exercise of the Warrant and the Additional Warrants
(as such term is defined in the Warrant); provided that the number of shares so
reserved shall be increased in accordance with the terms of the Warrant and the
Additional Warrants. Except for the issued capital stock set forth in Schedule
3.1(c) (the "Shares"), there are no shares of capital stock or other securities
of Borrower issued or outstanding. Except for the Warrant, the Additional
Warrants and as set forth in Schedule 3.1(c), there are no outstanding options,
warrants or rights to purchase or acquire from Borrower any securities of
Borrower, and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions
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<PAGE>
relating to any shares of capital stock or other securities of Borrower, whether
or not outstanding, to which Borrower is a party or by which it is bound or, to
the best knowledge of Borrower, to which any of its shareholders is a party or
by which any such shareholder is bound. All of the Shares are validly issued,
fully paid and non-assessable and were not issued in violation of any preemptive
rights, rights of first refusal, anti-dilution rights or any similar rights held
by any party. Borrower has not violated any federal or state securities laws in
connection with the issuance of any securities.
(d) The issuance of the Warrant has been duly authorized and,
upon delivery to Lender, will be validly issued, fully paid and nonassessable,
free and clear of all liens and other encumbrances. Except as set forth in
Schedule 3.1(d), there are no statutory or contractual preemptive rights, rights
of first refusal, anti-dilution rights or any similar rights held by any party
with respect to the issuance of the Warrant or the issuance of common stock upon
exercise of the Warrant. The issuance of shares of common stock upon exercise of
the Warrant has been duly authorized and, when issued upon exercise of the
Warrant in accordance with the terms thereof, such shares of common stock will
be validly issued, fully paid and nonassessable. The offer, sale and issuance of
the Warrant do not require registration under the Securities Act of 1933, as
amended, or any applicable state securities laws.
3.2 Authorization. Borrower has full legal right, power and
authority to enter into and perform its obligations under the Loan Documents,
without the consent or approval of any other person, firm, governmental agency
or other legal entity, other than consents listed on Schedule 3.2, which
consents have previously been obtained. Borrower has all necessary right, power
and authority to grant to Lender a valid and enforceable security interest in
the Collateral. The execution and delivery of this Agreement, the borrowing
hereunder, the execution and delivery of each Loan Document to which Borrower is
a party, and the performance by Borrower of its obligations hereunder and
thereunder are within the corporate powers of Borrower and have been duly
authorized by all necessary corporate action properly taken, have received all
necessary governmental approvals, if any were required, and do not and will not
contravene or conflict with the articles of incorporation or bylaws of Borrower
or any material agreement binding upon Borrower or its properties or any
provision of law, any applicable judgment, ordinance, regulation or order of any
court or governmental agency. The officer(s) executing this Agreement, the Note
and all of the other Loan Documents to which Borrower is a party, are duly
authorized to act on behalf of Borrower.
3.3 Validity and Binding Effect This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower, enforceable
in accordance with their respective terms, subject to limitations imposed by
bankruptcy, insolvency, moratorium, or similar laws or provisions affecting the
rights of creditors generally and further subject to the discretion of the court
in the exercise of equitable remedies.
3.4 Priority of Liens: Title to Property. Except as disclosed on
Schedule 3.4, there are no outstanding loans, liens, pledges, security
interests, agreements or other financings which provide any third person with a
lien against any of the collateral securing the Secured Obligations, whether
such collateral is pledged pursuant to this Agreement or any other Security
Instruments.
6
<PAGE>
Borrower has good and marketable title to all of its real and personal property,
free and clear of any and all claims, liens, encumbrances, equities and
restrictions of every kind and nature whatsoever, except as disclosed on
Schedule 3.4.
3.5 Location of Collateral. The records with respect to all
intangible personal property constituting the collateral security for the
Secured Obligations are maintained at one or more of the addresses set forth on
Schedule 3.5. None of the Collateral comprised of tangible personal property is
located at any address other than at one of the addresses set forth on Schedule
3.5.
3.6 Litigation. Except as set forth on Schedule 3.6, there are no
actions, suits or proceedings pending, or, to the knowledge of Borrower,
threatened, against or affecting Borrower or involving the validity or
enforceability of any of the Loan Documents or the priority of the liens
thereof, at law or in equity, or before any governmental or administrative
agency, except actions, suits and proceedings that are fully covered by
insurance and that, if adversely determined, would not impair materially the
ability of Borrower to perform each and every one of its obligations under and
by virtue of the Loan Documents; and to Borrower's knowledge, Borrower is not in
default with respect to any order, writ, injunction, decree or demand of any
court or any governmental authority.
3.7 Financial Statements. The financial statements of Borrower for
the years ended December 31, 1996 and December 31, 1997 heretofore delivered to
Lender are true and correct in all material respects, have been prepared on the
basis of generally accepted accounting principles ("GAAP") consistently applied
(except that the unaudited financial statements do not include footnotes and are
subject to normal year-end adjustments), and fairly present the financial
condition of the subjects thereof as of the date(s) thereof. No material adverse
change has occurred in the condition (financial or otherwise), business,
operations, properties or, to the best of Borrower's knowledge, prospects of
Borrower since the date(s) thereof, and no additional indebtedness or
obligations have been incurred by Borrower since the date(s) thereof, other than
trade payables incurred in the ordinary course of business.
3.8 No Defaults. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under and by
virtue of the Loan Documents will not result in any breach of, or constitute a
default under, the charter documents or bylaws of Borrower or any mortgage,
security deed or agreement, deed of trust, lease, loan or credit agreement,
partnership agreement, license, franchise or any other material instrument or
agreement to which Borrower is a party or by which Borrower or its properties
may be bound or, to the knowledge of Borrower, affected.
3.9 Compliance With Law. Borrower is in compliance with all laws,
regulations, decrees and orders applicable to it (including but not limited to
laws, regulations, decrees and orders relating to environmental, occupational
and health standards and controls, antitrust, monopoly, restraint of trade or
unfair competition).
3.10 Environmental Matters. Borrower has no actual knowledge of (i)
the presence of any Hazardous Substances (as defined below) on any property
owned, leased or otherwise
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<PAGE>
controlled by Borrower (collectively, the "Property"); (ii) any spills,
releases, discharges, or disposal of Hazardous Substances that have occurred or
are presently occurring on or onto any of the Property; (iii) the presence on
any of the Property of underground or above-ground storage tanks or pipelines
which are required to be licensed by any local, state or federal agency; (iv)
any spills or disposal of Hazardous Substances that have occurred or are
occurring off the Property as a result of any construction on or operation and
use of the Property; (v) any failure by Borrower to comply with any Applicable
Environmental Laws (as defined below); (vi) any notices related to Borrower or
any of the Property claiming a violation of any Applicable Environmental Laws,
or the commencement of any action or proceeding against Borrower or related to
any of the Property alleging a violation of Applicable Environmental Laws; (vii)
any notices related to Borrower or any of the Property requiring compliance with
Applicable Environmental Laws, or demanding payment or contribution for injury
to the environment or human health; or (viii) any outstanding notices or
citations relating to violations by any former owner or operator of any of the
Property. For the purposes of this Agreement, "Hazardous Substances" means any
substance or material defined or designated as a hazardous or toxic waste,
material or substance, or other similar term, by any federal, state, or local
environmental statute, regulation, or ordinance presently in effect, including,
without limitation, asbestos in any form, urea formaldehyde foam insulation,
petroleum products, and polychlorinated biphenyls. For the purposes of this
Agreement, "Applicable Environmental Laws" means any and all applicable local,
state, and federal environmental laws, regulations, ordinances, and
administrative and judicial orders relating to the generation, recycling, reuse,
sale, storage, handling, transport, or disposal of any Hazardous Substances.
3.11 Taxes. Borrower has filed or caused to be filed all tax returns
required to be filed (except for returns that have been appropriately extended),
and has paid all taxes shown to be due and payable on said returns and all other
taxes, impositions, assessments, fees or other charges imposed on it by any
governmental authority, agency or instrumentality, prior to any delinquency with
respect thereto (other than taxes, impositions, assessments, fees and charges
currently being contested in good faith by appropriate proceedings, for which
appropriate amounts have been reserved). No tax liens have been filed against
Borrower or any of its properties.
3.12 Certain Transactions. Except as set forth on Schedule 3.12(a),
(i) Borrower is not indebted, directly or indirectly, to any of its respective
officers or directors, or to their respective spouses or children, and (ii) none
of said officers or directors or any members of their immediate families are
indebted to Borrower or have any direct or indirect ownership interest in any
firm or corporation with which Borrower is affiliated or with which Borrower has
a business relationship, or any firm or corporation which competes with
Borrower, except that officers and directors of Borrower may own no more than 1%
of the outstanding stock of any publicly traded company which competes directly
with Borrower. Except as set forth on Schedule 3.12(b), no officer or director
or any member of their immediate families is, directly or indirectly, interested
in any material contract with Borrower and each such contract has been fully
disclosed to and approved by the Board of Directors of Borrower and is on arm's
length terms. Except as set forth on Schedule 3.12(c), Borrower is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
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3.13 Intellectual Property. Borrower is the lawful owner of or has
the lawful right to use all of its proprietary information free and clear of any
claim, right, trademark, patent or copyright protection of any third party. As
used herein, "proprietary information" includes without limitation (i) any
computer software and related documentation, inventions, technical data and
nontechnical data related thereto, and (ii) other documentation, inventions and
data related to patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or used by
Borrower or marketing studies conducted by Borrower, all of which is
commercially important and competitively sensitive and which generally has not
been disclosed to third parties other than customers in the ordinary course of
business. Borrower has good and valid title to or has a valid and subsisting
license to use all patents, trademarks, trade names, service marks, copyrights
or other intangible property rights, and registrations or applications for
registration thereof, owned by Borrower or used or required by Borrower in the
operation of its business as presently being conducted. There is no infringement
or conflict with asserted rights of others with respect to copyrights, patents,
trademarks, service marks, trade names, trade secrets or other intangible
property rights or know-how utilized by Borrower. To the knowledge of Borrower,
no products or processes of Borrower infringe or conflict with any rights of
patent or copyright, or any discovery, invention, product or process, that is
the subject of a patent or copyright application or registration. Borrower
follows such procedures as are necessary or appropriate to provide reasonable
protection of Borrower's trade secrets and proprietary rights in intellectual
property of all kinds. To the knowledge of Borrower, no person employed by or
affiliated with Borrower has employed or proposes to employ any trade secret or
any information or documentation proprietary to any former employer and, to the
knowledge of Borrower, no person employed by or affiliated with Borrower has
violated any confidential relationship that such person may have had with any
third person, in connection with the development, manufacture, sale or lease of
any product or proposed product or the development or sale of any service or
proposed service of Borrower.
3.14 Regulatory Compliance. Borrower possesses all licenses, permits
and other authorizations from federal, state or local regulatory bodies
necessary for the conduct of its business and for the ownership, maintenance and
operation of its properties and assets. All such licenses, permits and
authorizations are in full force and effect. Borrower's business is not subject
to the regulation of any federal, state or local government regulatory body by
reason of the nature of the business being conducted.
3.15 ERISA. With respect to the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder ("ERISA"):
(a) Plans. Schedule 3.15 sets forth any and all "employee
benefit plans" maintained by or on behalf of Borrower or any ERISA
Affiliate as defined in Section 3(3) of ERISA (a "Plan"), including,
but not limited to, any defined benefit pension plan, profit sharing
plan, money purchase pension plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, Multiemployer Plan, or
any plan, fund, program, arrangement or practice providing for
medical (including post-retirement
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medical), hospitalization, accident, sickness, disability, or life
insurance benefits. For purposes of this Agreement, "ERISA
Affiliate" shall mean each trade or business (whether or not
incorporated) which, together with Borrower, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended from time to time, and the
regulations promulgated and the rulings issued thereunder (the
"Code"); and "Multiemployer Plan" shall mean a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA. Neither Borrower nor any
ERISA Affiliate maintains or contributes to, or has maintained or
contributed to, any defined benefit pension plan or Multiemployer
Plan.
(b) Compliance. Each Plan has at all times been maintained, by
its terms and in operation, in accordance in all material respects
with all applicable laws.
(c) Liabilities. Except for liabilities and expenses which
become payable and are timely paid pursuant to the terms and usual
operations of the Plans, Borrower is not currently and, to the best
of its knowledge, will not become subject to any material liability
(including withdrawal liability), tax or penalty whatsoever to any
person whomsoever with respect to any Plan including, but not
limited to, any material tax, penalty or liability arising under
Title I or Title IV of ERISA or Chapter 43 of the Code.
(d) Funding. Borrower and each ERISA Affiliate has made full
and timely payment of all amounts (i) required to be contributed
under the terms of each Plan and applicable law and (ii) required to
be paid as expenses of each Plan. No Plan or Plans have an "amount
of unfunded benefit liabilities" (as defined in Section 400l(a)(18)
of ERISA) which, in the aggregate, exceed $100,000.
3.16 Regulations G, T, U and X. Borrower is not engaged in the
business of extending credit for the purposes of purchasing or carrying margin
stock, and no proceeds of the Loan will be used for a purpose which violates, or
would be inconsistent with, Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System.
3.17 Government Regulation. Borrower is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or subject to regulation under the
Federal Power Act, the Interstate Commerce Act or any other federal law or state
laws limiting its ability to incur indebtedness or to execute, deliver or
perform the Loan Documents.
3.18 Statements Not False or Misleading. No representation or
warranty given as of the date hereof by Borrower contained in this Agreement or
any schedule attached hereto or any statement in any document, certificate or
other instrument furnished or to be furnished to Lender pursuant hereto, taken
as a whole, contains or will (as of the time so furnished) contain any untrue
statement of a material fact or omits or will (as of the time so furnished) omit
to state any material fact which is necessary in order to make the statements
contained therein not misleading.
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3.19 Survival. The representations and warranties of Borrower
contained in this Agreement or any schedule attached hereto or any statement in
any document, certificate or other instrument furnished or to be furnished to
Lender pursuant hereto, shall survive until this Agreement terminates in
accordance with Article 7 hereof.
ARTICLE 4 - COVENANTS AND AGREEMENTS OF BORROWER
Borrower covenants and agrees that, without Lender's prior written
consent:
4.1 Sales of and Encumbrances on Collateral. Borrower will not sell,
exchange, lease, negotiate, pledge, assign or grant any security interest in or
otherwise dispose of any Collateral, nor Borrower permit any other lien of any
kind to attach thereto, except that (i) Borrower may sell or lease inventory in
the ordinary course of business, (ii) Borrower may sell or otherwise dispose of
obsolete or retired equipment in the ordinary course of business, (iii) Borrower
may grant security interests to secure "Senior Debt" as such term is defined in
the Intercreditor Agreement, and (iv) Borrower may grant security interests to
Lender.
4.2 Use of Proceeds. Borrower shall use the proceeds of the Loan to
finance expansion of the Borrower's existing business and for other working
capital purposes.
4.3 Further Assurances. Borrower will take all actions reasonably
requested by Lender to create and maintain in Lender's favor valid liens upon
and perfected security interests in any Collateral secured pursuant to this
Agreement or the other Security Instruments and all other security for the
Secured Obligations now or hereafter held by or for Lender. Without limiting the
foregoing, Borrower agrees to execute such further instruments (including
financing statements and continuation statements) as may be required or
permitted by any law relating to notices of, or affidavits in connection with,
the perfection of Lender's liens and security interests, and to cooperate with
Lender in the filing or recording and renewal thereof.
4.4 Limitations on Debt and Obligations. Borrower shall not incur,
assume or otherwise suffer to exist any Debt except (i) Debt reflected on
Borrower's balance sheet dated as of December 31, 1997 and delivered to Lender
in connection with the making of the Loan, (ii) "Senior Debt" as such term is
defined in the Intercreditor Agreement, and (iii) Debt incurred pursuant to this
Agreement and evidenced by the Note. For purposes of this Agreement, "Debt" of
any person means, without duplication, (a) all obligations of such person for
borrowed money and all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are
customarily paid, (b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such person, (c) all capitalized lease
obligations of such person (to the extent required by generally accepted
accounting principles to be included on the balance sheet of such person) and
(d) all obligations of such person (contingent or otherwise) to guarantee,
purchase or otherwise acquire, or otherwise assure a creditor against loss in
respect of, Debt of another person.
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4.5 Financial Statements and Reports. Borrower shall furnish to
Lender the following financial information:
(i) within ninety (90) days after the end of each fiscal year
of Borrower, (A) audited consolidated financial statements of
Borrower, including a balance sheet as of the close of such fiscal
year, an income statement and statements of changes in stockholders'
equity, and of cash flows for such fiscal year, all in reasonable
detail, prepared in accordance with GAAP consistently applied, and
with the report thereon of independent public accountants acceptable
to Lender and (B) unaudited consolidating financial statements,
including a balance sheet as of the close of such fiscal year, an
income statement and statements of changes in stockholders' equity,
and of cash flows for such fiscal year;
(ii) within ninety (90) days after the end of each fiscal year
of Borrower, a certificate of the chief executive or chief financial
officer of Borrower stating that to the best knowledge of such
officer, (A) Borrower has kept, observed, performed and fulfilled
each covenant, term and condition of this Agreement and the other
Loan Documents during the preceding fiscal year and (B) no Event of
Default hereunder has occurred and is continuing (or if such officer
has knowledge that an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence
of same and the action Borrower proposes to take in connection
therewith);
(iii) within thirty (30) days after the end of each calendar
month, a consolidated balance sheet of Borrower as of the close of
such month and consolidated statements of earnings and retained
earnings of Borrower for such month and for the prior months of the
current fiscal year (on a year to date basis), each compared to the
same period in the previous fiscal year, all in reasonable detail,
and unaudited but prepared on the basis of GAAP consistently applied
(except for the absence of footnotes and subject to year-end
adjustments), together with a report of Borrower's management with
respect to such financial statements; and
(iv) with reasonable promptness, such other financial data as
Lender may reasonably request.
4.6 Maintenance of Books and Records: Inspection. Borrower shall
maintain its books, accounts and records on the basis of GAAP consistently
applied, and permit a representative of Lender to visit and inspect any of its
properties (including but not limited to the collateral security described in
Section 2.1 or the Security Instruments), corporate books and financial records,
and to discuss its accounts, affairs and finances with Borrower or the principal
officers of Borrower during reasonable business hours, all at such times as
Lender may reasonably request.
4.7 Insurance. Without limiting any of the requirements of any of
the other Loan Documents, Borrower shall maintain, in amounts customary for
entities engaged in comparable business activities, fire, liability and other
forms of insurance on its properties (including but not
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limited to the collateral now or hereafter securing payment and performance of
the Secured Obligations), against such hazards and in at least such amounts as
is customary in Borrowers business. Lender shall be named as an additional
insured with respect to liability insurance and an additional loss payee with
respect to hazard insurance (subject to the interests of any holder of "Senior
Debt" as such term is defined in the Intercreditor Agreement). Each such
insurance policy shall require the insurer to notify Lender in writing at least
thirty (30) days prior to any cancellation or material reduction or limitation
of such policy. At the request of Lender, Borrower will deliver forthwith a
certificate specifying the details of such insurance in effect.
4.8 Taxes and Assessments. Borrower shall (i) file all tax returns
and appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Borrower upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided that Borrower shall have the right to
contest in good faith and by appropriate proceedings the applicability or
validity of any such tax, assessment, charge or levy without paying such tax,
assessment, charge or levy so long as adequate reserves with respect thereto are
maintained in accordance with generally accepted accounting principles.
4.9 Corporate Existence. Borrower shall maintain its corporate
existence in the state indicated in Section 3.1 hereof, and its qualification
and good standing as a foreign corporation in each jurisdiction in which such
qualification is required by applicable law.
4.10 Compliance with Law and Agreements. Except where failure to do
so does not and would not constitute a Material Adverse Event, Borrower shall
maintain its business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which Borrower is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing, Borrower shall pay all of
its indebtedness promptly and substantially in accordance with the terms
thereof.
4.11 Environmental Requirements. In addition to, and not in
derogation of, the requirements of Section 4.10, Borrower will comply with all
laws, governmental standards and regulations applicable to Borrower or to
properties owned or leased by Borrower, in respect of occupational health and
safety and Applicable Environmental Laws (unless such laws, standards or
regulations are being contested in good faith by appropriate proceedings and
adequate reserves therefor have been established), promptly notify Lender of its
receipt of any notice of a violation of any such law, standard or regulation,
and indemnify and hold Lender harmless from all loss, cost, damage, liability,
claim and expense incurred by or imposed upon Lender on account of Borrower's
failure to perform its obligations under this Section 4.11.
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4.12 Notice of Default. Borrower shall give written notice to Lender
of the occurrence of any default or Event of Default under this Agreement or
default or event of default under any other Loan Document promptly upon
knowledge of the occurrence thereof. Borrower shall give written notice to
Lender of the occurrence of any default under any of the documents evidencing,
governing or otherwise relating to "Senior Debt" as such term is defined in the
Intercreditor Agreement (the "Senior Debt Documents").
4.13 Notice of Litigation. Borrower shall give notice, in writing,
to Lender of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower or materially affecting any of the assets of
Borrower, and (ii) any dispute between Borrower on the one hand and any
governmental regulatory body on the other hand, which dispute might interfere
with the normal operations of Borrower, except where such actions, suits,
proceedings and disputes do not and would not reasonably be expected to
constitute a Material Adverse Event.
4.14 ERISA. If Borrower has in effect, or hereafter institutes, a
Plan, then the following warranty and covenants shall be applicable during such
period as any such Plan shall be in effect: (i) Borrower hereby warrants that no
fact that might constitute grounds for the involuntary termination of the Plan,
or for the appointment by the appropriate United States District Court of a
trustee to administer the Plan, exists at the time of execution of this
Agreement; (ii) Borrower hereby covenants that throughout the existence of the
Plan, Borrower's contributions under the Plan will meet the minimum funding
standards required by ERISA and Borrower will not institute a distress
termination of the Plan; and (iii) Borrower hereby covenants that it will send
to Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
4.15 Key Man Insurance. Borrower will maintain in full force and
effect, at all times during the term of this Agreement and at its sole cost and
expense, an insurance policy in the amount of at least the amount of the Loan
insuring the life of William S. Reece issued by an insurance company having an
A.M. Best Rating of "A" or better and a financial size category of not less than
VIII, the proceeds of which policy shall be assigned to Lender.
4.16 Name Change. Borrower will not change its name or conduct its
business under any name other than its legal name.
4.17 Merger. Consolidation and Sale of Assets. Borrower will not
acquire the business of or a substantial portion of the assets of, or merge or
consolidate with any other entity or sell, lease or transfer or otherwise
dispose of all or a substantial portion of its assets to any person or entity,
other than sales or leases of inventory in the ordinary course of business.
Notwithstanding the foregoing, Borrower may acquire the business of or a
substantial portion of the assets of any entity whose business is substantially
related to the Borrower's business as an on-line provider of medical and health
information for healthcare professionals, patients and insurers. Borrower shall
not acquire or create any Subsidiaries.
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4.18 Liability for Other Parties. Borrower will not become liable,
directly or indirectly, for any obligation of any other person, by guaranty,
endorsement, or otherwise, except by endorsement in the ordinary course of
business of negotiable instruments payable at sight for deposit or collection,
and except for those guarantees set forth on Schedule 3.12(c).
4.19 Dividends: Redemptions. Borrower will not (i) declare, set
aside, or pay any dividend or make any other distribution, whether in cash, in
kind, or otherwise, on account of or with respect to, or (ii) apply any of its
funds, property or. assets to the purchase, redemption or other retirement of,
any class of its capital stock or any warrants, options or other rights with
respect to any class of its capital stock.
4.20 Liquidation. Borrower will not permit the dissolution or
liquidation of Borrower.
4.21 Loans and Investments. Borrower will not (i) make any loans
other than deposits required by government agencies or public utilities, or (ii)
make any investments (which term shall include the purchase of any ownership or
similar interest in any corporation, partnership, joint venture, limited
liability company or other business organization or the purchase of any debt or
equity securities or instruments issued by any such entity) other than cash
equivalent investments.
4.22 Notice of Issuance of Stock. Upon the issuance of additional
shares of capital stock of Borrower, Borrower shall promptly disclose to Lender,
in writing, the number of shares issued, the price therefor, and such other
information as Lender may from time to time request.
4.23 Change in Business. Borrower will not engage in any line of
business other than the business conducted by Borrower as of the date of this
Agreement, provided, however, that the expansion of Borrower's business into
related fields and business shall be deemed not to be a breach of this Section.
4.24 Location of Business and Collateral. Borrower shall give
written notice to Lender (i) thirty (30) days prior to the opening of any new
business office, setting forth the address (including county) of such new
location, (ii) thirty (30) days prior to changing the location of records with
respect to intangible personal property constituting collateral security for the
Secured Obligations and (iii) whenever any Collateral comprised of tangible
personal property will be located in a county or state that is not set forth on
Schedule 3.5 hereof for a period of four months or longer. Prior to establishing
any new business office location or locating any collateral in a county or state
that is not set forth on Schedule 3.5 hereof for a period of four months or
longer, Borrower shall have (i) executed and delivered to Lender all financing
statements and financing statement amendments which Lender may reasonably
request in connection therewith in order to perfect and protect the security
interests and priority of Lender in such Collateral, (ii) paid in full all
filing fees and taxes, if any, payable in connection with such filings and (iii)
complied with any other requirement in this Agreement or any other Loan Document
relating to the location of any Collateral.
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4.25 Information; Post-Closing Review. Borrower will furnish to
Lender such financial data and other information relating to the business of
Borrower as Lender may from time to time reasonably request. In addition to the
foregoing, at Borrower's request, no later than ninety (90) days after the Loan
is advanced, Borrower shall furnish Lender a certificate executed by the
president itemizing the use of proceeds from the Loan, and, at Borrower's
request, Borrower shall cooperate with Lender in connection with a post-closing
review with respect to the use of the proceeds of the Loan and such other
matters relating to the Loan as Lender shall reasonably request.
ARTICLE 5 - CONDITIONS TO CLOSING
5.1 Deliveries. The obligation of Lender to make the Loan is subject
to the receipt by Lender of the following documents, each of which shall be
satisfactory to Lender in form and substance:
(a) Corporate Documents. A copy of the Certificate of
Incorporation of Borrower, as certified by the Secretary of State of
Delaware, and a certificate of existence or good standing from the
Secretary of State of Delaware and each other State in which
Borrower is legally required to qualify to transact business as a
foreign corporation, each as of a recent date.
(b) Security Instruments. Each of the Security Instruments,
duly executed by Borrower.
(c) Officer's Certificate. A certificate of the President of
Borrower to the effect set forth in Exhibit E.
(d) Opinion of Counsel. The favorable written opinion of Rich,
May, Bilodeau & Flaherty, P.C., counsel to Borrower, in form
satisfactory to King & Spalding, counsel to Lender, and
substantially in the form of Exhibit F hereto.
(e) The Note. The Note, duly completed and executed by
Borrower.
(f) UCC-1 Financing Statements. Financing statements on Form
UCC-1, duly completed and executed by Borrower, perfecting the
security interest of Lender in the Collateral.
(g) Stock Purchase Warrant. The Warrant duly completed and
executed by Borrower.
(h) Consents and Approvals. True copies of all consents and
required governmental approvals, if any, necessary to the execution,
delivery and performance of the Loan Documents and the transactions
contemplated hereby and thereby.
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(i) Closing Certificate. A certificate of a duly authorized
officer of Borrower, substantially in the form of Exhibit G hereto,
certifying that, after giving effect to this Agreement, all
representations and warranties herein are true and correct and there
is no default or Event of Default in existence as of such date, nor
any event which, given the passage of time, would constitute an
Event of Default.
(j) Additional Deliveries. Such additional documents,
certificates and instruments as are deemed reasonably necessary or
appropriate by Lender.
5.2 Other Conditions to Lender's Obligation to make Loan. The
obligation of the Lender to make the Loan is subject to the satisfaction of each
of the additional conditions precedent set forth in this Section 5.2:
(a) Compliance with Warranties. No Default. etc. The
representations and warranties set forth in this Agreement and the
Security Instruments shall have been true and correct in all
material respects, both before and after giving effect to the making
of the Loan.
(b) No Default. No Event of Default shall have occurred and be
continuing, and no event shall have occurred that with the giving of
notice or the passage of time or both would constitute an Event of
Default.
(c) Material Adverse Event. In the reasonable judgment of
Lender, no Material Adverse Event shall have occurred.
ARTICLE 6 - DEFAULT AND REMEDIES
6.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) default in the punctual payment of any portion of the
principal amount of the indebtedness evidenced by the Note, or
default in the payment of any interest on the indebtedness evidenced
by the Note which is not cured within five (5) days;
(b) any representation by Borrower hereunder or under any of
the other Loan Documents, or delivery by Borrower of any schedule,
statement, resolution, report, certificate, notice or writing to
Lender, is untrue in any material respect on the date as of which
made, stated or certified;
(c) a default or event of default (not covered by Section
6.1(a) or (b)) shall occur under, or there shall occur such other
failure by Borrower to perform its obligations
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under, any of the Loan Documents and such default or event of
default shall not be cured within thirty (30) days;
(d) Borrower (i) shall admit in writing its inability to pay
its debts generally as they become due; or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for
it or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall
have had any such petition or application filed or any such
proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall
indicate, by any act or omission, its consent to, approval of, or
acquiescence in any such petition, application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee
for it or a substantial part of its assets; or (vi) shall suffer any
such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more;
(e) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the articles or certificate of incorporation of
Borrower shall expire or be revoked;
(f) Borrower shall default in the timely payment or
performance of any obligation now or hereafter owed to Lender in
connection with any indebtedness of Borrower now or hereafter owed
to Lender, other than the Loan, subject to any applicable grace
period; or
(g) (i) Borrower shall fail to pay any principal of or premium
or interest on any Debt owed by Borrower (other than the Loan),
which is outstanding in a principal amount of at least $100,000 in
the aggregate, when the same becomes due and payable (whether by
scheduled maturity, acceleration, demand or otherwise), and such
failure shall continue after any cure period applicable thereto; or
(ii) any other event shall occur or condition shall exist under any
agreement or instrument relating to any such indebtedness and shall
continue after any applicable cure period, if the effect of such
event or condition is to accelerate or permit the acceleration of
such indebtedness; or (iii) any such indebtedness shall be
accelerated or otherwise declared to be due and payable prior to the
stated maturity thereof; or (iv) any such indebtedness shall be
required to be prepaid, redeemed, purchased or defeased, or an offer
to repay, redeem, purchase or defease such indebtedness shall be
required to be made, in each case prior to the stated maturity
thereof;
(h) the occurrence of any default or event of default under
the Senior Debt Documents;
(i) William S. Reece shall have sold, transferred or otherwise
disposed of record or beneficial ownership of shares of common stock
of Borrower held by such person on
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the date hereof, provided, however, a transfer of shares to William
S. Reece's spouse, children or parents or any trust in which William
S. Reece or any of the foregoing persons is a beneficiary shall be a
permitted transfer hereunder;
(j) William S. Reece shall cease to hold the office of Chief
Executive Officer of Borrower; or
(k) any shareholder shall have exercised or given notice to
the Borrower of his or her or its intention to exercise his or her
or its right to require the Borrower to purchase or redeem any stock
of the Borrower.
6.2 Acceleration of Maturity: Remedies. Upon the occurrence of any
Event of Default described in Section 6.1(d) or Section 6.1(k), the indebtedness
evidenced by the Note as well as any and all other indebtedness of Borrower to
Lender shall be immediately due and payable in full; and upon the occurrence of
any other Event of Default described in Section 6.1, Lender at any time
thereafter while such Event of Default is continuing may at its option
accelerate the maturity of the indebtedness evidenced by the Note as well as any
and all other indebtedness of Borrower to Lender, whereupon such indebtedness
shall be and become immediately due and payable; all without notice of any kind.
Upon the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and
all rights and remedies possessed by Lender pursuant to the terms of
this Agreement (including without limitation, those remedies set
forth in Sections 6.3 and 6.4), the Security Instruments and all of
the other Loan Documents;
(b) Lender shall have all of the rights and remedies of a
secured party under the under the Uniform Commercial Code as in
effect in any applicable jurisdiction (the "UCC"); and
(c) Lender shall have any and all other rights and remedies
that Lender may now or hereafter possess at law, in equity or by
statute.
6.3 Lender's Rights.
(a) Power of Attorney. Borrower hereby irrevocably constitutes and
appoints Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Borrower and in the name of
Borrower or in its own name, from time to time after the occurrence, and during
the continuation of, an Event of Default, in Lender's discretion, for the
purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, Borrower hereby gives Lender
the power and right, on behalf of Borrower, without notice to or assent by
Borrower, to do the following:
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(i) in the name of Borrower or its own name, or otherwise, to
take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys
due under, or with respect to, any Collateral and to file any claim
or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by Lender for the purpose of
collecting any and all such moneys due with respect to such
Collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Agreement and to pay all
or part of the premiums therefor and the costs thereof; and
(iii) to direct any party liable for any payment under any of
the Collateral to make payment of any and all monies due or to
become due thereunder directly to Lender or as Lender shall direct,
to ask or demand for, collect, receive payment of and receipt for,
any and all moneys, claims and other amounts due or to become due at
any time in respect of or arising out of any Collateral, to sign and
endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of
the Collateral, to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral, to defend any
suit, action or proceeding brought against Lender with respect to
any Collateral, to settle, compromise or adjust any suit, action or
proceeding described in the preceding clause and, in connection
therewith, to give such discharges or releases as Lender may deem
appropriate, to assign any trademark (along with goodwill of the
business to which such trademark pertains), throughout the world for
such term or terms, on such conditions, and in such manner, as
Lender shall in its sole discretion determine, and generally, to
sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though Lender were the absolute owner thereof for all purposes, and
to do, at Lender's option and Lender's expense, at any time, or from
time to time, all acts and things which Lender deems necessary to
protect, preserve or realize upon the Collateral and the liens of
Lender thereon and to effect the intent of this Agreement, all as
fully and effectively as Borrower might do.
Lender hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof This power of attorney is a power
coupled with an interest and shall be irrevocable.
(b) Other Powers. Borrower also authorizes Lender, at any time and
from time to time, to execute, in connection with any sale provided for in
Section 6.4, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.
(c) No Duty on the Pan of Lender. The powers conferred on Lender
hereunder are solely to protect the interests of Lender in the Collateral and
shall not impose any duty upon Lender
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to exercise any such powers. Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither it
nor any of its partners, officers, directors, employees or agents shall be
responsible to Lender for any act or failure to act hereunder, except for their
own gross negligence or willful misconduct.
6.4 Remedies with respect to Collateral. If an Event of Default
shall occur and be continuing, Lender may exercise, in addition to all other
rights and remedies granted to it in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Lender without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon Borrower or any other
person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and may
forthwith sell, lease, assign, give an option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, at any office of Lender or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or on future delivery without assumption of any credit risk. Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, at any private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in Borrower, which
right of equity is hereby waived or released. Borrower further agrees, at
Lender's request, to assemble the Collateral and make it available to Lender at
places which Lender shall reasonably select, whether at Borrower's premises or
elsewhere. Lender shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of Lender hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Secured Obligations, in such order as Lender may elect, and only after such
application and after the payment by Lender of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the UCC,
need Lender account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, Borrower waives all claims, damages and demands it
may acquire against Lender arising out of the exercise by Lender of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least five days before such sale or other disposition. Borrower shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Secured Obligations
and the reasonable fees and expenses of any attorneys employed by Lender to
collect such deficiency.
6.5 Remedies Cumulative: No Waiver. No right, power or remedy
conferred upon or reserved to Lender by this Agreement or any of the other Loan
Documents is intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder,
under any of the other Loan Documents or now or hereafter existing at law, in
21
<PAGE>
equity or by statute. No delay or omission by Lender to exercise any right,
power or remedy accruing upon the occurrence of any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and every right,
power and remedy given by this Agreement and the other Loan Documents to Lender
may be exercised from time to time and as often as may be deemed expedient by
Lender.
6.6 Proceeds of Remedies. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
(a) First, to the costs and expenses, including reasonable
attorney and paralegal fees and costs, incurred by Lender in
connection with the exercise of its remedies;
(b) Second, to the expenses of curing the default that has
occurred, in the event that Lender elects, in its sole discretion,
to cure the default that has occurred;
(c) Third, to the payment of accrued and unpaid interest on
the indebtedness evidenced by the Note;
(d) Fourth, to the payment of the unpaid principal of the
Note;
(e) Fifth, to the payment of all other Secured Obligations;
and
(f) Sixth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
ARTICLE 7 - TERMINATION
This Agreement shall remain in full force and effect until the
payment in full by Borrower of all amounts owed to Lender under the Loan
Documents, within a reasonable time after which Lender shall take such actions
as necessary to release its security interests in the Collateral, including the
filing of appropriate UCC-3 termination statements.
ARTICLE 8 - MISCELLANEOUS
8.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
Lender may, at its option, after 3 days advance written notice to the Borrower,
pay, perform or observe the same, and all payments made or costs or expenses
incurred by Lender in connection therewith (including but not limited to
22
<PAGE>
reasonable attorney and paralegal fees and costs), with interest thereon at the
highest default rate provided in the Note, shall be immediately repaid to Lender
by Borrower and shall constitute a part of the Secured Obligations and be
secured hereby until fully repaid. Lender, in its sole and complete discretion
and without any liability therefor, shall determine the necessity for any such
actions and of the amounts, if any, to be paid.
8.2 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
8.3 Costs and Expenses. Borrower agrees to pay up to $10,000 of the
costs and expenses incurred by Lender in connection with the making of the Loan,
including but not limited to filing fees and recording taxes, but excluding
attorney and paralegal fees and costs, promptly upon demand of Lender. Borrower
further agrees to pay up to $20,000 of the reasonable attorney and paralegal
fees and costs incurred by Lender in connection with the making of the Loan,
promptly upon demand of Lender. Borrower further agrees to pay all of the
out-of-pocket costs and expenses incurred by Lender in connection with the
maintenance of its security interest in the Collateral, protection of the
Collateral, and collection of the Loan, including but not limited to reasonable
attorney and paralegal fees and costs related thereto (including any such
incurred in connection with any appellate litigation), promptly upon demand of
Lender.
8.4 Assignment. The Note, this Agreement and the other Loan
Documents may be endorsed, assigned and transferred in whole or in part by
Lender and any such subsequent holder or assignee of the same shall succeed to
and be possessed of the rights and powers of Lender under all of the same to the
extent transferred and assigned. Lender may grant participations in the Note,
this Agreement and the other Loan Documents (or any portion thereof). Lender
shall notify Borrower in writing of any such endorsement, assignment or transfer
by Lender. Borrower shall not assign any of its rights nor delegate any of its
duties hereunder or under any of the other Loan Documents without the prior
express written consent of Lender.
8.5 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
8.6 Severability. If any provisions of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby nor shall the validity and enforceability thereof be affected.
8.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note, the Security Instruments or any of the
other Loan Documents
23
<PAGE>
to the contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and other consideration
agreed to be paid to Lender for the use of the money advanced or to be advanced
hereunder exceed the maximum amounts collectible under applicable laws in effect
from time to time. It is understood and agreed by the parties that, if for any
reason whatsoever the interest or other consideration paid or contracted to be
paid by Borrower in respect of the indebtedness evidenced by the Note shall
exceed the maximum amounts collectible under applicable laws in effect from time
to time, then ipso facto, the obligation to pay such interest and other
consideration shall be reduced to the maximum amounts collectible under
applicable laws in effect from time to time, and any amounts collected by Lender
that exceed such maximum amounts shall be applied to the reduction of the
principal balance of the indebtedness evidenced by the Note or refunded to
Borrower, in Lender's sole discretion, so that at no time shall the interest and
other consideration paid or payable in respect of the indebtedness evidenced by
the Note exceed the maximum amounts permitted from time to time by applicable
law.
8.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
8.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
faxed (provided that such notice is mailed to the other party promptly
thereafter), or sent by certified mail or nationally recognized overnight
courier service (such as Federal Express) to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery, the
date of successful fax transmission, the third day after the date of mailing, or
the business day after the date of delivery to such courier service, as the case
may be, shall be the date of such notice, election or demand. For the purposes
of this Agreement, notices, elections or demands made pursuant hereto shall be
made to the following addresses:
If to Lender: Petra Capital, LLC
150 Fourth Avenue North, Suite 1050
Nashville, TN 37219
Fax: 615-313-5990
Attention: Robert G. Shuler
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Fax: 404-572-5149
Attention: Hector E. Llorens, Jr.
24
<PAGE>
If to Borrower: HealthGate Data Corp.
380 Pleasant Street
Maiden, Massachusetts 02148
Fax: 781-321-5577
Attention: William S. Reece
with a copy to: Rich, May, Bilodeau & Flaherty, P.C.
294 Washington Street
Boston, MA 02108
Fax: 617-556-3889
Attention: Stephen M. Kane
8.10 Entire Agreement. This Agreement and the other written
agreements between Borrower and Lender executed contemporaneously herewith
represent the entire agreement between the parties concerning the subject matter
hereof, and all oral discussions and prior agreements are merged herein.
8.11 Counterparts. This Agreement may be executed in multiple
originals or counterparts, each of which shall be deemed an original and all or
which when taken together shall constitute but one and the same instrument.
8.12 Governing Law. This Agreement shall be construed and enforced
under the internal laws of the State of Georgia, without reference to the
conflict of laws principles thereof.
8.13 Amendments: Incorporation. No amendment or modification hereof
shall be effective except in a writing executed by each of the parties hereto.
All schedules, exhibits, riders, and other documents and instruments referenced
herein shall be deemed to be incorporated herein and made a part hereof.
8.14 Waiver of Jury Trial. LENDER AND BORROWER EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY
APPLICABLE LAW) ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER,
RELATING TO, OR CONNECTED WITH THIS AGREEMENT, THE COLLATERAL OR ANY OTHER
AGREEMENT, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR DELIVERED IN CONNECTION
HEREWITH AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER
INTO THIS AGREEMENT.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan and
Security Agreement, or have caused this Agreement to be executed by their duly
authorized officers, as of the day and year first above written.
BORROWER:
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
------------------------------------------
Name: William S. Reece
Title: President & Chief Executive Officer
Attest: /s/ Stephen M. Kane
--------------------------------------
Name: Stephen M. Kane
--------------------------------
Title: Asst. Sec.
-------------------------------
LENDER:
PETRA CAPITAL, LLC
By: Petra Capital Management, LLC,
Manager
By:
---------------------------------------
Robert G. Shuler
Member
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Loan and
Security Agreement, or have caused this Agreement to be executed by their duly
authorized officers, as of the day and year first above written.
BORROWER:
HEALTHGATE DATA CORP.
By:
-------------------------------------------
Name: William S. Reece
Title: President & Chief Executive Officer
Attest:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
LENDER:
PETRA CAPITAL, LLC
By: Petra Capital Management, LLC,
Manager
By: /s/ Robert G. Shuler
-------------------------------------
Robert G. Shuler
Member
[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]
<PAGE>
Ex 10.16
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT AND STOCK PURCHASE WARRANT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND STOCK PURCHASE
WARRANT dated as of April 7, 1999 (the "Amendment") by HEALTHGATE DATA CORP., a
Delaware corporation ("Borrower"), and PETRA CAPITAL, LLC, a Georgia limited
liability company ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Loan and Security
Agreement, dated as of March 26, 1998 (as heretofore amended or modified, the
"Loan Agreement"; capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Loan Agreement), pursuant to
which Borrower has borrowed and Lender has made a loan in the amount of Two
Million and No/100 Dollars ($2,000,000.00), upon the terms and conditions set
forth in the Loan Agreement;
WHEREAS, Borrower and Lender are parties to that certain Stock Purchase
Warrant, dated as of March 26, 1999 (as heretofore amended or modified, the
"Stock Warrant"; capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in the Stock Warrant);
WHEREAS, the Lender and the Borrower, at the request of Borrower, desire
to amend certain terms of the Loan Agreement and the Stock Warrant in connection
with the proposed issuance of the Series E Redeemable Preferred Stock;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Borrower and the Lender
hereto, intending to be legally bound, hereby agree to amend the Loan Agreement
as follows:
1. Section 1.5 of the Loan Agreement is hereby amended by replacing said Section
with the following:
1.5 Subordination. The obligations evidenced by the Note shall be
subordinate to Senior Debt (as defined herein). For purposes of this
agreement, "Senior Debt" shall mean the principal of and interest on any
Debt incurred under one or more credit or loan agreements by and between
the Borrower and one or more lenders designated by the Borrower as a
"Senior Lender" by written notice to Lender (collectively, the "Senior
Lender"), together with all replacements, renewals, extensions,
refinancings and refundings thereof; provided, that at any time the
outstanding principal amount of all Debt shall not exceed an amount equal
to the greater of (i) the amount of the Borrower's stockholders'
<PAGE>
equity (as such term is defined in accordance with GAAP) in existence at
such time or (ii) $3,160,000; provided, that Senior Debt shall not bear
interest at a rate that exceeds the Prime Rate plus three percent (3%);
and provided further, that no Debt shall constitute Senior Debt to the
extent such Debt is incurred in violation of the terms of this Agreement.
For purposes of determining whether any Debt is incurred in violation of
the terms of this Agreement, Senior Lender may, in the absence of actual
knowledge otherwise, conclusively rely upon the certificate of the
Borrower to that effect. For purposes of this Agreement, "Debt" of any
person means, without duplication, (a) all obligations of such person for
borrowed money and all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments on which interest charges
are customarily paid, (b) all obligations, contingent or otherwise,
relative to the face amount of all letters of credit, whether or not
drawn, and banker's acceptances issued for the account of such person, (c)
all capitalized lease obligations of such person (to the extent required
by GAAP to be included on the balance sheet of such person) and (d) all
obligations of such person (contingent or otherwise) to guarantee,
purchase or otherwise acquire, or otherwise assure a creditor against loss
in respect of, Debt of another person. For purposes of this Agreement,
"Prime Rate" means the rate which First Union National Bank, or its
successors, publicly announces from time to tine to be its prime lending
rate, as in effect from time to time.
2. Section 4.4 of the Loan Agreement is hereby amended by replacing said Section
with the following:
4.4 Limitations on Debt and Obligations. Subject to the limitations
set forth in Section 1.5, Borrower shall not incur, assume or otherwise
suffer to exist any Debt except (i) Debt reflected on Borrower's balance
sheet dated as of December 31, 1997 and delivered to Lender in connection
with the making of the Loan, (ii) "Senior Debt" as such term is defined in
the Intercreditor Agreement, (iii) Debt incurred pursuant to this
Agreement and evidenced by the Note, and (iv) capitalized lease
liabilities in an aggregate amount outstanding not to exceed $1,000,000;
provided, however, that notwithstanding the foregoing, the Borrower may
incur, assume or otherwise suffer to exist any other Debt provided that at
any time the outstanding principal amount of all Debt shall not exceed the
greater of (i) the amount of the Borrower's stockholders' equity in
existence at such time or (ii) $3,160,000.
3. Section 6.1(j) of the Loan Agreement is hereby amended by replacing said
Section with the following:
(j) a Change of Control shall have occurred. For purposes of this
Loan Agreement, the term "Change of Control" shall mean (i) the
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
of the commission thereunder (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 1 3d-3 promulgated under the Exchange Act), in
one transaction
-2-
<PAGE>
or a series of related transactions, of securities which result in such
individual, entity or group having beneficial ownership of 35% or more of
the Common Stock; (ii) a sale of all or substantially all of the assets of
the Borrower and its Subsidiaries taken as a whole; (iii) a merger or
consolidation of the Borrower with any Person, if as a result of such
merger or consolidation the stockholders of the Borrower immediately prior
to such transaction do not own at least a majority of the voting power in
the election of directors of the surviving company or its parent entity;
or (iv) any stockholder of the Borrower who owned more than 5% of the
outstanding shares of Common Stock on a fully diluted basis as of April 5,
1999 shall have sold or otherwise disposed (except for any assignment,
transfer or other disposition (x) by an individual stockholder to such
stockholder's spouse, child, parent, siblings and descendants, whether
natural or adopted (collectively, "Relatives") or to or among a trust of
which there are no principal beneficiaries other than one or more
Relatives of such stockholder, and (y) by any stockholder to any of its
Affiliates (as such term is defined in Rule 126-2 of the General Rules and
Regulations under the Exchange Act) or partners) of more than 25% of such
shares (as adjusted for stock splits, stock dividends, recapitalizations
and similar transactions) in the aggregate in one or more transactions; or
4. Section 4(c) of the Stock Warrant is hereby amended by replacing said Section
with the following:
(c) The Company covenants and agrees that it will not issue any
Option Securities or Convertible Securities (as such terms are defined in
Section 5(c)) to any officer, director or holder of Common Stock, Option
Securities or Convertible Securities; provided, however, that the Company
may issue such Option Securities and Convertible Securities pursuant to
which the maximum number of shares of Common Stock issuable do not exceed
an additional 10% of the outstanding shares of Common Stock calculated on
a Fully Diluted Basis as of March 26, 1998; provided, further, however,
that the Company may issue Option Securities or Convertible Securities to
GE Capital Equity Investments, Inc. ("GE Equity") and Blackwell Science
Ltd. ("Blackwell") pursuant to the terms of the HealthGate Data Corn.
Series E Redeemable Convertible Preferred Stock Purchase Agreement dated
on or about April 5, 1999 (the "Series F Purchase Agreement"). This
Section 4(c) of this Warrant shall terminate upon the closing of an IPO
(as defined herein).
5. Section 10 of the Stock Warrant is hereby amended by replacing said Section
with the following:
(10) Registration.
(a) The Company and the Holder shall enter into a Registration
Agreement, dated as of March 26, 1998 (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the
"Registration Agreement") substantially similar to the registration
agreement between the
-3-
<PAGE>
Company and the holders of the Company's preferred stock (other than
the holders of the Series E Redeemable Preferred Stock).
(b) After the date hereof, the Company shall not grant to any
holder of securities of the Company any registration rights which
have a priority greater than or equal to those granted to Holder(s)
pursuant to this Warrant without the prior written consent of the
Holder(s) (other than those registration rights granted to the
holders of the Series E Redeemable Preferred Stock pursuant to a
Registration Agreement dated on or about April 7, 1999).
6. Lender hereby consents to the issuance of the Series E Redeemable Convertible
Preferred Stock and the granting by the Company to GE Equity and Blackwell of
registration rights which have a priority greater than those granted to Lender
pursuant to the terms of the Stock Warrant.
7. Lender hereby waives any and all defaults that arise under the Loan Documents
as of the date hereof as a result of the issuance by the Borrower of the
Series E Redeemable Preferred Stock and related transactions described in the
Series E Purchase Agreement, and hereby agrees that the issuance of the Series E
Redeemable Preferred Stock does not result in any adjustment to the exercise
price pursuant to Section 5 of the Stock Warrant; provided, however, that
notwithstanding anything herein to the contrary, nothing herein shall be deemed
to be a waiver of any default or Event of Default that arises from, or might
arise from or pursuant to Section 4.19 or 6.1(k) of the Loan Agreement.
8. Except as expressly provided herein, the Loan Agreement and the Stock Warrant
shall continue in full force and effect, and the amended terms and conditions of
the Loan Agreement and the Stock Warrant are expressly incorporated herein and
ratified and confirmed in all respects. This Amendment is not intended to be or
to create, nor shall it be construed as, a novation or an accord and
satisfaction.
9. From and after the date hereof, references to the Loan Agreement shall be
references to the Loan Agreement as amended hereby and references to the Stock
Warrant shall be references to the Stock Warrant as amended hereby.
10. Borrower hereby affirms that no Event of Default (as defined in the Loan
Agreement) has occurred and is continuing under the Loan Agreement as amended
hereby.
11. THIS AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY AND CONSTRUED IN
ACCORDANCE WITH GEORGIA LAW.
12. This Amendment may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which, taken together, shall
constitute one and the same document.
13. Lender hereby confirms that it has authority to enter into this First
Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or
have caused this Amendment to be executed by the duly authorized officers, as of
the day and year first above written.
BORROWER:
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
-----------------------------------------
Name: William S. Reece
Title: Chairman and President
Attest: /s/ Stephen M. Kane
-------------------------------------
Name: Stephen M. Kane
Title: Assistant Secretary
[SIGNATURE PAGE
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND STOCK
PURCHASE WARRANT]
<PAGE>
LENDER:
PETRA CAPITAL, LLC
By: PETRA CAPITAL PARTNERS,
LLC
By: /s/ Michael W. Blackburn
-------------------------------------
Michael W. Blackburn
Title: Member
[SIGNATURE PAGE
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND STOCK
PURCHASE WARRANT]
<PAGE>
Ex 10.17
$2,000,000 Atlanta, Georgia
March 26, 1998
SECURED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, HEALTHGATE DATA CORP., a Delaware
corporation ("Maker"), promises to pay to the order of PETRA CAPITAL, LLC, a
Georgia limited liability company ("Payee" and, together with any subsequent
holder(s) hereof, "Holder"), to Payee's account number 2080000549194 at First
Union National Bank of Georgia, Perimeter Center, 4570 Ashford Dunwoody Road,
Atlanta, Georgia 30346, ABA routing number 061000227, or at such other place as
Holder may designate to Maker in writing from time to time, on March __, 2003
(the "Maturity Date"), the principal sum of TWO MILLION AND NO/100 DOLLARS
($2,000,000.00), together with interest on the outstanding principal balance
hereof from the date of each advance at the rate of thirteen percent (13.0%) per
annum (computed on the basis of a 360-day year and the actual number of days
elapsed).
Interest on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
last day of March, 1998, and subsequent installments being payable on the last
day of each succeeding month thereafter until the Maturity Date, at which time
the entire outstanding principal balance, together with all accrued and unpaid
interest, shall be immediately due and payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note.
This is the Note referenced in, and issued pursuant to, the Loan and
Security Agreement of even date herewith between the Maker and the Payee (as
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"). The indebtedness evidenced by this Note was incurred pursuant to,
and is governed and secured by the Loan Agreement and the other "Loan Documents"
referenced therein. Reference is made to the Loan Agreement for a description of
the terms and conditions governing this Note and the indebtedness evidenced
hereby, including but not limited to the circumstances under which the
indebtedness evidenced by this Note may be declared or may automatically become
immediately due and payable prior to the Maturity Date.
To the extent permitted by applicable law, upon the occurrence of any
Event of Default (as
<PAGE>
such term is defined in the Loan Agreement), at the option of Holder and without
notice to Maker, all overdue interest, if any, shall be added to the outstanding
principal balance hereof, and the entire outstanding principal balance, as so
adjusted, shall bear interest thereafter until paid at an annual rate equal to
the otherwise applicable interest rate plus an additional two percent (2%) per
annum (computed on the basis of a 360-day year and the actual number of days
elapsed).
If this Note is placed in the hands of an attorney for collection or for
enforcement or protection of the security, or if Holder incurs any costs
incident to the collection of the indebtedness evidenced hereby or the
enforcement or protection of the security, Maker and any endorsers hereof agree
to pay to Holder an amount equal to all such costs, including, without
limitation, all reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
All interest accruing under this Note is subject to the terms of
Section 8.7 of the Loan Agreement. Without limitation to the foregoing, all
agreements herein made are expressly limited so that in no event whatsoever,
whether by reason of advancement of proceeds hereof, acceleration of maturity of
the unpaid balance hereof or otherwise, shall the amount paid or agreed to be
paid to Holder for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time (the "Maximum Rate"). If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of said Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to said Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at said Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note shall be construed and enforced under the internal laws of the
State of Georgia,
<PAGE>
without reference to the conflict of laws principles thereof.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
HEALTHGATE DATA CORP.
By: /s/ William S. Reece
-----------------------------------------
Name: William S. Reece
Title: President & Chief Executive Officer
Attest: /s/ Stephen M. Kane
-------------------------------------
Name: Stephen M. Kane
Title: Asst Sec
<PAGE>
Ex 10.18
THIS STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT
BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER; PROVIDED, HOWEVER,
WITHOUT SUCH A REGISTRATION STATEMENT BECOMING EFFECTIVE AND WITHOUT SUCH AN
OPINION OF COUNSEL, PETRA CAPITAL LLC MAY ASSIGN THIS WARRANT TO PETRA SPECIAL
PURPOSE, LLC, PETRA SPECIAL PURPOSE, LLC MAY COLLATERALLY ASSIGN AND PLEDGE THIS
WARRANT TO ITS LENDERS TO SECURE INDEBTEDNESS OWED BY PETRA SPECIAL PURPOSE, LLC
AND SUCH LENDERS MAY FORECLOSE ON THEIR PLEDGE OF, AND SUBSEQUENTLY ASSIGN, THIS
WARRANT.
STOCK PURCHASE WARRANT
This Warrant is issued as of this 26th day of March, 1998 by HEALTHGATE
DATA CORP., a Delaware corporation (the "Company"), to PETRA CAPITAL, LLC, a
Georgia limited liability company (Petra Capital, LLC and any subsequent
assignee or transferee hereof are hereinafter referred to collectively as
"Holder" or "Holders").
AGREEMENT:
1. Issuance of Warrant: Term.
(a) For and in consideration of Petra Capital, LLC making a loan to
the Company in an amount of Two Million and No/100 Dollars ($2,000,000.00)
pursuant to the terms of a secured promissory note of even date herewith
(together with any and all extensions, replacements and renewals thereof, the
"Note") and related loan and security agreement of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
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Company hereby grants to Holder the right to purchase 1,720 shares of the
Company's common stock (the "Common Stock"), which the Company represents to
equal 3.0% of the shares of Common Stock outstanding on the date hereof,
calculated on a Fully Diluted Basis (as defined below).
(b) In addition to the right to purchase shares of Common Stock
granted under Section 1(a), the Company hereby grants to Holder the right to
purchase 2,788 additional shares of Common Stock (the "Additional Warrants"),
which the Company represents to equal 4.5% of the Common Stock outstanding on
the date hereof, calculated on a Fully Diluted Basis (as defined below), on the
terms and conditions set forth below:
(i) if on March 26, 2000, any indebtedness evidenced by the
Note or any other obligation under the Loan Agreement is
outstanding, the Holder shall have the right to purchase an
additional 900 shares of Common Stock;
(ii) if on March 26, 2001, any indebtedness evidenced by the
Note or any other obligation under the Loan Agreement is
outstanding, the Holder shall have the right to purchase an
additional 929 shares of Common Stock; and
(iii) if on March 26, 2002, any indebtedness evidenced by the
Note or any other obligation under the Loan Agreement is
outstanding, the Holder shall have the right to purchase an
additional 959 shares of Common Stock;
(c) In addition to the rights granted to Holder under subsection (a)
and (b) of this Section 1, if the Note has not been paid in full as of December
31, 1998 and the Company's audited Sales (calculated in accordance with GAAP)
for the fiscal year ended December 31, 1998 are less than $6,000,000, the
Company hereby grants to Holder the right to purchase 579 additional shares of
Common Stock, which the Company represents to equal 1.0% of the shares of Common
Stock outstanding on the date hereof, calculated on a Fully Diluted Basis (as
defined below).
(d) As used in this Section 1, "Fully Diluted Basis" means, as of
any date of determination, the shares of Common Stock outstanding on such date,
together with all shares of Common Stock that would be outstanding on such date
assuming the issuance of all shares of Common Stock issuable upon the issuance
of all shares of Common Stock issuable upon the exercise, exchange or conversion
of (i) any securities outstanding as of such date and convertible into or
exchangeable for Common Stock (whether or not the rights to exchange or convert
thereunder are immediately exercisable) (such convertible or exchangeable
securities being herein called "Convertible Securities"), (ii) any rights
outstanding as of such date to subscribe for or to purchase, or any warrants or
options outstanding for the purchase of, Common Stock or Convertible Securities
(whether or not immediately exercisable) (such rights, warrants or options being
herein called "Option Securities") and (iii) any such Convertible Securities
issued upon the exercise of such
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Option Securities; provided, however, that whenever "Fully Diluted Basis" is
used in connection with (A) the right granted to the Holder under subsection (a)
of Section 1 of this Warrant, the calculation of Fully Diluted Basis shall be
made after giving effect to such right but without giving effect to any rights
granted to the Holder under subsections (b) and (c) of Section 1 of this
Warrant, (B) the right granted to the Holder under subsection (b)(i) of Section
1 of this Warrant, the calculation of Fully Diluted Basis shall be made after
giving effect to the rights granted to the Holder under subsections (a), (b)(i)
and (c) of Section 1 of this Warrant, but without giving effect to the rights
granted to the Holder under subsections (b)(ii) and (b)(iii) of Section 1 of
this Warrant, (C) the right granted to the Holder under subsection (b)(ii) of
Section 1 of this Warrant, the calculation of Fully Diluted Basis shall be made
after giving effect to the rights granted to the Holder under subsections (a),
(b)(i), (b)(ii) and (c) of Section 1 of this Warrant, but without giving effect
to the rights granted to the Holder under subsection (b)(iii) of this Warrant,
(D) the right granted to the Holder under subsection (b)(iii) of Section 1 of
this Warrant, the calculation of Fully Diluted Basis shall be made after giving
effect to the rights granted to the Holder under subsections (a), (b)(i),
(b)(ii), (b)(iii) and (c) of Section 1 of this Warrant and (E) the right granted
to the Holder under subsection (c) of Section 1 of this Warrant, the calculation
of Fully Diluted Basis shall be made after giving effect to the rights granted
to the Holder under subsection (a) of Section 1 of this Warrant, but without
giving effect to the rights granted to the Holder under subsections (b)(i),
(b)(ii) and (b)(iii) of Section 1 of this Warrant. The Company represent and
warrants that, as of the date of this Warrant the outstanding shares of Common
Stock, calculated on a Fully Diluted Basis, are as set forth on Schedule 3.1(c)
to the Loan Agreement.
(e) The shares of Common Stock issuable upon exercise of this
Warrant are hereinafter referred to as the "Shares." This Warrant shall be
exercisable at any time and from time to time from the date hereof until ten
(10) years from the date hereof.
2. Exercise Price. The exercise price per share for which all or any of
the Shares may be purchased pursuant to the terms of this Warrant shall be one
cent ($.0l) (as adjusted from time to time pursuant to Section 5, the "Exercise
Price").
3. Exercise. (a) This Warrant may be exercised by the Holder hereof (but
only on the conditions hereafter set forth) as to all or any increment or
increments of one hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: HealthGate Data Corp. 380 Pleasant Street,
Malden, Massachusetts 02148, Attention: William S. Reece, or such other address
as the Company shall designate in a written notice to the Holder hereof,
together with this Warrant and payment to the Company of the aggregate Exercise
Price of the Shares so purchased. The Exercise Price shall be payable, at the
option of the Holder, (i) by certified or bank check, or (ii) by the surrender
of the Note or portion thereof having an outstanding principal balance equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a certificate
or certificates for the total number of whole Shares for which this Warrant is
being
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exercised in such names and denominations as are requested by such Holder. If
this Warrant shall be exercised with respect to less than all of the Shares, the
Holder shall be entitled to receive a new Warrant covering the number of Shares
in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The Company
covenants and agrees that it will pay when due any and all state and federal
issue taxes which may be payable in respect of the issuance of this Warrant or
the issuance of any Shares upon exercise of this Warrant.
(b) Cashless Exercise. In lieu of exercising this Warrant pursuant
to Section 3(a) above, the Holder shall have the right to require the Company to
convert any then existing rights to purchase Common Stock pursuant to this
Warrant, in whole or in part and at any time or times into Shares (the
"Conversion Right"), upon delivery of written notice of intent to convert to the
Company at its address in Section 3(a) or such other address as the Company
shall designate in a written notice to the Holder hereof, together with this
Warrant. Upon exercise of the Conversion Right, the Company shall deliver to the
Holder (without payment by the Holder of any Exercise Price) that number of
Shares which is equal to the quotient obtained by dividing (x) the value of the
number of Shares with respect to which the Conversion Right is being exercised
(determined by subtracting the aggregate Exercise Price for the Shares with
respect to which the Conversion Right is being exercised from a number equal to
the product of (i) the Fair Market Value per Share (as such term is defined in
Section 5(b)) as at such time, multiplied by (ii) the number of Shares with
respect to which the Conversion Right is being exercised), by (y) such Fair
Market Value per Share. Any references in this Warrant to the "exercise" of this
Warrant, and the use of the term exercise herein, shall be deemed to include
(without limitation) any exercise of the Conversion Right.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for investment
purposes and not with a view to distribution or resale and may not be pledged,
hypothecated, sold, made subject to a security interest, or otherwise
transferred without (i) an effective registration statement for such Warrant
under the Securities Act and such applicable Blue Sky Laws, or (ii) an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to the
Company and its counsel, that registration is not required under the Securities
Act or under any applicable Blue Sky Laws (the Company hereby acknowledges that
King & Spalding is acceptable counsel). Transfer of Shares issued upon the
exercise of this Warrant shall be restricted in the same manner and to the same
extent as the Warrant and the certificates representing such Shares shall,
subject to Section 6 hereof, bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
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TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment therefor,
be legally and validly issued and outstanding, fully paid and nonassessable,
free from all taxes, liens, charges and preemptive rights, if any, with respect
thereto or to the issuance thereof The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
(c) The Company covenants and agrees that it will not issue any
Option Securities or Convertible Securities (as such terms are defined in
Section 5(c)) to any officer, director or holder of Common Stock, Option
Securities or Convertible Securities; provided, however, that the Company may
issue such Option Securities and Convertible Securities pursuant to which the
maximum number of shares of Common Stock issuable do not exceed an additional
10% of the outstanding shares of Common Stock calculated on a Fully Diluted
Basis as of the date hereof This Section 4(c) of this Warrant shall terminate
upon the closing of an IPO (as defined herein).
5. Adjustment of Exercise Price and Number of Shares Issuable. The
Exercise Price and the number of Shares (or other securities or property)
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 5.
(a) Common Stock Reorganization. If the Company shall (i) subdivide
or consolidate its outstanding shares of Common Stock (or any class thereof)
into a greater or smaller number of shares, (ii) pay a dividend or make a
distribution on its Common Stock (or any class thereof) in shares of its capital
stock, or (iii) issue by reclassification of its Common Stock (or any class
thereof) any shares of its capital stock (any such event described in clauses
(i), (ii) or (iii) being called a "Common Stock Reorganization"), then the
Exercise Price and the type of securities for which this Warrant is exercisable
shall be adjusted immediately such that the Holder thereafter shall be entitled
to receive upon exercise of this Warrant the aggregate number and type of
securities that
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it would have received if this Warrant had been exercised immediately prior to
such Common Stock Reorganization.
(b) Common Stock Distribution. Except as otherwise provided in
subsection (k) of this Section 5, if the Company shall issue, sell, distribute
or otherwise grant any shares of Common Stock, other than pursuant to a Common
Stock Reorganization (any such issuance, sale, distribution or grant being
herein called a "Common Stock Distribution"), for a consideration per share less
than the Fair Market Value per Share immediately prior to such Common Stock
Distribution, then the Exercise Price shall be reduced to the price determined
by multiplying such Exercise Price by a fraction, the numerator of which shall
be the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such Common Stock Distribution calculated on a Fully Diluted Basis plus
(B) the quotient obtained by dividing the aggregate consideration, if any,
received by the Company upon such Common Stock Distribution by such Fair Market
Value per Share, and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such Common Stock
Distribution calculated on a Fully Diluted Basis. "Fair Market Value per Share"
as of any time means the fair market value of the Company as of such time
divided by the number of outstanding shares of Common Stock as of such time
calculated on a Fully Diluted Basis.
(c) Convertible Securities and Option Securities. Except as
otherwise provided in subsection (k) of this Section 5, if the Company shall
issue, sell, distribute or otherwise grant (including by assumption):
(i) any stock or other securities convertible into or exchangeable
for Common Stock, whether or not the rights to exchange or convert
thereunder are immediately exercisable (such convertible or exchangeable
stock or securities being herein called "Convertible Securities"), or
(ii) any rights to subscribe for or to purchase, or any warrants or
options for the purchase of, Common Stock or Convertible Securities,
whether or not immediately exercisable (such rights, warrants or options
being herein called "Option Securities"),
and the lowest aggregate consideration per share for which Common Stock is
issuable upon the exercise of such Convertible Securities or Option Securities
(and, if applicable, upon conversion or exchange of Convertible Securities
issuable upon exercise of Option Securities) shall be less than the Fair Market
Value per Share at such time, then the Exercise Price shall be reduced to the
price determined by multiplying such Exercise Price by a fraction, the numerator
of which shall be the sum of (A) the number of shares of Common Stock then
outstanding plus the number of shares issuable upon exercise of this Warrant
plus (B) the quotient obtained by dividing the aggregate consideration, if any,
received or receivable by the Company upon such issuance, sale, distribution or
grant by such Fair Market Value per Share, and the denominator of which shall be
the total number of shares of Common Stock then outstanding plus the number of
shares issuable upon
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exercise of this Warrant plus the total maximum number of shares issuable upon
exercise or conversion of such Convertible Securities or Option Securities and,
in the case of Option Securities to acquire Convertible Securities, upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Option Securities. If any of such
Convertible Securities or Option Securities shall have terminated, lapsed or
expired prior to exercise, exchange or conversion, the Exercise Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of Warrants after such readjustment) to the Exercise Price which would
then be in effect had the adjustment not been made upon the issuance, sale,
distribution or grant of such Convertible Securities or Option Securities.
(d) Adjustment in Number of Shares. Upon each adjustment to the
Exercise Price pursuant to subsections (a), (b) or (c) of this Section 5, this
Warrant shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of Shares obtained by multiplying the number
of Shares previously issuable upon exercise of this Warrant by a fraction the
numerator of which is the Exercise Price prior to adjustment and the denominator
of which is the adjusted Exercise Price.
(e) Non-Cash Consideration. If any shares of Common Stock, Option
Securities or Convertible Securities shall be issued, sold, distributed or
granted for a consideration other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be the fair market
value of such consideration. If any shares of Common Stock, Option Securities or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair market value of such portion of the assets and
business of the non-surviving corporation as shall be attributable to such
Common Stock, Option Securities or Convertible Securities, as the case may be.
(f) Capital Reorganizations. If there shall be any consolidation,
merger or amalgamation of the Company with another person or entity or any
acquisition of capital stock of the Company by means of a share exchange, other
than a consolidation, merger or share exchange in which the Company is the
continuing corporation or any sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, or any reorganization or
recapitalization of the Company (any such event being called a "Capital
Reorganization"), then the Holder of this Warrant shall no longer have the right
to purchase Common Stock, but shall have instead the right to purchase, upon
exercise of this Warrant, the kind and amount of shares of stock and other
securities and property (including cash) which the Holder would have owned or
have been entitled to receive pursuant to such Capital Reorganization if this
Warrant had been exercised immediately prior to the effective date of such
Capital Reorganization. As a condition to effecting any Capital Reorganization,
the Company or the successor or surviving corporation, as the case may be, shall
assume by a supplemental agreement, reasonably satisfactory in form, scope and
substance to the Holder (which shall be mailed or delivered to the Holder of
this Warrant at the last address of such Holder appearing on the books of the
Company) the obligation to deliver to such Holder such shares
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of stock, securities, cash or property as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase, and all other obligations
of the Company set forth in this Warrant.
(g) Determination of Fair Market Value. Subject to the provisions
set forth below, the fair market value of the Company or of any non-cash
consideration received by the Company upon any Common Stock Distribution shall
be determined in good faith by the Board of Directors of the Company. Upon each
such determination, the Company shall promptly give notice thereof to the
Holder, setting forth in reasonable detail the calculation of such fair market
value and the method and basis of determination thereof (the "Company
Determination"). If the Holder shall disagree with the Company Determination and
shall, by notice to the Company given within thirty (30) days after the
Company's notice of the Company Determination, elect to dispute the Company
Determination, the Company shall, within thirty (30) days after such notice,
engage an investment bank or other qualified appraisal firm acceptable to the
Holder to make an independent determination of the fair market value of the
Company or of any non-cash consideration received by the Company upon any Common
Stock Distribution (the "Appraiser Determination"). The Appraiser Determination
shall be final and binding on the Company and the Holder. The cost of the
Appraiser Determination shall be borne by the Company; provided, however, that
in the event the Company Determination is not less than ninety percent (90%) of
the value of the Appraiser Determination, the cost of the Appraiser
Determination shall be borne by the Holder. In determining the fair market value
of the Company pursuant to this Section 5(g), neither the Board of Directors of
the Company nor any appraiser shall take into account or otherwise make any
discount in respect of (i) any restriction on the transfer of shares of Common
Stock of the Company or this Warrant, (ii) any minority interest, (iii) any lack
of liquidity of shares of Common Stock of the company or this Warrant due to the
fact that there may be no public or private market for such shares or this
Warrant, or (iv) the voting status of this Warrant or any share of Common Stock
of the Company, whether under the articles of incorporation or bylaws of the
Company, by agreement or otherwise.
(h) Adjustment Rules. Any adjustments pursuant to this Section 5
shall be made successively whenever an event referred to herein shall occur. No
adjustment shall be made pursuant to this Section 5 in respect of the issuance
from time to time of shares of Common Stock upon the exercise of this Warrant or
upon the exercise or conversion of any other Option Securities or Convertible
Securities.
(i) Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 5, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the Holder of this Warrant is
entitled to receive upon exercise thereof.
(j) Notice of Adjustment. Not less than 10 days prior to the record
date or effective date, as the case may be, of any action which requires or
might require an adjustment or
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readjustment pursuant to this Section 5, the Company shall give notice to the
Holder of such event, describing such event in reasonable detail and specifying
the record date or effective date, as the case may be, and, if determinable, the
required adjustment and the computation thereof If the required adjustment is
not determinable at the time of such notice, the Company shall give notice to
the Holder of such adjustment and computation promptly after such adjustment
becomes determinable.
(k) Below Fair Market Value Distributions or Sales. Notwithstanding
anything contained in this Warrant to the contrary, the Company may make a
Common Stock Distribution to employees, Directors, or consultants of the
Company, or may issue, sell, distribute or otherwise grant Convertible
Securities or Option Securities to employees, Directors, or consultants of the
Company, for a consideration per share less than the Fair Market Value per Share
without an adjustment to the Exercise Price or the number of Shares provided the
maximum number of shares of Common Stock issuable pursuant to this Section (k)
do not exceed an additional 7.5% of the outstanding shares of Common Stock
calculated on a Fully Diluted Basis as of the date hereof provided, further,
however, that the consideration per share is not less than $100.00. No
adjustment pursuant to Sections 5(b) or 5(c) shall be made to the Exercise Price
or the number of Shares issuable hereunder in connection with or following an
IPO (as defined herein).
6. Transfer of Warrant. Subject to the provisions of Section 4
hereof, this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer. Upon such presentation for transfer, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants under this
Section.
7. Warrant Holder Not Shareholder: Rights Offering: Preemptive Rights.
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such offer. The Company shall not grant any preemptive rights
with respect to any of its capital stock if such preemptive rights are
exercisable upon exercise of this Warrant.
8. Observation Rights: Interim Dividends.
(a) Observation Rights. The Holder of this Warrant shall receive
notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity and shall receive a copy of all correspondence and information
delivered to the Company's Board of Directors, from the date hereof until such
time as the indebtedness evidenced by the Note has been paid in full. To the
extent that the Holder of this
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Warrant elects to attend or have a representative attend any meeting of the
Company's Board of Directors, the Holder agrees to abide by all written rules
and policies of the Company regarding confidential information to the extent
such rules and policies are generally applicable to the directors of the Company
and the Company has given such Holder notice of and a copy of such rules and
policies.
(b) Interim Dividends. If the Company pays a dividend or makes a
distribution to the holders of its capital stock of any securities (other than
capital stock) or property (including cash and securities of other companies) of
the Company, or any rights, options or warrants to purchase securities (other
than capital stock) or property (including securities of other companies) of the
Company, then, simultaneously with the payment of such dividend or the making of
such distribution, and as a condition precedent to its right to do so, it will
pay or distribute to the Holder of this Warrant an amount of property (including
without limitation cash) and/or securities (including without limitation
securities of other companies) of the Company as would have been received by
such Holder had it exercised this Warrant and received all of the Shares of
Common Stock issuable upon the exercise of this Warrant immediately prior to the
record date (or other applicable date) used for determining stockholders of the
Company entitled to receive such dividend or distribution. Anything in Section 5
to the contrary notwithstanding, no adjustment to the Exercise Price shall be
made for any distribution of Convertible Securities of the Company to the Holder
pursuant to the provisions of this Section 8.
9. Financial Statements and Reports. Unless the Company is otherwise
furnishing such information to the Holder hereof, from the date hereof until the
earlier to occur of (i) the exercise in full of this Warrant or (ii) its
termination, the Company shall deliver to the Holder the following financial
information:
(a) within ninety (90) days after the end of each fiscal year of
Company, (A) audited consolidated financial statements of Company, including a
balance sheet as of the close of such fiscal year, an income statement,
statements of changes in stockholders equity, and of cash flows for such fiscal
year, all in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied, and with the report thereon of
independent public accountants acceptable to the Holder, and (B) unaudited
consolidating financial statements, including a balance sheet as of the close of
such fiscal year, an income statement, statements of changes in stockholders'
equity, and of cash flows for such fiscal year;
(b) within thirty (30) days after the end of each calendar month, a
consolidated balance sheet of Company as of the close of such month and
consolidated statements of earnings and retained earnings of Company for such
month and for the prior months of the current fiscal year (on a year to date
basis), each compared to the same period in the previous fiscal year, all in
reasonable detail, and unaudited but prepared on the basis of generally accepted
accounting principles consistently applied (except for the absence of footnotes
and subject to year-end adjustments), together with a report of Company's
management with respect to such financial statements; and
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(c) with reasonable promptness, such other financial data as the
Holder may reasonably request.
10. Registration.
(a) The Company and the Holder shall enter into a Registration
Agreement, dated as of the date hereof (as the same may be amended, restated,
supplemented or otherwise modified from time to time, the "Registration
Agreement") substantially similar to the registration agreement between the
Company and the holders of the Company's preferred stock.
(b) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holder(s) pursuant to this Warrant
without the prior written consent of the Holder(s).
11. Certain Notices. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its Common
Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially all
of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up of
the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the Holder, by
certified or registered mail, (i) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription fights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend, distribution or subscription fights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required by
clause (ii) shall specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such
-11-
<PAGE>
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
12. Co-Sale Rights.
(a) Co-Sale Right. None of the shareholders of the Company on the
date hereof, as set forth on Annex A hereto (each a "Selling Shareholder") shall
enter into any transaction that would result in the sale by it of any Common
Stock now or hereafter owned by it, unless prior to such sale the Selling
Shareholder shall give notice to the Holder of its intention to effect such sale
in order that Holder may exercise its rights under this Section 12 as
hereinafter described. Such notice shall set forth (i) the number of shares to
be sold by the Selling Shareholder, (ii) the principal terms of the sale,
including the price at which the shares are intended to be sold, and (iii) an
offer by the Selling Shareholder to cause to be included with the shares to be
sold by it in the sale, on a share-by-share basis and on the same terms and
conditions, the Shares issuable or issued to the Holder pursuant to this
Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such
offer in writing within a period often (10) days from the date of receipt of the
notice specified in subsection (a) of this Section, then the Selling Shareholder
shall thereafter be free for a period of ninety (90) days to sell the number of
shares specified in such notice, at a price no greater than the price set forth
in such notice and on otherwise no more favorable terms to the Selling
Shareholder than as set forth in such notice, without any further obligation to
Holder in connection with such sale. In the event that the Selling Shareholder
fails to consummate such sale within such ninety-day period, the shares
specified in such notice shall continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If the Holder accepts such offer in
writing within a period often (10) days from the date of receipt of the notice
specified in subsection (a) of this Section, such acceptance shall be
irrevocable unless the Selling Shareholder shall be unable to cause to be
included in his sale the number of Shares of stock held by the Holder and set
forth in the written acceptance. In that event, the Selling Shareholder and the
Holder shall participate in the sale on the basis of the Selling Shareholder and
the Holder each selling half the total number of such shares to be sold in the
sale.
(d) In no event shall this Section 12 apply to transfers of shares
to a Selling Shareholder's spouse, children or parents or any trusts in which
Selling Shareholder or any of the foregoing persons is a beneficiary.
(e) Selling Shareholder's obligations under this Section 12 shall
terminate upon the Company's consummation of an initial public offering of
Common Stock pursuant to a firm commitment underwriting (an "IPO").
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
HEALTHGATE DATA CORP.
a Delaware corporation
By: /s/ William S. Reece
----------------------------------------------
Name: William S. Reece
Title: President & Chief Executive Officer
Attest: /s/ Stephen M. Kane
------------------------------------------
Name: Stephen M. Kane
------------------------------------
Title: Asst. Sec
-----------------------------------
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC,
Manager
By:
-------------------------------------------
Robert G. Shuler
Member
[SIGNATURE PAGE TO STOCK PURCHASE WARRANT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
HEALTHGATE DATA CORP.
a Delaware corporation
By:
-----------------------------------------------
Name: William S. Reece
Title: President & Chief Executive Officer
Attest:
-------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC,
Manager
By: /s/ Robert G. Shuler
------------------------------------------
Robert G. Shuler
Member
[SIGNATURE PAGE TO STOCK PURCHASE WARRANT]
<PAGE>
ANNEX A
Section 12 of this Warrant is hereby acknowledged and agreed to by the
undersigned shareholders of the Company as of the date first above written.
/s/ William S. Reece
- ------------------------------------
William S. Reece
William S. Reece
- ------------------------------------
Name:
- ------------------------------------
Name:
<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
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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
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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
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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.
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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.
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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
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<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.
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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.
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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
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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
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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;
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(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.
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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);
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(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
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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
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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
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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.
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(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.
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"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.
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"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.
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<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
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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
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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
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<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
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<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.
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<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,
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<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.
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<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.
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<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
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<PAGE>
EXHIBIT 10.21
Standard Distribution Agreement
Original Equipment Manufacturer (OEM)
THIS AGREEMENT is entered into as of the 28th day of July 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 Inteli-Health, Inc. ("InteliHealth"), a Delaware corporation,
having an address at 960c Harvest Drive, Blue Bell, PA 19422 (hereinafter
referred to as "OEM").
WITNESSETH:
WHEREAS, OEM owns, operates or makes available, alone or in combination
with others, interactive information, communication and transactional services
(whether presently existing or hereafter developed referred to herein as the
"OEM Services"); and
WHEREAS, OEM has developed an interactive area on the World Wide Web in
which various content sources are available for use by Web users; and
WHEREAS, HealthGate offers 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"); and any other URLs that HealthGate registers.
WHEREAS, OEM and HealthGate wish to enter into an agreement providing for
certain of HealthGate's databases to be embedded into an internet site
environment accessible to certain users of the OEM Services as described herein
(the "Co-Branded Site").
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. OEM Site; Links to HealthGate Site; Authorized Users
1.1 OEM Site. OEM shall design, develop, maintain and host an internet
site within which a section called the "Co-Branded Site" will be enabled with
links, accessible only to Authorized Users (as defined in Section 1.2 below), to
the Products (as defined in Section 2.1 below) on HealthGate's Site.
1.2 Authorized Users. For the purposes of this Agreement, "Authorized
User" shall mean an individual user of the Co-Branded Site who is a natural
person and who registered for or has accessed the Co-Branded Site through an
individual personal computer. Without limiting the generality of the foregoing:
(i) institutions, companies, corporations or other entities are not Authorized
Users, and (ii) persons who access the Co-Branded Site through an institution,
company, corporation or other entity either through such entity's intranet or
internet access
<PAGE>
pursuant to a corporate, company or institutional agreement with the OEM under
which the entity pays OEM specifically for access to the Co-Branded Site are not
Authorized Users.
1.3 Links to HealthGate Site: Interactions between Sites. HealthGate will
accept queries posed by an Authorized User on the Co-Branded Site and return to
the Authorized User the results of said queries to the Co-Branded Site. In this
regard the Co-Branded Site will contain the same features, functionality and
performance as those similar products and services offered on the current
HealthGate.com Site.
All such interactions between the two sites will be conducted according to
mutually agreed upon design, but will be characterized by the same functionality
and performance. The Co-Branded Site shall contain prominent reference to
HealthGate and prominently feature HealthGate's logo in a manner to be approved
by HealthGate, which approval will not be unreasonably withheld.
The parties will work diligently to agree upon the interaction design
within 30 days of the date of this agreement.
II. Products on the Co-Branded Site
2.1 HealthGate Products. OEM Authorized Users shall have access via the
Co-Branded Site to the databases listed on Schedule A attached hereto (the
"Products").
2.2 Exclusivity. OEM agrees that during the term of this agreement it
shall not provide links, access, or in any other way provide access from its
site to any other entity's products or services that are similar in nature to
those of HealthGate Products, under contract with this agreement, other than
through HealthGate. Notwithstanding the foregoing, OEM is not prohibited from
providing links that point their users to other web sites that might contain
HealthGate type products, provided the purpose of the link is not to encourage
users to use the site as an alternative means to search the HealthGate type
products. Additionally, OEM is not prohibited from providing services that OEM
inherits through acquisitions from other companies that already offer products
or services that are similar in nature to those of HealthGate Products, under
contract with this agreement. HealthGate acknowledges that this paragraph does
not prohibit OEM's relationship with Harris Informatics.
III. Fees
3.1 License Fees. OEM agrees to pay to HealthGate a monthly License Fee as
set forth in Schedule A.
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
<PAGE>
concerning other Professional services, custom development or setup fees, if
any, are set forth on Schedule C attached hereto.
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 July 27, 1998, and shall
continue in effect until July 27, 1999 (the "Initial Scheduled Expiration
Date"), unless otherwise terminated as provided hereunder.
4.2 Adjustment of Fees: Renewal. All fees hereunder shall be fixed for the
duration of the initial term of this Agreement (and for any renewal term). If
HealthGate wishes to increase the License Fee for any renewal term, it shall
notify OEM in writing at least 90 days prior to the then-current Scheduled
Expiration Date. If OEM does not wish to renew this Agreement on the terms
contained in HealthGate's notice, it must notify HealthGate within 60 days of
its receipt of the notice. In the absence of such a notice from HealthGate,
unless notice of intent not to renew is given by either party at least sixty
(60) 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 (A) ten (10) days following
receipt of the Termination Notice in the case of a breach relating to a payment
due hereunder which is not legitimately in dispute by the parties or (B) thirty
(30) days following receipt of the Termination Notice for all other nonpayment
breaches. 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 which are not legitimately in
dispute 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, OEM will delete all Links to the Co-Branded Site from the OEM Service
and any of its menus, listings or directories
<PAGE>
and, within thirty (30) business days of such termination, both parties will
destroy advertising or promotional materials, if any, containing any reference
to the other party or their products.
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 Site, OEM
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. OEM recognizes and acknowledges that HealthGate
Trademarks have acquired a secondary meaning and are associated with high
quality services and products available from HealthGate. Accordingly, any use of
any HealthGate Trademark pursuant to this Agreement by OEM or the Co-Branded
Site shall be subject to HealthGate's approval, which HealthGate may deny or
revoke at any time if in HealthGate's sole judgment such use in not consistent
with the goodwill otherwise associated with the HealthGate Trademarks.
OEM acknowledges and agrees that each HealthGate Trademark is and will
remain the exclusive property of HealthGate and all use by the Co-Branded Site
or OEM 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 OEM nor the Co-Branded Site of any rights in or to any
HealthGate Trademark, except for the limited rights expressly granted under this
Agreement.
All advertising and promotional material for the Co-Branded Site, which
contains any HealthGate Trademark, shall be subject to review and approval by
HealthGate (which approval shall not be unreasonably withheld).
5.2 OEM Trademarks. Notwithstanding the limited right to use OEM's name,
logo and other marks created or utilized by OEM (collectively the "OEM's
Trademarks") in accordance with this Agreement, HealthGate recognizes and
acknowledges OEM is the sole owner of the OEM Trademarks and all rights therein
and the goodwill pertaining thereto belong exclusively to OEM. HealthGate
recognizes and acknowledges that OEM Trademarks have acquired a secondary
meaning and are associated with high quality services and products available
from OEM. Accordingly, any use of any OEM Trademark pursuant to this Agreement
by HealthGate or the Co-Branded Site shall be subject to OEM's approval, which
OEM may deny or revoke at any time if in OEM's sole judgment such use in not
consistent with the goodwill otherwise associated with the OEM Trademarks.
HealthGate acknowledges and agrees that each OEM Trademark is and will
remain the exclusive property of OEM and all use by the Co-Branded Site or
HealthGate of any OEM Trademark will inure solely to the benefit of OEM. Neither
this Agreement nor any rights granted hereunder will operate as a transfer to
HealthGate nor the Co-Branded Site of any rights in or to any OEM Trademark,
except for the limited rights expressly granted under this Agreement
<PAGE>
All advertising and promotional material for the Co-Branded Site, which
contains any OEM Trademark, shall be subject to review and approval by OEM
(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 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 frill ownership of the HealthGate Trademarks.
6.2 Compliance with Laws. Except to the extent such obligation is
expressly assumed by OEM, HealthGate shall, at its own expense, comply with any
laws relating to the sale, lease, or license of the Products, and shall procure
all licenses and pay all fees and other charges required thereby.
6.3 OEM Representations and Warranties. OEM represents and warrants that
it has the right to enter into this Agreement.
6.4 Compliance With Laws: Prohibition on Resale and Relicensing of
Products. OEM shall require each Authorized User to acknowledge acceptance of
OEM's standard subscriber agreement, a copy of which will be provided to
HealthGate upon request. This agreement prohibits users of the Co-Branded Site
from reselling or re-licensing any content or materials available on the
Co-Branded Site without the express written consent from the appropriate
copyright owner. OEM shall have all Authorized Users register with OEM under
OEM's standard registration process and such registration information shall be
available for review by HealthGate upon written request for audit purposes only.
In no event may HealthGate use such information for any other purpose or
disclose or make available such information to any third party without OEM's
prior written consent.
6.5 Indemnification. Each party (the "indemnifying party") will indemnify,
defend and hold harmless the other party and its affiliated companies
(collectively, the "indemnified party") from and against all claims, suits and
proceedings, and any and all related liabilities, losses, expenses, damages and
costs (including, without limitation, reasonable attorneys' fees), including,
without limitation, any third-party claims alleging infringement of any
copyright, trademark or other intellectual property right or alleging libel,
defamation or invasion of privacy, arising from the use of any content,
products, software, trademarks, logos or other materials or information
(collectively, "Materials") (a) provided by the indemnifying party or (b)
accessible on the indemnifying party's Web site or via a link from the
indemnifying party's Web site, unless such Materials were originally provided by
the indemnified party.
The indemnified party will: promptly notify the indemnifying party of any
claim, suit, or proceeding for which indemnity is claimed; cooperate reasonably
with the indemnifying party at the latter's expense; and allow to the
indemnifying party to control the defense or settlement
<PAGE>
thereof The indemnified party will have the right to participate in any defense
of a claim and/or to be represented by counsel of its own choosing at its own
expense. The indemnifying party's obligations under this section shall not apply
to any claims based upon the use of any Materials that have been altered by any
party other than the indemnifying party, the combination of any Materials with
any items not provided by the indemnifying party, or the display of any
Materials in a manner not approved by the indemnifying party, if and to the
extent such claim would not have arisen but for such alteration, combination or
display.
VII. Administrators; Contact Persons.
7.1 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:
Jean Maguire
HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, MA 02148
1-781-321-6000 x201 (voice)
1-781-321-2262 (fax)
[email protected] (electronic mail)
OEM's Administrator is:
InteliHealth, Inc.
960c Harvest Drive
Blue Bell, PA 19422
Attn: President
1-888-244-4636 (voice)
215-775-6826 (fax)
Either party may change its Administrator pursuant to written notice to
the other party containing an express reference to this Agreement.
VIII. DISPUTE RESOLUTION
8.1 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.
8.2 Mediation. In the event of any dispute regarding the terms of this
Agreement, including any Exhibit hereto, the parties agree, within thirty (30)
days following notice of one party to the other of the nature of the dispute, to
select a third party mediator as shall be acceptable to each of the parties. The
parties shall meet in good faith with the mediator for the purpose of resolving
the dispute. No decision or recommendation made by the mediator shall be
<PAGE>
binding upon either party. If the dispute is not resolved within sixty (60) days
following the selection of the mediator, the parties may pursue any other remedy
available at law or in equity. The cost of the mediation shall be divided
equally between the parties. Notwithstanding anything herein to the contrary,
either party may proceed to a court of competent jurisdiction to obtain
injunctive relief at any time.
8.3 Injunctive Relief. Each party 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, the non-breaching party may not have an
adequate remedy at law and may suffer irreparable damage and injury. Therefore,
in addition to any other remedy available, each party agrees that if it violates
any of the provisions of Article V or Sections 4.4(b) or 6.4, the non-breaching
party shall be entitled to seek injunctive relief by a court of competent
jurisdiction.
IX. Miscellaneous
9.1 Confidential Information. Unless otherwise agreed to in a 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 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.
9.2 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 or the parties'
indemnification obligations described in Section 6.5 above. Except for the
foregoing sentence, in no event shall either party be liable under this
Agreement to the other for damages exceeding the amounts paid by OEM 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, except for HealthGate's obligations under
Section 6.5 above, OEM's remedy shall be limited to an abatement of that portion
of the monthly License Fee attributable to the period of time of which the
HealthGate Site is unavailable or not functioning.
9.3. 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 any products or services offered on the
Co-Branded Site.
9.4 Independent Contractor. HealthGate and OEM are and shall remain
independent contractors with respect to all work completed pursuant to the
Agreement.
<PAGE>
9.5 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, except to such party's parent
company or in connection with the sale of all or substantially all of the
assets, business or stock of such party.
9.6 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.
9.7 Third Party Rights. This Agreement is not intended and shall not be
construed to create any rights for any third party.
9.8 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.
9.9 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.
9.10 Entire Agreement: Severability. This Agreement, together with the
Exhibits 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.
9.11 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.
9.12 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.
<PAGE>
IN WITNESS WHEREOF, duly authorized representatives of the parties have executed
this Agreement as of the date first written above:
HealthGate Data Corp. Inteli-Health, Inc. (OEM)
By: /s/ William S. Reece By: /s/ Joel Kahn, M.D.
- --------------------------------- ---------------------------------
Name: William S. Reece Name: Joel Kahn, M.D.
Title: Chief Executive Officer Title: Chief Medical Officer
<PAGE>
EXHIBIT 10.22
Standard Distribution Agreement
Original Equipment Manufacturer (OEM)
THIS AGREEMENT is entered into as of the 15th day of July 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 AHN Partners, L.P. d/b/a America's Health Network ("AHN") a
Delaware limited partnership, having an address at 2500 Universal Studios Plaza,
Orlando, FL 32819 (hereinafter referred to as "OEM").
WITNESSETH:
WHEREAS, OEM owns, operates or makes available, alone or in combination
with others, interactive information, communication and transactional services
and is a cable television programming network providing health information to
consumers (whether presently existing or hereafter developed referred to herein
as the "OEM Services"); and
WHEREAS, OEM has developed an interactive area on the World Wide Web in
which various content sources are available for use by Web users; and
WHEREAS, HealthGate offers 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"); and any other URLs that HealthGate registers.
WHEREAS, OEM and HealthGate wish to enter into an agreement providing for
certain of HealthGate's databases to be embedded into an internet site
environment accessible to certain users of the OEM Services as described herein
(the "Co-Branded Site").
NOW, THEREFORE, in consideration of the mutual promises Let forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
I. OEM Site; Links to HealthGate Site; Authorized Users
1.1 OEM Site. OEM shall design, develop, maintain and host an internet
site (the "Co-Branded Site") of OEM's services, content and products on OEM's
website with links accessible only to Authorized Users (as defined in Section
1.2 below) to the Products (as defined in Section 2.1 below) on HealthGate's
Site.
1.2 Authorized Users. For the purposes of this Agreement, "Authorized
User" shall mean an individual, registered user of OEM's Services who is a
natural person and who registered for or has accessed OEM's services through an
individual personal computer. Without limiting the generality of the foregoing:
(i) institutions, companies, corporations or other entities are not Authorized
Users, and (ii) persons who access OEM's Services through an institution,
company, corporation or other entity either through such entity's intranet or
<PAGE>
internet access pursuant to a corporate, company or institutional agreement with
the OEM are not Authorized Users.
1.3 Links to HealthGate Site: Interactions between Sites. HealthGate will
accept queries posed by an Authorized User on the Co-Branded Site 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 design. The Co-Branded Site shall contain prominent
reference to HealthGate and prominently feature HealthGate's logo in a manner to
be approved by HealthGate.
In the event the parties do not mutually agree upon the interaction
standards within thirty (30) days of the date of this Agreement, such standards
shall be established by OEM to be consistent with the interaction standards
utilized by HealthGate in its other OEM arrangements.
II. Products on the Co-Branded Site
2.1 HealthGate Products. OEM Authorized Users shall have access via the
Co-Branded Site to the databases listed on Schedule A attached hereto (the
"Products").
2.2 Exclusivity. OEM agrees that during the term of this Agreement it
shall not provide links, access, or in any other way provide access from its
site to any other entity's products or services that are similar in nature to
those of HealthGate Products other than through HealthGate.
III. Fees
3.1 License Fees. OEM agrees to pay to HealthGate a monthly License Fee as
set forth in Schedule A.
3.2 Advertising and other Fee Arrangements. Arrangements concerning
advertising or other fee arrangements, if any, are set forth on Schedule C
attached hereto.
3.3 Professional Services and Custom Development (Setup charges).
Arrangements concerning other Professional services, if any, custom development
or setup fees, are set forth on Schedule C attached hereto.
3.4 Late Fees. All late fee payments shall accrue interest at the rate of
twelve percent (12%) per annum.
<PAGE>
IV. Term and Termination
4.1 Term. This Agreement shall be effective on July 15, 1998, and shall
continue in effect until July 14, 1999 (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 (a) 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 (A) ten (10) days following
receipt of the Termination Notice in the case of a breach relating to a payment
due hereunder or (B) thirty (30) days following receipt of the Termination
Notice for all other non-payment breaches. 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 has, within such thirty (30) day
period, presented an agreed upon plan to cure the default, or 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 end the Agreement shall continue in full force and effect.
(b) In the event the number of daily Page Views, as defined on Schedule A,
exceeds 30,000 and the parties, in good faith, cannot agree to mutually
acceptable rates, either party may terminate this Agreement.
4.4 Post Termination Obligations. (a) Payments. In the event of any
termination of this Agreement by either party, all fees previously due or
previously 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, each party will delete all Links to the Co-Branded Site from each
party's respective Service and any of its menus, listings or directories and,
within thirty (30) business days of such termination, both parties will destroy
advertising or promotional materials, if any, containing any reference to the
other party or their products.
<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 Site, OEM
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. OEM recognizes and acknowledges that HealthGate
Trademarks have acquired a secondary meaning and are associated with high
quality services and products available from HealthGate. Accordingly, any use of
any HealthGate Trademark pursuant to this Agreement by OEM or the Co-Branded
Site shall be subject to HealthGate's approval, which HealthGate may deny or
revoke at any time if in HealthGate's sole judgment such use in not consistent
with the goodwill otherwise associated with the HealthGate Trademarks.
OEM acknowledges and agrees that each HealthGate Trademark is and will
remain the exclusive property of HealthGate and all use by the Co-Branded Site
or OEM 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 OEM nor the Co-Branded Site of any rights in or to any
HealthGate Trademark, except for the limited rights expressly granted under this
Agreement. OEM 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 Site, which
contains any HealthGate Trademark, shall be subject to review and approval by
HealthGate (which approval shall not be unreasonably withheld).
5.2 OEM Trademarks. Notwithstanding the limited right to use OEM's name, logo
and other marks created or utilized by OEM (collectively the "OEM's Trademarks")
on the Co-Branded Site, HealthGate recognizes and acknowledges OEM is the sole
owner of the OEM Trademarks and all rights therein and the goodwill pertaining
thereto belong exclusively to OEM. HealthGate recognizes and acknowledges that
OEM Trademarks have acquired a secondary meaning and arc associated with high
quality services and products available from OEM. Accordingly, any use of any
OEM Trademark pursuant to this Agreement by HealthGate or the Co-Branded Site
shall be subject to OEM's approval, which OEM may deny or revoke at any time if
in OEM's sole judgment such use in not consistent with the goodwill otherwise
associated with the OEM Trademarks.
HealthGate acknowledges and agrees that each OEM Trademark is and will
remain the exclusive property of OEM and all use by the Co-Branded Site or
HealthGate of any OEM Trademark will inure solely to tile benefit of OEM.
Neither this Agreement nor any rights
<PAGE>
granted hereunder will operate as a transfer to HealthGate nor the Co-Branded
Site of any rights in or to any OEM Trademark, except for the limited rights
expressly granted under this Agreement. HealthGate will not take any action that
would undermine, conflict with, or be contrary to the rights and interest of
OEM, including, without limitation, any use of, or attempt to register, any
trademark, service mark or trade name substantially similar to any OEM
Trademark.
All advertising and promotional material for the Co-Branded Site, which
contains any OEM Trademark, shall he subject to review and approval by OEM
(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 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; iv) this Agreement
constitutes the valid and binding obligation of HealthGate enforceable in
accordance with the terms hereunder; v) any written, audio or visual materials
furnished by HealthGate for or in connection with the Co-Branded Site will not
violate, conflict with or infringe upon any rights whatsoever (including without
limitation, any intellectual property, privacy or proprietary right in any work)
of any third party whatsoever, specifically excluding any material independently
furnished by OEM to HealthGate; and vi) no claim, suit, action or other
proceeding has been threatened or is pending in connection with the Products
which would or might affect any of the rights granted herein to OEM.
6.2 Compliance with Laws. Except to the extent such obligation is
expressly assumed by OEM, HealthGate shall, at its own expense, comply with any
laws relating to the sale, lease, or license of the Products, and shall procure
all licenses and pay all fees and other charges required thereby.
6.3 OEM Representations and Warranties. OEM represents and warrants that
(i) it has the right to enter into this Agreement; (ii) this Agreement
constitutes the valid and binding obligation of OEM enforceable in accordance
with the terms hereunder; (iii) it has full ownership of the OEM Trademarks (iv)
any written, audio or visual materials furnished by OEM for or in connection
with the Co-Branded Site will not violate, conflict with or infringe upon any
rights whatsoever (including without limitation, any intellectual property,
privacy or proprietary right in any work) of any third party whatsoever,
specifically excluding any material independently furnished by HealthGate to
OEM; and (v) no claim, suit, action or other proceeding has been threatened or
is pending in connection with the Products which would or might affect any of
the rights granted herein to HealthGate.
<PAGE>
6.4 Compliance With Laws; Prohibition on Resale and Relicensing of
Products. OEM shall require each of its customers and users to limit its actions
and use of the Products under the subscriber agreement (or similar agreement,
contract or arrangement) between OEM and its customer or user, 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. Users of the Co-Branded Site shall
be prohibited from reselling or re-licensing the Products or any portion thereof
without the express written consent of OEM and HealthGate (which consent may be
withheld for any reason or for no reason). OEM shall use its best efforts to
enforce this prohibition and will place appropriate written limitations of the
use of the Products with all its customers or other users of the Co-Branded
Site. OEM shall have all Authorized Users register with OEM in a manner
acceptable to HealthGate and such registration information shall be available
for review by HealthGate upon written request. In the event HealthGate monitors
an excessive number of accesses to the Co-Branded Site from one domain and
HealthGate reasonably believes such accesses are due to an unauthorized
sublicensing or sale of any portion or all of HealthGate's Products, HealthGate
shall demand a reasonable cure by OEM within thirty (30) days of such notice
thereof.
VII. Administrators; Contact Persons.
7.1 Administrators. The parties each hereby designate an Administrator to
receive notices, and any other contact between parties pursuant to this
Agreement. Except as otherwise provided herein, all notices provided for in this
Agreement shall be in writing and shall be given by electronic mail, first
class certified mail postage prepaid, return receipt requested, by reputable
overnight delivery service, or by telecopier confirmed by the telecopier
confirmation report. All notices shall be sent to the principal offices of the
respective parties at the addresses shown below:
HealthGate's Administrator is;
Jean Maguire
HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, MA 02148
1-781-321-6000 x201 (voice)
1-781-321-2262 (fax)
[email protected] (electronic mail)
OEM's Administrator is:
Robert Hutsell
AHN Partners, L.P. d/b/a America's Health Network
<PAGE>
2500 Universal Studios Plaza
Orlando, FL 32819
615 269 5113 (voice)
615 269 4261 (fax)
[email protected] (electronic mail)
Either party may change its Administrator pursuant to written notice to
the other party containing an express reference to this Agreement.
VIII. DISPUTE RESOLUTION
8.1 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.
8.2 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.
8.3 Injunctive Relief. OEM and HealthGate each acknowledge 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, either party may not have an
adequate remedy at law and will suffer irreparable damage and injury. Therefore,
in addition to any other remedy available, each party agrees that if it violates
any of the provisions of Article V or Sections 4.4(b) or 6.4, the other party
shall be entitled to seek injunctive relief by a court of competent
jurisdiction.
IX. Miscellaneous
9.1 Confidential Information. Unless otherwise agreed to in a 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
<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.
9.2 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. In no event shall HealthGate be liable under
this Agreement to OEM for damages exceeding the amounts paid by OEM under this
Agreement nor shall OEM be liable under this Agreement to HealthGate for any
damages exceeding the amount equal to the monies paid by OEM under this
Agreement; provided, however, this limitation shall not apply to any liabilities
based on obligations to third parties.
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 inaction's by HealthGate, OEM's remedy shall be limited to an
abatement of that portion of the monthly License Fee attributable to the period
of time of which the HealthGate Site is unavailable or not functioning.
9.3. 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 Site.
9.4 Independent Contractor. HealthGate OEM are and shall remain
independent contractors with respect to all work completed pursuant to the
Agreement. Nothing contained in this Agreement shall create an agency,
partnership or joint venture between the parties or render either party liable
for the debts or obligations of the other. Neither party is authorized to bind
the other party in any respect.
9.5 No Assignment. Neither party may not sell, transfer, assign, or
subcontract, any right or obligation set forth in this Agreement without the
express advance written consent of the other party.
9.6 Amendments in Writing. No amendment, modification, or waiver of any
provision of this Agreement shall be effective unless it is set forth in 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.
9.7 Third Party Rights. This Agreement is not intended and shall nor be
construed to create any rights for any third party.
9.8 Force Majeure. Neither party shall be liable nor deemed to be in
default of its
<PAGE>
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.
9.9 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 State of Florida.
9.10 Entire Agreement; Severability. This Agreement, together with the
Exhibits 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.
9.11 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.
9.12 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.
9.13 Exhibits. Any waiver given one time by either party of any of the
terms or conditions of this agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of any
subsequent breach thereof.
9.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which taken
together shall constitute one and the same Agreement. A telecopy of an original
signature shall be deemed an original signature.
PAGE>
IN WITNESS WHEREOF, duly authorized representatives of the parties have
executed this Agreement as of the date first written above:
HealthGate Data Corp. AHN PARTNERS, L.P.
By: America's Health Network, Inc.
Its Managing General Partner
By: /s/ William S. Reece By: /s/ J. Tod Fetherling
-------------------------------- --------------------------------
Name: William S. Reece Name: J. Tod Fetherling
Title: Chief Executive Officer Title: President, AHN COM
<PAGE>
EXHIBIT 10.23
HYPERLINK AGREEMENT
This Agreement dated as of May 29,1996 is by and between the American Medical
Association ("AMA") 515 North State Street, Chicago, Illinois 60610 and
HealthGate Data Corp. ("HealthGate") 380 Pleasant Street, Suite 230, Malden,
Massachusetts 02148.
The parties agree as follows:
1. Definitions:
a. "Internet" The worldwide network of computers commonly referred to as
the Internet.
b. "Hyperlink" The mechanism on the WWW by which a user at one WWW site
can automatically move to another WWW site and other sites on the
Internet.
c. "Web Site" The specific area within the Internet that is developed,
created by each of the parties hereto.
d. "WWW" The specific part of the Internet commonly referred to as the
world wide web, which contains among other things, documents written in
HTML and from which a world wide web document can provide Links to other
documents or sites on the Internet.
2) Hyperlink.
a. HealthGate agrees to allow the AMA to provide a Hyperlink from
its Web Site to the following databases ("Databases") currently available
at HealthGate's Web Site only to registered users of the HealthGate site
on a paid basis subject to the terms and conditions set forth in this
Agreement:
AIDSLINE(R): a compilation of citations and abstracts in the HIV/AIDS
literature.
AIDSDRUGS: a listing of drugs being tested for treatment of HIV/AIDS.
AIDSTRIALS: a listing of clinical trials of drugs to treat HIV and
AIDS-related conditions.
BIOETHICSLINE(R): a compilation of citations and abstracts in the
bioethics literature.
The parties acknowledge and agree that the Databases will be available to
users of the AMA Web Site ("Users") on a free basis and without the
requirement of registering with HealthGate. Users shall have unrestricted
unlimited opportunity to search and download selections from the Databases
<PAGE>
b. The Databases shall be accessible to Users via the Hyperlink
seven (7) days a week twenty-four (24) hours a day except for regularly
scheduled maintenance, notice of which shall be provided to the AMA 45
days prior to such scheduled maintenance, or when HealthGate is unable to
provide access for reasons beyond HealthGate's control. In the event
technical problems impede Users' access to or use of the Databases, or in
AMA's opinion, access and use processes are unsatisfactory, the AMA may
terminate this Agreement by notice to HealthGate effective as of the end
of the month during which notice is given.
c. The AMA agrees to cooperate with HealthGate to develop mutually
acceptable language explaining to Users of the Databases how access to the
Databases works and through whom.
3) Fees. The AMA agrees to pay to HealthGate an initial fee if $8000 due upon
the execution of this Agreement. Subsequent fees in the amount of $2667.00 shall
be due on invoice the first day of September and each month thereafter during
the term of this Agreement for a total amount of $18,668.00. In the event that
HealthGate is unable to provide access to the AMA for the use of the Databases
for a period of 24 consecutive hours due to HealthGate's server being down
(other than for regularly scheduled maintenance) the AMA shall be entitled to a
pro-rata rebate of its monthly fee in the amount of $88.88 for each twenty-four
hour period the Hyperlink is not available to the AMA due to technical
difficulties experienced by HealthGate. The monthly fee shall be prorated with
respect to any month during which the Hyperlink is provided for less than the
complete month.
4) Term. The initial term of this Agreement shall begin June 1, 1996, and
continue through December 31,1996 unless earlier terminated by the AMA. The AMA
may terminate this Agreement without cause on thirty days written notice to
HealthGate. HealthGate acknowledges that the AMA relies upon third party funding
for the fees due under this Agreement
5) Use. The parties to this Agreement agree to cooperate with each other to
assure that all necessary copyright and intellectual property rights to and in
the Databases are properly acknowledged and that the users of the AMA Web Site
who Hyperlink to the Databases will be informed of any restrictions placed on
the reproduction, retransmission or other use of the Databases by the National
Library of Medicine or HealthGate. HealthGate represents and warrants that use
of the Databases in compliance with any such restrictions will not infringe upon
any statutory or common law rights of any third person.
6) Obligations of HealthGate. HealthGate represents and warrants that it has a
license to use the Databases and to provide access to the Databases as provided
herein and that it will use its best efforts to maintain such license in the
future. HealthGate agrees to maintain the quality, integrity and functionality
of its search engine and Web interface such that Users are able to access and
use the Databases as easily through AMA's Web Site as by directly accessing and
using HealthGate's Web Site. Unless the parties agree otherwise under separate
technical agreement, HealthGate is not responsible for maintaining the Hyperlink
between the AMA Web Site and the HealthGate Web Site
2
<PAGE>
insofar as technical problems interrupting such link are the fault of the AMA.
The parties acknowledge that due to traffic on the Internet and the WWW that
neither party can guarantee the availability, speed or access of the Hyperlink
between the parties' respective Web Sites.
7) Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Illinois, excluding the
body of law known as conflicts law.
The parties each have caused a duly authorized officer to execute this Agreement
on its behalf as set forth.
American Medical Association HealthGate Data Corp.
By: /s/ J.T. Rappel By: /s/ Rick Lawson
------------------------ -----------------------
RICK LAWSON
Executive Vice-President
3
<PAGE>
EXHIBIT 10.24
Standard Distribution Agreement
Original Equipment Manufacturer (OEM)
THIS AGREEMENT is entered into as of the 3rd 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 Greenberg News Networks Inc. ("Greenberg") a Delaware
corporation, having an address at 1175 Peachtree St. N.E., Colony Square 100,
Suite 2400, Atlanta, GA 30361 (hereinafter referred to as "OEM").
WITNESSETH:
WHEREAS, OEM owns, operates or makes available, alone or in combination
with others, interactive information, communication and transactional services
(whether presently existing or hereafter developed referred to herein as the
"OEM Services"); and
WHEREAS, OEM has developed a telecommunications service called Medcast
Networks. Medcast Networks is a news and information service for physicians and
other healthcare providers distributed to subscribers' desktops via the
Internet.
WHEREAS, HealthGate offers 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"); and any other URLs that HealthGate registers.
WHEREAS, OEM and HealthGate wish to enter into an agreement providing for
certain of HealthGate's databases to be embedded into an internet site
environment accessible to certain users of the OEM Services as described
herein (the "Co-Branded Site").
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. OEM Site; Links to HealthGate Site; Authorized Users
1.1 OEM Site. OEM shall design, develop, maintain and host an internet
site (the "Co-Branded Site") of OEM's services and products with links
accessible only to Authorized Users (as defined in Section 1.2 below) to the
Products (as defined in Section 2.1 below) on HealthGate's Site.
1.2 Authorized Users. For the purposes of this Agreement, "Authorized
User" shall mean an individual, registered user of OEM's Services who is a
natural person and who registered for or has accessed OEM's services through an
individual personal computer. Without limiting the generality of the foregoing:
(i) institutions, companies, corporations or other entities are not Authorized
Users, and (ii) persons who access OEM's Services through an institution,
company, corporation or other entity either through such entity's intranet or
internet access pursuant to a corporate, company or institutional agreement with
the OEM are
<PAGE>
not Authorized Users. Notwithstanding the foregoing exclusions, a person who
accesses OEM's Services and has a separate individual registration
identification, has a separate individual user agreement with OEM and who pays
for OEM's Services individually (and not through an institution, company,
corporation or other entity) may be an Authorized User.
1.3 Links to HealthGate Site; Interactions between Sites. HealthGate will
accept queries posed by an Authorized User on the Co-Branded Site 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 design. The Co-Branded Site shall contain prominent
reference to HealthGate and prominently feature HealthGate's logo in a manner to
be approved by HealthGate.
II. Products on the Co-Branded Site
2.1 HealthGate Products. OEM Authorized Users shall have access via the
Co-Branded Site to the databases listed on Schedule A attached hereto (the
"Products").
2.2 Exclusivity. OEM agrees that during the term of this agreement it
shall not provide links, access, or in any other way provide access from its
site to any other entity's products or. services that are similar in nature to
those of HealthGate Products other than through HealthGate.
III. Fees
3.1 License Fees. OEM agrees to pay to HealthGate a monthly License Fee as
set forth in Schedule A.
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.
3.4 Late Fees. All late fee payments shall accrue interest at the rate of
twelve percent (12%) per annum.
IV. Term and Termination
<PAGE>
4.1 Term. This Agreement shall be effective on June 15, 1998, and shall
continue in effect until June 14, 1999 (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 thirty (30) 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 (A) ten (10) days following
receipt of the Termination Notice in the case of a breach relating to a payment
due hereunder or (B) thirty (30) days following receipt of the Termination
Notice for all other non-payment breaches. 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, OEM will delete all Links to the Co-Branded Site from the OEM Service
and any of its menus, listings or directories and, within thirty (30) business
days of such termination, both parties will destroy advertising or promotional
materials, if any, containing any reference to the other party or their
products.
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 Site, OEM
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. OEM recognizes and acknowledges that HealthGate
<PAGE>
Trademarks have acquired a secondary meaning and are associated with high
quality services and products available from HealthGate. Accordingly, any use of
any HealthGate Trademark pursuant to this Agreement by OEM or the Co-Branded
Site shall be subject to HealthGate's approval, which HealthGate may deny or
revoke at any time if in HealthGate's sole judgment such use in not consistent
with the goodwill otherwise associated with the HealthGate Trademarks.
OEM acknowledges and agrees that each HealthGate Trademark is and will
remain the exclusive property of HealthGate and all use by the Co-Branded Site
or OEM 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 OEM nor the Co-Branded Site of any rights in or to any
HealthGate Trademark, except for the limited rights expressly granted under this
Agreement. OEM 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 Site, which
contains any HealthGate Trademark, shall be subject to review and approval by
HealthGate (which approval shall not be unreasonably withheld).
5.2 Notwithstanding the limited right to use OEM's name, logo and other
marks created or utilized by OEM (collectively the "OEM's Trademarks") on the
Co-Branded Site, HealthGate recognizes and acknowledges OEM is the sole owner of
the OEM Trademarks and all rights therein and the goodwill pertaining thereto
belong exclusively to OEM. HealthGate recognizes and acknowledges that OEM
Trademarks have acquired a secondary meaning and are associated with high
quality services and products available from OEM. Accordingly, any use of any
OEM Trademark pursuant to this Agreement by HealthGate or the Co-Branded Site
shall be subject to OEM's approval, which OEM may deny or revoke at any time if
in OEM's sole judgment such use in not consistent with the goodwill otherwise
associated with the OEM Trademarks.
HealthGate acknowledges and agrees that each OEM Trademark is and will
remain the exclusive property of OEM and all use by the Co-Branded Site or
HealthGate of any OEM Trademark will inure solely to the benefit of OEM. Neither
this Agreement nor any rights granted hereunder will operate as a transfer to
HealthGate nor the Co-Branded Site of any rights in or to any OEM Trademark,
except for the limited rights expressly granted under this Agreement. HealthGate
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 OEM Trademark.
All advertising and promotional material for the Co-Branded Site, which
contains any
<PAGE>
OEM Trademark, shall be subject to review and approval by OEM (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 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 OEM, HealthGate shall, at its own expense, comply with any
laws relating to the sale, lease, or license of the Products, and shall procure
all licenses and pay all fees and other charges required thereby.
6.3 OEM Representations and Warranties. OEM represents and warrants that
it has the right to enter into this Agreement.
6.4 Compliance With Laws; Prohibition on Resale and Relicensing of
Products. OEM shall require each of its customers and users to limit its actions
and use of the Products under the subscriber agreement (or similar agreement,
contract or arrangement) between OEM and its customer or user, 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. Users of the Co-Branded Site shall
be prohibited from reselling or re-licensing the Products or any portion thereof
without the express written consent of OEM and HealthGate (which consent may be
withheld for any reason or for no reason). OEM shall be responsible for
enforcing this prohibition and having appropriate written limitations of the use
of the Products with all its customers or other users of the Co-Branded Site.
OEM shall have all Authorized Users register with OEM in a manner acceptable to
HealthGate and such registration information shall be available for review by
HealthGate upon written request.
VII. Administrators; Contact Persons.
7.1 Administrators. The parties each hereby designate an Administrator to
receive notices, and any other contact between parties pursuant to this
Agreement.
<PAGE>
HealthGate's Administrator is:
Jean Maguire
HealthGate Data Corp.
380 Pleasant Street, Suite 230
Malden, MA 02148
1-781-321-6000 x201
(voice) 1-781-321-2262 (fax)
[email protected] (electronic mail)
OEM's Administrator is:
Thomas G. Lombardo
Editor-in-Chief
GNN/Medcast
1175 Peachtree St. N.E.
Colony Square 100 Suite 2400
Atlanta, GA 30361
404-266-8500 ext. 3011 (voice)
404-266-3999 (fax)
[email protected] (electronic mail)
Either party may change its Administrator pursuant to written notice to
the other party containing an express reference to this Agreement.
VIII. DISPUTE RESOLUTION
8.1 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.
8.2 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.
<PAGE>
8.3 Injunctive Relief. OEM and CUSTOMER each acknowledge 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 will suffer irreparable damage and injury. Therefore, in
addition to any other remedy available, OEM 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 injunctive relief by a court of competent jurisdiction.
IX. Miscellaneous
9.1 Confidential Information. Unless otherwise agreed to in a 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 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.
9.2 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 OEM for damages exceeding the amounts paid by
OEM 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, OEM's remedy shall be limited to an
abatement of that portion of the monthly License Fee attributable to the period
of time of which the HealthGate Site is unavailable or not functioning.
9.3. 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 Site.
9.4 Independent Contractor. HealthGate and OEM are and shall remain
independent contractors with respect to all work completed pursuant to the
Agreement.
9.5 No Assignment. OEM may not sell, transfer, assign, or subcontract, any
right or obligation set forth in this Agreement without the express advance
written consent of HealthGate.
9.6 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
<PAGE>
party in exercising any right, power, or remedy will operate as a waiver of any
such right, power, or remedy.
9.7 Third Party Rights. This Agreement is not intended and shall not be
construed to create any rights for any third party.
9.8 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.
9.9 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.
9.10 Entire Agreement; Severability. This Agreement, together with the
Exhibits 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.
9.11 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.
9.12 Cautions & 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.
<PAGE>
IN WITNESS WHEREOF, duly authorized representatives of the parties have executed
this Agreement as of the date first written above:
HealthGate Data Corp. Greenberg News Networks
By: /s/ William S. Reece By: /s/ Thomas G. Lombardo
-------------------------- -----------------------------
Name: William S. Reece Name: THOMAS G. LOMBARDO
Title: Chief Executive Officer Title: EDITOR-IN-CHIEF
<PAGE>
EXHIBIT 10.25
Confidential Information
October 30, 1997
Mr. Jeff Arnold
Chairman and Chief Executive Officer
Endeavor Technologies, Inc.
1100 Lake Hearn Drive, Suite 370
Atlanta, GA 30342-1524
Dear Mr. Arnold:
This letter sets forth our agreement for creating and hosting a web site for
your company:
1. Host Web Site. HealthGate will design, develop, and host Endeavor's
healthcare Internet initiative, currently know as the EPIC Web Site,
establishing links, as reasonably defined by Endeavor, to the Premiere
site (for the Virtual Receptionist) or other applicable sites. Hosting
includes maintaining appropriate bandwidth, storage space, and access
speed to insure timely access to information. Endeavor and HealthGate
agree to cooperate on the design of the Web Site. The EPIC Web Site will
be released on January 1, 1998, pending the cooperation of both parties in
fulfilling the terms of this letter agreement. In the event that Endeavor
wishes to move its web site from HealthGate's server, Endeavor shall give
HealthGate 30 days written notice of such move. HealthGate agrees to
provide to Endeavor one copy of Endeavor's web site on magnetic tape and
will cooperate with Endeavor in moving its site. In the event that
Endeavor elects to move its site from HealthGate's server, Endeavor shall
not be entitled to a rebate of any of the fees set forth in paragraph 7 of
this Letter Agreement.
2. Private Label. HealthGate will provide private label access for clients of
EPIC to the following content sources and/or services: MEDLINE, AIDSLINE,
AIDSDRUGS, AIDSTRIALS, HealthSTAR, Medical Software Reviews, DPH:
Diagnostic Procedures, DIH: Drug Information (or US Pharmacopoeia), EMBASE
Cardiology Consultant, Reuters Medical News, BIOETHICSLINE, CANCERLIT,
Healthy Eating, Healthy Man, Healthy Woman, Healthy Sexuality, Healthy
Parenting, Wellness Center family, Detwiler Directory, MDX Health Digest,
and AgeLine. Access will be provided via the EPIC Web Site hosted by
HealthGate.
3. EPIC2 Service. HealthGate will host the EPIC2 Web Site for Endeavor. EPIC2
will provide links to non-medical content sources available elsewhere on
the Web, such as stock quotes, sports, news, etc. Endeavor will contact
and negotiate contractual terms with the providers of these services. All
royalty fees for these services will be the responsibility of Endeavor.
HealthGate agrees to maintain, update, and serve as technical contact with
the content providers for all EPIC2 services. In Year 1, HealthGate shall
recommend methods to insure that the look and feel of each of the services
in EPIC2 retains the look and feel of the EPIC site. Such methods may
include linking to the content on the provider's site and utilizing frames
around the information. HealthGate shall also provide usage statistics to
Endeavor for the EPIC2 service so that both parties can evaluate whether
or not content on EPIC2 should be loaded locally on the EPIC Web Site
hosted by HealthGate. Such usage statistics require the cooperation of the
EPIC2 content providers. HealthGate further agrees to recommend to
Endeavor content sources that may be appropriate for inclusion in EPIC2.
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<PAGE>
Confidential Information
Endeavor agrees to include HealthGate in discussions with prospective
EPIC2 content providers to insure compatibility with the EPIC2 Web Site.
HealthGate will have the option of providing access to EPIC2 to the
customers of its Web Site located at www.healthgate.com in exchange for
fees, which shall be mutually agreed upon.
4. Topics; ReADER Search Engine. HealthGate will create "Topics," and subject
areas within each Topic, on subjects of interest to target markets.
Endeavor will assist HealthGate to identify potential Topics. HealthGate
will create the Topics, the subjects found within, maintain the areas, and
update the Topics on a regular basis. Topics do not require that the user
search a database, but present the user with current information on
subjects of interest to the target markets. The user will then link to
more detailed information on each subject from each Topic. In addition to
Topics, the option to search all content sources, utilizing HealthGate's
ReADER technology, will be provided.
5. Awareness Service. HealthGate will create a current awareness service for
clients of EPIC, alerting all registered users that new information has
been added to Topics of interest. HealthGate and Endeavor agree to work
jointly on developing the screens and interface necessary to deliver this
information to EPIC users. All technical work will be performed by
HealthGate.
6. Statistics. HealthGate agrees to provide usage statistics for both EPIC
and EPIC2 to Endeavor for the purposes of evaluation. Statistics shall
include that information reasonably required by Endeavor for registration,
such as zip code, name, institution, state, etc. HealthGate shall also
provide, when requested by Endeavor, information collected (when possible)
on the Internet domain from which the user reaches EPIC (i.e. America
Online, ISP, CompuServe, etc.), type of browser used by the customer, type
of computer and operating system used by Customer, and breakdowns on
adverting banners and click-through to advertiser by Customer.
7. Fees and Expenses. Endeavor will remit to HealthGate a fee of $375,000 in
Year 1 to partially cover the costs of the tasks noted in 1, 2, 3, 4, 5,
and 6 above, which includes developing, maintaining, and providing access
to the EPIC site and to partially cover the costs of providing access to
the private-labeled content. HealthGate's fees to the content providers
for the services noted in paragraph 2 above are a combination of flat rate
subscription models and variable costs. HealthGate agrees that, for the
content sources noted in paragraph, HealthGate shall be responsible for
all royalty payments to content providers, even if royalty payments exceed
the fees noted here. HealthGate reserves the right to replace any of these
content sources with a comparable source if HealthGate should lose the
right to offer the source from the provider or there is a substantial
increase in licensing fees. The fee for Year 1 shall be payable in two
equal payments: 50% at signing of the contract and 50% upon release of the
EPIC site. The fee in Year 2 will be $281,250, payable in two equal
payments: 50% at one year from signing of the contract and 50% within 60
days thereafter.
8. Additional Topics; Transaction Services and Customized Content
Development.
(a) Additional Topics. Additional Topics may be created and added to the
Web Site upon mutual agreement of the parties.
2
<PAGE>
Confidential Information
(b) Transaction Services. HealthGate will make available to EPIC users, on
either a subscription or Transaction basis, other services not available
as part of the free EPIC service. Endeavor will receive 20% of the charge
to the user collected by HealthGate for these services. The initial annual
fees for such content sources, which may be modified from time to time,
are estimated to be as follows:
EMBASE Anesthesiology Consultant $1.50 each reference
EMBASE Drugs and Pharmacology Consultant $1.50 each reference
EMBASE Gastroenterology Consultant $1.50 each reference
EMBASE Immunology and AIDS Consultant $1.50 each reference
EMBASE Nephrology Consultant $1.50 each reference
EMBASE Neurosciences Consultant $1.50 each reference
EMBASE Obstetrics and Gynecology Consultant $1.50 each reference
EMBASE Pathology Consultant $1.50 each reference
EMBASE Pediatrics Consultant $1.50 each reference
EMBASE Psychiatry Consultant $1.50 each reference
EMBASE Radiology and Nuclear Medicine Consultant $1.50 each reference
PsycINFO $0.75 each reference
Complete Guide to Medical Tests $2.00 each reference
Complete Guide to Pediatric Symptoms, Illness &
Medications $2.00 each reference
Complete Guide to Prescription and
Non-Prescription Drugs $2.00 each reference
Complete Guide to Sports Injuries $2.00 each reference
Complete Guide to Symptoms, Illness & Surgery $2.00 each reference
Drugs, Health and Nutrition During Pregnancy $2.00 each reference
New Our Bodies, Ourselves $29.95 annually
Vitamins, Minerals, Herbs and Dietary Supplements $2.00 each reference
Well-Connected Consumer Health Reports $2.00 each reference
HealthGate agrees to provide Endeavor, when possible, with unlimited price
quotes for the above sources currently available via transaction only.
Endeavor and HealthGate agree that there is no guarantee that an unlimited
price for these content sources will be made available.
HealthGate agrees to provide Endeavor with transaction fee based access to
Continuing Medical Education (CME) programs. HealthGate agrees to provide
Endeavor, when possible, with unlimited price quotes for the CME programs
for use by EPIC users. Endeavor and HealthGate agree that there is no
guarantee that an unlimited price for CME programs will be made available.
Endeavor and HealthGate further agree that HealthGate may not offer CME
programs via private label at this time.
Other content sources available from HealthGate may be added from time to
time upon mutual agreement of the parties.
(c) Customized Customer Content. HealthGate shall add content sources not
available from HealthGate to EPIC upon Endeavor's payment of integration
and licensing fees. Endeavor shall negotiate the rights for such services
and be responsible for any licensing or royalty fees associated with said
content. Outside consultants may be used upon mutual agreement of the
parties.
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9. Discussion Groups; Chat Rooms. HealthGate agrees to provide the ability
for EPIC users to participate in either discussion groups or in Chat
sessions. HealthGate further agrees to provide Endeavor with
recommendations on the type of service to be offered based upon the
requirements set forth by Endeavor. The fees to Endeavor for partially
covering the costs of offering discussion groups are as follows: 1)
software, set-up, and development: $4,000; 2) annual maintenance for each
discussion group: $2,000. The fees to Endeavor for partially covering the
costs of offering Chat sessions are as follows: 1) software, set-up, and
development: $10,000; 2) annual maintenance for each Chat Room: $2,500.
Endeavor shall be solely responsible for monitoring each chat room and
assuring compliance by users with the terms of use established for such
Chat Room.
10. Advertising; Sponsorship. HealthGate agrees to provide Endeavor with space
available advertising, at no cost, on the HealthGate site to promote
Endeavor's telecommunications products. Either party will have the ability
to place advertising or sponsorship on the EPIC site. All advertising and
sponsorship revenue (collectively called 'advertising') associated with
the EPIC site, regardless of the party who places the advertising, will be
split as follows: Endeavor will receive 80% of all advertising revenue,
after expenses which shall not exceed 25%, until Endeavor recovers the
fees noted in 7 above. After Endeavor reaches this level of advertising
revenue, all future advertising revenue will be split as follows: the
party placing the advertising will receive 60% of the revenue after
expenses, which shall not exceed 25%, with the other party receiving 40%.
Endeavor will retain the right to approve any advertising placed by
HealthGate on the EPIC service. Both parties agree to renegotiate the
split on advertising revenue at the end of Year 1.
11. Act as Reseller; Intranets. Endeavor shall have the option of reselling to
hospital and/or institutional clients, the right to access various content
sources available through HealthGate. Each hospital and institutional
client shall be defined as a single site. The initial annual fees for such
content sources are estimated to be as follows:
Databases ([C] denotes Consumer oriented content)
Currently Available
AgeLine $3,000
AIDSDRUGS $1,000
AIDSLINE $3,000
AIDSTRIALS $1,000
BIOETHICSLINE $3,000
CANCERLIT $5,000
Detwiler's Directory of Health and Medical
Resources $5,000
EMBASE Anesthesiology Consultant In Negotiation
EMBASE Cardiology Consultant $35,000 - $40,000
estimated
EMBASE Drugs and Pharmacology Consultant In Negotiation
EMBASE Gastroenterology Consultant In Negotiation
EMBASE Immunology and AIDS Consultant In Negotiation
EMBASE Nephrology Consultant In Negotiation
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EMBASE Neurosciences Consultant In Negotiation
EMBASE Obstetrics and Gynecology Consultant In Negotiation
EMBASE Pathology Consultant In Negotiation
EMBASE Pediatrics Consultant In Negotiation
EMBASE Psychiatry Consultant In Negotiation
EMBASE Radiology and Nuclear Medicine
Consultant In Negotiation
HealthSTAR $3,000
MDX Health Digest [C] $3,000
MEDLINE $21,000
PsycINFO In Negotiation
In Development
CINAHL $5,000
HCIA Cost Report Database $15,000
HCIA DRG Summary Database $15,000
HCIA Health Care Professionals Database $15,000
HCIA Managed Care Database [C] $15,000
HCIA Medical Rehabilitation Facilities
Database [C] $15,000
HCIA National Inpatient Profile Database In Negotiation
HCIA National Link Study In Negotiation
HCIA National Outpatient Profile Database In Negotiation
HCIA Nursing Home Database [C] $15,000
HCIA Retirement Facilities Database [C] $15,000
Full-Text Information Sources
Complete Guide to Medical Tests [C] $3,000
Complete Guide to Pediatric Symptoms, Illness
& Medications [C] $3,000
Complete Guide to Prescription and
Non-Prescription Drugs [C] $3,000
Complete Guide to Sports Injuries [C] $3,000
Complete Guide to Symptoms, Illness &
Surgery [C] $3,000
DPH: Diagnostic Procedures $10,000 estimated
DIH: Drug Information $30,000 estimated
Drugs, Health and Nutrition During Pregnancy [C] $3,000
HealthGate Healthy Eating [C] $12,000
HealthGate Healthy Parenting [C] $12,000
HealthGate Healthy Man [C] $12,000
HealthGate Healthy Sexuality [C] $12,000
HealthGate Healthy Woman [C] $12,000
Medical Software Reviews $12,000
New Our Bodies, Ourselves [C] $3,000
Vitamins, Minerals, Herbs and Dietary
Supplements [C] $3,000
Well-Connected Consumer Health Reports [C] $9,000
In Development
Adult Health Advisor [C] $12,500
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Behavioral Health Advisor [C] $12,500
Pediatric Advisor [C] $12,500
Senior Health Advisor [C] $12,500
Women's Health Advisor [C] $12,500
12. Corporate Accounts. Endeavor shall have the option of reselling to
corporations, as Corporate Wellness Programs, the following packages on a
per member per month basis. HealthGate and Endeavor agree to establish a
per member per month pricing schedule for different sized corporations.
The contents of each program and the initial annual minimum fees per
Corporate Wellness Program for each package are estimated to be as
follows:
Package 1: $5,000
HealthGate Wellness Centers
Healthy Eating
Healthy Man
Healthy Parenting
Healthy Sexuality
Healthy Woman
MEDLINE
Package 2: $30,000
Package 1, plus
Complete Guide to Medical Tests
Complete Guide to Pediatric Symptoms, Illness & Medications
Complete Guide to Prescription and Non-Prescription Drugs
Complete Guide to Sports Injuries
Complete Guide to Symptoms, Illness & Surgery
Drugs, Health and Nutrition During Pregnancy
MEDLINE
New Our Bodies, Ourselves
Vitamins, Minerals, Herbs and Dietary Supplements
MDX Health Digest
Package 3: $95,000
Package 2, plus
Adult Health Advisor
Behavioral Health Advisor
Pediatric Advisor
Senior Health Advisor
Women's Health Advisor
CANCERLIT
HCIA Managed Care Database
HCIA Medical Rehabilitation Facilities Database
HCIA Nursing Home Database
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HCIA Retirement Facilities Database
13. New Business; Commission Rates. For all new business that either party
brings to the other party, the referring party will receive a fee of 20%
of the final negotiated price for the first year. For example, if Endeavor
brings to HealthGate a hosting contract for a third party or a content
sale, Endeavor would receive 20% of the final negotiated sale price
between HealthGate and the third party. Payment of commissions will be
made only out of funds received in excess of 80% of billed revenues.
14. Non-competition. In the event that HealthGate is acquired by a direct
competitor of Endeavor as such term is mutually agreed upon by the parties
and set forth on Exhibit A, which may be amended by mutual agreement of
the parties from time to time, to this Letter Agreement, then Endeavor may
upon 180 days written notice to HealthGate terminate all agreements
between the parties. In the event of such a termination, all parties will
reasonably cooperate with the other in transferring the software and
operations to Endeavor (provided HealthGate shall not be obligated to
transfer any hardware to Endeavor, or any software not exclusively
developed for Endeavor). In the event that specific software is developed
exclusively for Endeavor by HealthGate for use on the EPIC site and paid
for by Endeavor at HealthGate's normal consulting rates, both parties
agree to negotiate a license fee to allow HealthGate to use said software
in other applications. If HealthGate and Endeavor can not mutually agree
upon a reasonable price such matter shall be subject to arbitration.
15. Non-solicitation of Customers and Employees. Each party agrees during the
term of this Letter Agreement and further agrees that for a period of one
(1) year after its termination, it shall not directly or indirectly:
(i) Make known to any person, firm or corporation the names and
addresses of any of the customers of the other party or any
other information pertaining to them.
(ii) Solicit any customer of the other party for the purpose of
providing a service or product which is the same type of
service or product offered by the other party, or provide such
a product or service to any party which has been a customer of
the other party within the past 12 months, provided, however,
either party's advertising, general promotion, or direct mail
shall not be a violation of this provision. These
non-solicitation and non-competition restrictions shall not
apply if, and to the extent that, either party exits the
market for a particular product or service.
(iii) Solicit for employment or assist others in employing, any
individual who is an employee of the other party, for the
purpose of providing services that are the same or similar to
the types of services offered or provided by the other party.
16. Intellectual Property Rights; Royalty-Free Licenses. Except for those
rights and interests specifically provided for in this Letter Agreement,
HealthGate retains all right, title and interest in and to the Information
and all other material and property of HealthGate provided to
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Endeavor under this Letter Agreement. To the extent that HealthGate
provides to Endeavor any software, HealthGate agrees to provide Endeavor
with a royalty-free non-exclusive license in perpetuity to use the
Software, in machine-readable object code, solely for Endeavor's business
purposes and not for sale or commercial distribution. Endeavor shall have
the right to reproduce for internal use all of the Software and
Documentation provided to it by HealthGate subject to the restrictions on
use and disclosure set forth in this Letter Agreement. HealthGate shall
provide to Licensee one copy of the Software, in machine-readable object
code, solely for Endeavor's use. Licensee shall not have the right to
receive or use the source code of the Software.
17. Confidentiality. With respect to Confidential Information the parties
agree as follows:
(a) "Confidential Information" shall mean any information, data or
materials obtained by one party (the "Receiving Party"" from, or
disclosed to such party by, the other party, or its customers (the
"Disclosing Party"), which information, data or materials relate to
the past, present or future business activities of the Disclosing
Party, or any of its subsidiaries, affiliates or customers,
including methods, processes, strategies, financial data and
projections, customer names, account numbers and customer data.
"Customer Information" shall not include, however, such information
as:
(i) is previously known to the Receiving Party, free of any
obligation to keep it confidential;
(ii) was in the public domain prior to disclosure to the Receiving
Party, or which after such disclosure comes into the public
domain through no fault of the Receiving Party.
(iii) is lawfully obtained by the Receiving Party from a third party
who, in making such disclosure, breaches no obligation or
confidence; or is independently developed by the Receiving
Party without substantial effort and expense.
(b) Restrictions
(i) Receiving Party shall not disclose any Confidential Information
to third parties for two (2) years following the date of its
disclosure by Disclosing Party to Receiving Party, except to
Receiving Party's consultants as provided below. However, Receiving
Party may disclose Confidential Information in accordance with a
judicial or governmental order, provided Receiving Party shall give
Disclosing Party reasonable notice prior to such disclosure and
shall comply with any applicable protective order or equivalent.
(ii) Receiving Party shall take reasonable security precautions, as
least as great as the precautions it takes to protect its own
confidential information, to keep confidential the Confidential
Information. Receiving Party may disclose Confidential Information
only to Receiving Party's employees or consultants on a need-to-know
basis. Receiving Party will have executed or shall execute
appropriate written agreements with its employees and consultants
sufficient to enable it to comply with the provisions of this
Agreement.
(iii) Confidential Information may be disclosed, reproduced,
summarized or distributed only in pursuance of Receiving Party's
business relationship with Disclosing Party and only
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Confidential Information
as otherwise provided hereunder. Receiving Party agrees to segregate
all such Confidential Information from confidential materials of
others to avoid commingling.
(iv) Receiving Party may not reverse engineer, de-compile or
dissemble any software disclosed to Receiving Party.
18. Warranty
(a) HealthGate hereby warrants that the Information contained currently on
the HealthGate web site or to be procured by HealthGate for its use and
provided on the EPIC site ("Information") does not infringe any copyright
or other right of third parties. In the event of a breach of the foregoing
warranty, HealthGate agrees to indemnify, defend and hold harmless
Endeavor and its customers from and against any and all claims, actions,
losses, damages, and expenses, including reasonable attorneys' fees,
arising from any claim that any Information furnished by HealthGate
hereunder constitutes an infringement of any copyright or other
intellectual property right.
(b) HealthGate warrants that the EPIC site will be managed to the same
standards and quality of service that HealthGate manages its own site
located at www.healthgate.com. The HealthGate site is currently available
greater than 98% of available up-time, excluding regularly scheduled
maintenance.
(c) HEALTHGATE WARRANTS THAT THE INFORMATION, AND OTHER MATERIALS
FURNISHED UNDER THIS LETTER AGREEMENT, ARE FORMULATED WITH A REASONABLE
STANDARD OF CARE AND IN CONFORMANCE WITH PROFESSIONAL STANDARDS. HOWEVER,
BOTH PARTIES AGREE THAT HEALTHGATE HAS NOT AND WILL NOT INDEPENDENTLY
VERIFY ANY OF THE INFORMATION PROVIDED TO IT BY ITS LICENSORS AND
THEREFORE IT IS NOT RESPONSIBLE FOR ANY INACCURACIES OR OMISSIONS IN SUCH
INFORMATION. ACCORDINGLY, HEALTHGATE, ITS AFFILIATES, AND AGENTS CANNOT
AND DO NOT WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY OF THE
INFORMATION AVAILABLE ON HEALTHGATE OR ANY OTHER INFORMATION WHICH IS
REFERENCED OR LINKED TO ANY WEB SITE.
(d) Endeavor warrants that each of its customers shall have entered into
an agreement which provides that the customer shall not duplicate in hard
copy or machine readable form the Information, except that the Information
may be duplicated for the internal use of the customer. Endeavor further
represents and warrants that it has taken those commercially accepted
steps as may be reasonable and prudent to protect the Information and
HealthGate from use by third parties who attempt to gain access via the
Internet without subscribing to HealthGate including firewall and password
protection. In no event shall Endeavor be liable to any party for
unauthorized access to the Information or HealthGate in the event such
access could not have been reasonably foreseen by Endeavor.
19. Indemnity
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(a) Each party agrees to indemnify, defend and hold harmless the other
party and its successors, officers, directors, employees and assigns from
and against any and all actions, causes of action, claims, demands, costs,
liabilities, expenses (including reasonable attorneys' fees) and damages
("Liabilities") resulting from the indemnifying party's material breach of
any duty, representation or warranty of this Agreement except where
Liabilities result from the gross negligence or willful misconduct of the
other party.
(b) If either party requests indemnification pursuant to this paragraph
("requesting party"), it will give notice to the other party from which
indemnification is requested ("requested party") promptly after the
receipt of any claim that may be indemnifiable hereunder and afford the
requested party the opportunity to control the defense and approve any
compromise, settlement, litigation or other resolution or other
disposition of such claim except that the requesting party will have
reasonable approval as to any settlement. The requesting party agrees to
cooperate fully with the requested party at the requested party's expense
in defending or settling any claim.
20. Effective Date. This Letter Agreement shall become effective as of the
date first written above and shall remain in effect for a period of two
years ("Initial Term") unless it is canceled by either party. This
Agreement shall be automatically renewed on an annual basis thereafter
unless one party advises the other in writing at the address first
mentioned above by registered mail at least 180 days prior to the end of
the Initial Term or any renewal period that it elects not to renew this
Agreement, or wishes to renegotiate the terms of this Agreement.
21. Cancellation Either party shall be entitled to cancel this Agreement for
cause by giving notice in writing by registered mail to the other party
that the other party has failed to meet or is apparently unable or
unwilling to meet one or more of the material obligations of this
Agreement. In such a case, the other party will have 30 (thirty) days to
meet the stated obligation(s) and, if it does not do so, this Agreement
will be canceled effective the last day of the 30 (thirty) day period. In
the event this Letter Agreement is terminated in the first year by
Endeavor for other than HealthGate's material breach no refund will be
made of any fee paid under paragraph 7 of this Letter Agreement. After the
first year Endeavor will be entitled to a pro-rata refund of any amounts
paid but not yet due and owed under this Letter Agreement.
22. Post-Termination Activities. Upon termination or cancellation of this
Letter Agreement all obligations and rights under this Letter Agreement
will end on the effective date of the termination or cancellation with the
following exceptions:
(i) Endeavor's EPIC clients shall continue to have private label access
to the content sources and/or services provided by or through
HealthGate hereunder for the entire term for which Endeavor has made
payment for such content and/or services.
(ii) The commissions referred to in paragraphs 8 (b) and 13 shall be
paid; and
(iii) The provisions of paragraphs 14, 15, 16, 17, 18, and 19 shall
survive the termination of this letter agreement.
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23. Force Majeure. Neither party shall be responsible or liable or deemed to
be in default for delays or failures in performance under this Letter
Agreement resulting directly or indirectly from causes beyond the control
of either party in the exercise of reasonable, prudent business practices.
Such causes shall include Acts of God, lockouts, labor actions, riots,
acts of war, epidemics, government regulations subsequently imposed, fire,
earthquakes, or other natural disasters.
24. Entire Agreement, Amendment, No Assignment, Waiver. This Letter Agreement
sets forth the entire understanding of the parties on the subject matter
hereof, and supersedes all previous oral or written representations or
agreements relating to the rights and duties provided for herein, and this
Letter Agreement may not be modified or amended except by written
agreement of the parties. This Letter Agreement is personal to HealthGate,
and HealthGate, shall not without the prior written consent of Endeavor
assign, sub-license, or otherwise transfer this Letter Agreement or any
rights or benefits hereunder to any other person, firm or corporation. The
failure of either party to enforce or exercise, at any time or for any
period of time, any term of this Agreement does not constitute, and shall
not be construed as, a waiver of such term and shall in no way effect that
party's later right to enforce it.
25. Invalidity. The invalidity of individual terms and conditions within this
Letter Agreement shall not result in the invalidity of the whole Letter
Agreement. The parties hereto agree to replace any invalid provision by
some other, being as similar as possible in its economic and/or technical
effects as the original provision.
26. Independent Contractors The relationship of the parties is that of
independent contractors, and no agency, employment, partnership, joint
venture, or any other relationship is created by this Letter Agreement.
27. Notices. Any notice or other communication required or allowed under this
Letter Agreement shall be in writing and delivered by registered mail or
by facsimile. Mailed or transmitted notices shall be sent to the parties
at the addresses set forth above, or to such other address as the parties
may designate by notice given pursuant to this paragraph.
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Very truly yours,
HealthGate Data Corp.
By: /s/ Rick Lawson
------------------------
Rick Lawson
Vice President
Agreed and Accepted:
Endeavor Technologies, Inc.
By: /s/ W. Michael Heekin
------------------------
Name: W. Michael Heekin
----------------------
Title: COO
---------------------
Date: 11/5/97
----------------------
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EXHIBIT 10.26
CONTINUING MEDICAL EDUCATION PROGRAMS
LICENSE AGREEMENT
This agreement ("AGREEMENT") is made as of April 1, 1996 ("EFFECTIVE
DATE") by and between TRUSTEES OF BOSTON UNIVERSITY (hereinafter referred to as
"LICENSOR"), a non-profit corporation duly organized and existing under the laws
of the Commonwealth of Massachusetts, on behalf of its School of Medicine, which
has a principal office at 80 East Concord Street, Boston, Massachusetts 02218
and HealthGate Data Corp. (hereinafter referred to as "LICENSEE"), a corporation
duly organized and existing under the laws of the State of Delaware and having
its principal place of business at 380 Pleasant Street, Suite 230, Malden, MA
02148.
WITNESSETH
WHEREAS, LICENSOR holds the right to license the INFORMATION regarding
CONTINUING MEDICAL EDUCATION PROGRAMS as more fully described herein;
WHEREAS, LICENSOR wishes to make the INFORMATION commercially available
for searching, access, and review by LICENSEE'S CUSTOMERS; and
WHEREAS, LICENSEE wishes to obtain non-exclusive rights to provide online
interactive searching, access, and review of the INFORMATION and supply the
results in electronic form to LICENSEE'S CUSTOMERS; and
WHEREAS, LICENSOR wishes to make it possible for LICENSEE'S CUSTOMERS to
fulfill the requirements for obtaining credit for CME PROGRAMS electronically
and LICENSEE is willing to co-operate in this endeavor;
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NOW, THEREFORE, in consideration of the promises and agreements contained
herein, and for other good and valuable consideration, the receipt of which is
acknowledged by each of the parties hereto, the parties agree as follow:
ARTICLE 1 - DEFINITIONS
1.1 The following terms shall have the following meanings for purposes of this
AGREEMENT:
(a) "AGREEMENT" means the body of this Agreement and all Appendices
hereto, as the same may be amended from time to time in accordance
herewith. The following Appendices are attached hereto:
Appendix 1 - Continuing Medical Education Programs
Appendix 2 - Licensed Marks
Appendix 3 - Financial Arrangements
(b) "CME PROGRAMS" means the Continuing Medical Education Programs
listed in Appendix 1, which Appendix may be amended by LICENSOR from
time to time in its sole discretion by giving written notice thereof
to LICENSEE.
(c) "CUSTOMERS" means those individuals, institutions, and other
organizations who are authorized to gain access to one or more CME
PROGRAMS through LICENSEE.
(d) "INFORMATION" means the CME PROGRAMS, or such portions thereof as
are provided by LICENSOR to LICENSEE.
(e) "LICENSED MARKS" means the name, trademarks, and service marks
specified in Appendix 2, which Appendix may be amended by LICENSOR
from time to time in its sole discretion by giving written notice
thereof to LICENSEE.
(f) "LICENSOR PROPRIETARY INFORMATION" means any and all information
relating to the business of LICENSOR that may be obtained from any
source as a result of this Agreement, and the LICENSED MARKS.
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ARTICLE 2 - GRANT OF LICENSE
2.1 Subject to the terms and conditions set forth herein, LICENSOR grants to
LICENSEE a non-exclusive, non-transferable, worldwide license, hereinafter
referred to as "the LICENSE," to do the following, and LICENSEE agrees
that it shall do the following:
(a) Mount the INFORMATION on its computer facilities (presently located
in Malden, MA);
(b) Provide the INFORMATION in online interactive mode for searching,
access, and review and for printing on paper and displaying on
computer terminals by LICENSEE'S CUSTOMERS;
(c) Provide online access to the INFORMATION to LICENSEE'S CUSTOMERS
through telecommunication links, including, but not limited to
dial-up, the Internet, and leased lines, to its computer facilities;
and
(d) Use the LICENSED MARKS of LICENSOR listed in Appendix 2 solely for
the purpose of performing this AGREEMENT.
2.2 LICENSOR reserves the right to revoke the LICENSE as it applies to any
particular INFORMATION at any time if, in LICENSOR's sole opinion, such
INFORMATION or the related CME PROGRAM is no longer suitable, for any
reason, for use by LICENSEE'S CUSTOMERS, by giving written notice to
LICENSEE.
2.3 Except for those rights specifically provided for in the LICENSE, LICENSOR
retains all right, title and interest in and to the INFORMATION and the
LICENSED MARKS. Licensee hereby acknowledges that it will receive no
rights or licenses to the INFORMATION or the LICENSED MARKS independent of
or in addition to the rights expressly granted to it in this AGREEMENT.
Nothing in this AGREEMENT shall cause LICENSOR'S rights, title and
interest in the INFORMATION and the LICENSED MARKS to be reduced in any
way, nor cause LICENSEE or any of its CUSTOMERS to gain any ownership
rights in the INFORMATION or LICENSED MARKS. LICENSEE shall not, and shall
use its best efforts to ensure that its CUSTOMERS do not, use, duplicate
in hard copy, machine readable or any other form, distribute, modify, or
create derivative versions of the INFORMATION or use the LICENSED MARKS
except as specifically permitted herein.
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2.4 The parties agree to perform their obligations under this AGREEMENT in
strict adherence to the Accreditation Council for Continuing Medical
Education Essentials, Guidelines and Standards for Accreditation of
Sponsors of Continuing Medical Education, including the Standards for
Commercial Support of Continuing Medical Education and the Standards for
Interpreting the Essentials as Applied to Continuing Medical Education
Enduring Materials, as well as LICENSOR's own policies and practices
designed to ensure compliance with the highest standards of educational
integrity and quality, and applicable laws, regulations, rules, and orders
(collectively, the "ACCME/BU/Legal Standards"). Without limiting the
foregoing, it is understood that any commercial funding for the CME
PROGRAMS should be in the form of an educational grant made payable to
LICENSOR. Should either party be made aware of any actual or potential
conflict between any of the ACCME/BU/Legal Standards, and this AGREEMENT
or the arrangements contemplated hereby, such party shall promptly notify
the other party and the parties shall negotiate in good faith to modify
the AGREEMENT or their arrangements so as to ensure strict adherence to
all ACCME/BU/Legal Standards.
ARTICLE 3 - LICENSOR TO FURNISH INFORMATION
3.1 Subject to the terms and conditions set forth herein and to all necessary
approvals from third parties holding copyright or other rights and
interests in the INFORMATION, LICENSOR shall, at its own expense, furnish
to LICENSEE and LICENSEE shall accept from LICENSOR the following:
(a) Existing portions of the INFORMATION in machine-readable form where
possible.
(b) If machine readable form is not available, two (2) copies of the
printed version of the INFORMATION.
It is anticipated that the INFORMATION will include an examination and an
evaluation form for each CME PROGRAM.
3.2 It is understood by the parties that certain CME PROGRAMS involve the use
of materials, such as newsletters and articles in medical journals, that
are independently available through LICENSEE to its CUSTOMERS.
Notwithstanding anything herein to the contrary, LICENSEE shall be solely
responsible for obtaining the use of such materials in connection with the
CME PROGRAMS, including without limitation obtaining all
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necessary licenses and approvals. Such materials are excluded from the
INFORMATION to be provided herein by LICENSOR.
3.3 LICENSOR shall promptly replace all or part of the INFORMATION which was
unreadable or damaged or did not conform with this AGREEMENT when
furnished by LICENSOR to LICENSEE, at no additional charge, provided that
LICENSEE gives LICENSOR reasonably detailed written notice thereof. The
foregoing states LICENSOR's exclusive remedy for any defect, damage,
nonconformity, breach of warranty, or misrepresentation with respect to
the INFORMATION.
3.4 LICENSEE agrees to make available to LICENSOR two passwords which LICENSOR
may use to access the CME PROGRAMS for purposes of quality monitoring and
other internal uses as LICENSOR sees fit, at no extra charge to LICENSOR.
ARTICLE 4 - INFORMATION AND LICENSED MARKS: ACCESS AND CHANGES
4.1 LICENSEE shall design a file structure through which the INFORMATION will
be made commercially available on LICENSEE'S proprietary service. LICENSOR
agrees to use reasonable efforts to provide technical advice to LICENSOR
to assist in such file design. LICENSOR and LICENSEE shall also cooperate
on design of the system by which CUSTOMERS' examination results and
CUSTOMERS' program evaluation forms are transmitted to LICENSOR.
4.2 LICENSEE shall not make the INFORMATION available without prior written
approval by the LICENSOR of said file design, provided that such approval
shall not be unreasonably withheld.
4.3 LICENSEE agrees to use its best efforts to prevent the INFORMATION from
becoming available through LICENSEE to anyone who is not a CUSTOMER.
4.4 LICENSEE shall not make any changes whatsoever to the INFORMATION,
LICENSED MARKS, or other material supplied by LICENSOR under ARTICLE 3,
whether to the content, structure, design, or otherwise, without
LICENSOR'S prior written approval. If and when LICENSOR wishes to
implement any changes to the INFORMATION, LICENSED MARKS, or other
material supplied by LICENSOR under ARTICLE 3,
- Page 5 of 18 -
<PAGE>
LICENSEE shall request LICENSOR's approval by a written and reasonably
detailed notice thereof to LICENSEE as soon as practicable but in no event
less than three (3) months in advance. Section 4.2 above shall apply to
implemented changes.
ARTICLE 5 - FEES AND PAYMENTS
5.1 LICENSEE shall pay to LICENSOR the usage fees as specified in Appendix 3
for each CME PROGRAM used by each CUSTOMER of LICENSEE. LICENSEE shall
also collect on LICENSOR's behalf, and remit to LICENSOR, the CME
certification fees or like fees set by LICENSOR and payable by those
CUSTOMERS of LICENSEE who seek continuing medical education credit with
respect to the CME PROGRAMS, as specified in Appendix 3.
5.2 Any usage of a CME PROGRAM solely for purposes of demonstrating the CME
PROGRAM or LICENSEE'S products or services shall be free of fees to
LICENSOR, on the condition that it is understood by LICENSEE and its
potential CUSTOMERS that no certification or other evidence of completing
the CME PROGRAM shall be offered in connection with such demonstrations.
5.3 Fee payments required by Section 5.1 shall be based on usage of the CME
PROGRAMS, which LICENSEE shall report in monthly activity reports as
required under Section 6.2 of this AGREEMENT. Each payment shall be
accompanied by a statement setting forth in reasonable detail the
computation of the amount due. Each payment shall be due no later than
thirty (30) days following the due date for submission of the
corresponding activity report. Any payment that is overdue shall bear
interest at the rate of one and one-half percent (1.5%) per month until
paid.
5.4 Payment by LICENSEE of all fees and charges for services performed is to
be made by check, or in such other form as may be agreed upon between the
parties, delivered to LICENSOR in accordance with Section 15.5.
- Page 6 of 18 -
<PAGE>
ARTICLE 6 - ADDITIONAL OBLIGATIONS
6.1 (a) LICENSEE shall provide CUSTOMERS with instructions for completing
examinations for the CME PROGRAMS and obtaining CME credit from
LICENSOR, in accordance with LICENSOR's instructions.
(b) Immediately upon receipt of each completed examination, LICENSEE
shall grade the examination on LICENSOR's behalf and strictly in
accordance with LICENSOR's examination instructions, and shall
transmit examination results to the CUSTOMER.
(c) Each graded examination shall be immediately transmitted in full to
LICENSOR, together with the CUSTOMER'S program evaluation form.
(d) LICENSOR shall provide appropriate documentation to demonstrate
successful completion of the CME PROGRAMS to LICENSEE'S CUSTOMERS
who have successfully completed the CME PROGRAMS to LICENSOR's
satisfaction, paid the requisite fee, and are otherwise eligible to
receive such documentation in LICENSOR's sole determination.
LICENSOR reserves the right to make all determinations whatsoever
relating to the accreditation of, and the granting of continuing
medical education credit for, the CME PROGRAMS.
(e) LICENSOR and LICENSEE shall otherwise provide such cooperation and
assistance as is reasonably required to provide efficient and
effective access to the CME PROGRAMS to LICENSOR's CUSTOMERS
consistent with the provisions of this AGREEMENT.
6.2 LICENSEE shall provide LICENSOR with monthly activity reports of CME
PROGRAM usage, no later than thirty (30) days after the end of each
calendar month. These activity reports shall show, by CME PROGRAM, for
each month and cumulatively for the calendar year:
(i) the CME PROGRAM name
(ii) the number of LICENSEE'S CUSTOMERS who used the CME PROGRAM;
(iii) for each CUSTOMER who used the CME PROGRAM, the CUSTOMER'S
name and address, whether or not the CUSTOMER took an
examination on the CME PROGRAM, and if so, the examination
grade and certification fee paid; and
- Page 7 of 18 -
<PAGE>
(iv) detailed information to substantiate any claim for a bad debt
credit, as described in Appendix 3.
Submission of an activity report will be deemed to be an official
certificate of LICENSEE that the facts set forth in the activity report
are complete and accurate.
6.3 (a) LICENSEE shall maintain complete and accurate records of all
transactions involving the CME PROGRAMS for a minimum of two months
and shall provide such information, in addition to that required in
Section 6.2, as LICENSOR may reasonably request to verify the
accuracy of the monthly activity reports. In addition, LICENSEE
agrees to provide such other information as LICENSOR may reasonably
request from time to time regarding the subject matter of this
AGREEMENT.
(b) LICENSOR shall have the right, at its sole expense, upon reasonable
notice and during normal business hours, to inspect LICENSEE's
records relating to the subject matter of this AGREEMENT. In the
event that LICENSEE has underpaid LICENSOR by more than five percent
(5%) for any month, then LICENSEE shall pay the costs incurred by
LICENSOR for such inspection.
(c) Each party will hold the records and documents required or produced
under this AGREEMENT, including the contents of activity reports but
excluding LICENSOR PROPRIETARY INFORMATION (which is subject to
Section 15.7 below), in confidence and will not disclose such
records or documents to third parties without the other party's
prior written consent, except to their respective accountants,
attorneys, accrediting agencies, or others as required by law.
6.4 At LICENSEE's request, LICENSOR shall use reasonable efforts to notify (a)
recent recipients of continuing medical education credits from LICENSOR
and (b) recent recipients of the degree of Doctor of Medicine from the
Boston University School of Medicine, of the availability of the CME
PROGRAMS from LICENSEE, subject to the availability of current address
information and reimbursement of the costs of such notifications by
LICENSEE. The parties shall reasonably agree in advance upon the sums that
LICENSEE shall reimburse LICENSOR for the costs of such efforts.
ARTICLE 7 - WARRANTIES
7.1 LICENSOR hereby represents and warrants to LICENSEE as follows:
- Page 8 of 18 -
<PAGE>
(a) LICENSOR is a corporation duly organized and validly existing under
the laws of the Commonwealth of Massachusetts, and has the power and
authority to execute and deliver this AGREEMENT and to carry out the
transactions contemplated hereby. This AGREEMENT constitutes a valid
and binding obligation of LICENSOR, enforceable in accordance with
its terms;
(b) To the best of LICENSOR's knowledge, there are no actions, suits,
investigations or proceedings pending or threatened against LICENSOR
before any court, arbitrator or governmental body, and there are no
judgments or orders of any governmental authority applicable to
LICENSOR, which assert the invalidity of this AGREEMENT or seek to
prevent any of the transactions contemplated hereby;
(c) LICENSOR warrants that the INFORMATION furnished under ARTICLE 3,
was formulated with a reasonable standard of care and in conformance
with professional standards.
7.2 LICENSEE hereby represents and warrants to LICENSOR as follows:
(a) LICENSEE is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware, and has the
power and authority to execute and deliver this AGREEMENT and to
carry out the transactions contemplated hereby. This AGREEMENT
constitutes a valid and binding obligation of LICENSEE, enforceable
in accordance with its terms.
(b) To the best of LICENSEE's knowledge, there are no actions, suits,
investigations or proceedings pending or threatened against LICENSEE
before any court, arbitrator or governmental body, and there are no
judgments or orders of any governmental authority applicable to
LICENSEE, which assert the invalidity of this AGREEMENT or seek to
prevent any of the transactions contemplated hereby;
(c) All services performed by LICENSEE hereunder shall be performed in a
timely and professional manner.
7.3 EXCEPT AS EXPRESSLY STATED HEREIN, NEITHER PARTY MAKES ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
REPRESENTATION OR WARRANTY BY LICENSOR WITH RESPECT TO THE QUALITY,
CONDITION, USEFULNESS, DESIRABILITY, MERCHANTABILITY, FITNESS FOR ANY
PARTICULAR PURPOSE OF THE INFORMATION, OR ANY OTHER MATTER WHATSOEVER.
EACH PARTY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY TO ANY
PERSON OTHER THAN THE OTHER PARTY. REFERENCE IS MADE TO SECTION
- Page 9 of 18 -
<PAGE>
3.3 FOR A STATEMENT OF LICENSOR'S EXCLUSIVE OBLIGATION WITH RESPECT TO ANY
BREACH OF WARRANTY OR MISREPRESENTATION WITH RESPECT TO THE INFORMATION.
ARTICLE 8 - INJUNCTIVE RELIEF
8.1 LICENSEE acknowledges that any use, duplication, distribution, disclosure,
or modification of any INFORMATION, LICENSED MARKS, or LICENSOR
PROPRIETARY INFORMATION in violation of this AGREEMENT will give rise to
irreparable injury to LICENSOR, which will not be adequately compensated
by monetary damages. Accordingly, LICENSEE agrees that LICENSOR shall be
entitled to seek and obtain injunctive relief against the breach or
threatened breach of LICENSEE's obligations with respect to the
INFORMATION, LICENSED MARKS, and LICENSOR PROPRIETARY INFORMATION, in
addition to any other legal remedies which may be available.
ARTICLE 9 - INFRINGEMENT
9.1 LICENSOR hereby agrees to defend any claims or actions brought against
LICENSEE in the United States by third parties asserting that any of the
INFORMATION as furnished by LICENSOR to LICENSEE hereunder constitutes an
infringement of any United States copyright or other intellectual property
right under United States law, subject to the following conditions:
(a) LICENSEE shall promptly notify LICENSOR of the infringement claim or
action, and shall provide such assistance in the defense thereof as
may reasonably be requested; and
(b) LICENSOR shall have the exclusive right to control the defense,
including settlement, of the infringement claim or action.
LICENSOR shall pay any monetary award entered in a final judgment in such
action to the extent such award is adjudged to arise from such
infringement.
9.2 Should any part of the INFORMATION or materials provided by LICENSOR
hereunder become, or in LICENSOR's opinion be likely to become, the
subject of any infringement claim, LICENSOR may elect to do one of the
following: procure the right to continue to
- Page 10 of 18 -
<PAGE>
make the INFORMATION or materials available, modify same to make them
non-infringing, or cease making the affected CME PROGRAM available to
CUSTOMERS or otherwise cease such activities as may be claimed to give
rise to infringement. LICENSEE shall provide such cooperation as LICENSOR
may reasonably request to accomplish the foregoing.
9.3 LICENSOR shall have no obligation under this ARTICLE 9 to the extent that
an alleged infringement claim arises out of any addition to or
modification of the INFORMATION, or other act or omission, by LICENSEE or
any of its agents or employees.
9.4 LICENSOR's obligations under this ARTICLE 9 are its exclusive obligations
with respect to any infringement or alleged infringement of any copyright
or other intellectual property right of third parties.
ARTICLE 10 - INDEMNIFICATION: LIMITATION OF LIABILITY.
10.1 Each party agrees to indemnify, defend, and hold the other party harmless
from and against any and all claims, actions, losses, damages, and
expenses, including reasonable attorneys' fees, to the extent caused by
its negligence, misconduct, or breach of this AGREEMENT.
10.2 In no event shall either party be liable for any consequential,
incidental, special or indirect damages, whether in contract, tort or
otherwise, including but not limited lost profits, loss of business, or
other economic loss, unless such damages arise out of intentional
misconduct, fraud, or conduct punishable as a criminal offense.
ARTICLE 11 - CUSTOMERS
11.1 LICENSEE shall place the following terms and conditions, together with
such other material as LICENSOR shall approve, on the entry page into the
CME PROGRAMS, and shall ensure that the CUSTOMERS acknowledge and agree to
such terms and conditions prior to gaining access to the CME PROGRAMS:
(a) The information provided in these CME Programs is intended solely
for the continuing medical education needs of healthcare
professionals. Individuals should not rely upon any information
provided in these CME Programs.
- Page 11 of 18 -
<PAGE>
(b) THE CME PROGRAMS ARE OFFERED "AS IS." HEALTHGATE DATA CORP. AND
BOSTON UNIVERSITY, JOINTLY AND INDIVIDUALLY, DISCLAIM ALL WARRANTIES
AND REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE CME
PROGRAMS AND THE INFORMATION CONTAINED THEREIN, INCLUDING WITHOUT
LIMITATION ANY AND ALL WARRANTIES OF TITLE, NONINFRINGEMENT,
MERCHANTABILITY, OR FITNESS FOR ANY PARTICULAR PURPOSE. WITHOUT
LIMITING THE FOREGOING, NEITHER ENTITY SHALL BE RESPONSIBLE FOR ANY
INACCURACY OR OMISSION IN THE INFORMATION CONTAINED IN THE CME
PROGRAMS, AND NEITHER SHALL HAVE ANY LIABILITY WHATSOEVER OF ANY
KIND RESULTING FROM ANY CLAIM OR ACTION ARISING OUT OF THE USE OF
THE CME PROGRAMS.
(c) HealthGate Data Corp. will grade the examinations that form a part
of the CME Programs in accordance with Boston University's
instructions. HealthGate Data Corp. shall have no responsibility
for, or any liability from, the improper grading, tabulation or
administration of any examination, provided that it has complied in
all respects with Boston University's examination instructions and
has not otherwise committed gross negligence or willful misconduct.
HealthGate Data Corp. will relay your graded examination to Boston
University but shall have no responsibility to report any
examination grade to any regulatory agency, medical association, or
other third party. Boston University reserves final authority over
the issuance of continuing medical education credit.
(d) In no event shall either HealthGate Data Corp. or Boston University
be liable for any consequential, incidental, special or indirect
damages, whether in contract, tort or otherwise, including but not
limited to lost profits, loss of business or other economic loss.
(e) No person shall have any right to use, duplicate in hard copy,
machine readable form or any other form, distribute, modify, or
create derivative versions of any CME Program, except as necessary
to complete the CME Program for purposes of obtaining continuing
medical education credit. Any violation of this provision shall be
prosecuted to the fullest extent of the law.
- Page 12 of 18 -
<PAGE>
ARTICLE 12 - INSURANCE
12.1 LICENSEE agrees to obtain and maintain in effect the following insurance
provided by a company or companies acceptable to LICENSOR:
(a) Comprehensive General Liability Insurance naming Trustees of Boston
University as an additional insured, subject to a combined single
limit of at least $1,000,000 each occurrence and $1,000,000 in the
aggregate for bodily injury and property damage. The aggregate
limits shall be maintained continuously during the life of this
AGREEMENT. This insurance shall include coverage for Independent
Contractors, covering operations of any and all subcontractors and
sub-subcontractors, and shall contain a Broad Form General Liability
endorsement.
(b) Errors and Omissions Insurance subject to a limit of at least
$1,000,000 each occurrence and $1,000,000 in the aggregate.
(c) Umbrella liability insurance subject to a limit of at least
$1,000,000 providing excess coverage over that specified in
sub-paragraph (a) above.
(d) Crime Insurance, including coverage for Employee Dishonesty,
Premises Coverage and Transit Coverage.
LICENSEE shall cause the LICENSOR to be named as an additional insured
under all liability insurance to the extent of its interests hereunder.
12.2 LICENSEE shall provide standard ACORD certificates of the foregoing
insurance, in triplicate, to the LICENSOR upon execution of this AGREEMENT
and thereafter within thirty (30) days after the anniversary dates of the
insurance. Such certificates shall show any special coverage or provisions
required and shall provide for not less than thirty (30) days' prior
written notice to the LICENSOR in the event of cancellation, material
change, or intent not to renew.
ARTICLE 13 - DURATION
13.1 This AGREEMENT shall become effective on April 1, 1996 and shall terminate
on June 30, 1997, unless it is sooner terminated by either party pursuant
to ARTICLE 14 or unless it is renewed.
- Page 13 of 18 -
<PAGE>
13.2 This AGREEMENT shall be automatically renewed on an annual basis unless
one party advises the other in writing at least ninety (90) days prior to
the end of the original or any renewal period that it elects not to renew
this AGREEMENT, or wishes to renegotiate the terms of this AGREEMENT.
ARTICLE 14 - TERMINATION
14.1 Either party shall be entitled to terminate this AGREEMENT for cause by
giving written notice in writing to the other party that the other party
has failed to meet one or more of its obligations under this AGREEMENT. In
such case, the other party will have thirty (30) days to meet the stated
obligation(s) and, if it does not do so, this AGREEMENT will automatically
terminate effective the last day of the thirty (30) day period.
14.2 Either party may terminate this AGREEMENT with or without cause at any
time by giving not less than ninety (90) days' written notice of
termination to the other party.
14.3 In connection with the termination of this AGREEMENT by either party,
LICENSEE shall prominently post notices to CUSTOMERS of the termination of
availability of the CME PROGRAMS on its Web site and/or such other
locations, at such times, and in such manner as LICENSOR shall reasonably
request. In the case of termination pursuant to Section 14.2, such notice
to CUSTOMERS shall be posted no later than five (5) business days after
the notice of termination has been given or received by LICENSEE, as the
case may be.
14.4 Upon termination of this AGREEMENT, all rights and obligations under this
AGREEMENT will cease, except those rights and obligations that arose prior
to termination, such as the obligation by LICENSEE to make the payments to
LICENSOR required under this AGREEMENT, and those rights and obligations
whose intended benefit was not or could not be fully obtained prior to
termination, including without limitation the parties' indemnification
obligations, which shall survive.
14.5 Upon termination of this Agreement, each party shall be prohibited from
using any portion of the INFORMATION, LICENSED MARKS, or materials
supplied to it by the other party under the terms of this AGREEMENT and
shall, as directed by the other party, either return all copies of same to
the other party or erase, destroy, or eliminate them. Without
- Page 14 of 18 -
<PAGE>
limiting the foregoing, immediately upon termination, LICENSEE shall erase
from computer magnetic media, and make unsuitable for the uses licensed
under this AGREEMENT, all INFORMATION received from LICENSOR.
ARTICLE 15 - MISCELLANEOUS PROVISIONS
15.1 Neither party shall be liable for delays or failures in performance under
this AGREEMENT to the extent resulting from causes beyond the reasonable
control of such party, and the times for performance under this AGREEMENT
shall be extended by the duration of any such inability to perform,
provided that such party has promptly notified the other party of the
existence of such cause and has used its best efforts to mitigate its
consequences. Such causes shall include Acts of God, lockouts, labor
actions, riots, acts of war, epidemics, government regulations
subsequently imposed, fire, earthquakes, or other natural disasters. In
the event that one party's performance is delayed for thirty (30) or more
days in accordance with this Section, the other party shall have a right
to terminate this AGREEMENT by giving written notice to such
non-performing party.
15.2 Neither party shall grant any assignment, sublicense, or other transfer of
any of its rights or obligations under this AGREEMENT, by operation of law
or otherwise, without the prior written approval of the other party, which
shall not be unreasonably withheld, and any such assignment, sublicense,
or other transfer without such approval shall be void. It is understood,
however, that LICENSEE's provision of online interactive searching, access
and review of the CME PROGRAMS to LICENSEE's CUSTOMERS in accordance with
this AGREEMENT shall not be deemed to be a sublicense or other transfer of
rights by LICENSEE.
15.3 This AGREEMENT sets forth the entire understanding of the parties on the
subject matter hereof, and supersedes all previous oral or written
representations or agreements relating to the rights and duties provided
for herein.
15.4 Except as expressly provided herein with respect to Appendices 1 and 2,
this AGREEMENT may not be modified, amended, or waived except by written
agreement of both parties. The failure of either party to enforce or
exercise, at any time or for any period of time, any term of this
AGREEMENT does not constitute, and shall not be construed as, a waiver of
such term and shall in no way effect that party's later right to enforce
it.
- Page 15 of 18 -
<PAGE>
15.7 During the term of this AGREEMENT and for a period of three (3) years
following its termination, LICENSEE shall regard and preserve as
confidential any and all LICENSOR PROPRIETARY INFORMATION. LICENSEE shall
not, without first obtaining the LICENSOR's written consent, disclose to
any person, firm or enterprise or use for its own benefit any LICENSOR
PROPRIETARY INFORMATION.
During the term of this AGREEMENT and for a period of three (3) years
following its termination, LICENSOR agrees that, unless it has obtained
LICENSEE's prior written consent, LICENSOR shall keep confidential any
materials or information designated by LICENSEE in writing as
"Confidential Information" at the time of its delivery to the LICENSOR and
which is not LICENSOR PROPRIETARY INFORMATION, and shall prevent
disclosure of the same to any person, firm or enterprise other than
for purposes specifically relating to the LICENSOR's permitted uses.
Notwithstanding the foregoing, the LICENSOR shall not be required to take
any steps to keep confidential and prevent disclosure of any such
information other than those steps the LICENSOR normally takes to protect
its own similar confidential information.
Both LICENSOR and LICENSEE agree not to disclose this AGREEMENT or the
terms of this AGREEMENT, to third parties, except to their respective
accountants, attorneys, accrediting agencies, or others as required by
law.
15.8 The relationship of the parties is that of independent contractors, and no
agency, employment, partnership, joint venture, or any other relationship
is created by this AGREEMENT.
15.9 This AGREEMENT shall be interpreted and enforced in accordance with the
laws of the Commonwealth of Massachusetts excluding that body of law known
as conflicts of laws.
- Page 17 of 18 -
<PAGE>
IN WITNESS WHEREOF LICENSOR AND LICENSEE have caused this AGREEMENT to be
executed and delivered by their duly authorized representatives.
HEALTHGATE DATA CORP. TRUSTEES OF BOSTON UNIVERSITY
(LICENSEE) (LICENSOR)
By: /s/ Rick Lawson By: /s/ William Gasper
------------------------- -------------------------
Name: Rick Lawson Name: William Gasper
------------------------- -------------------------
Title: Executive Vice-President Title: Assistant Treasurer
------------------------- -------------------------
- Page 18 of 18 -
<PAGE>
Exhibit 21.1 List of Subsidiaries
HealthGate Europe Limited, a United Kingdom private limited company
HealthGate Acquisition Corp., a Delaware corporation
(inactive)
<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 April 23, 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.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 23, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Balance Sheet and Consolidated Statement of Operations from
Form S-1 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<EXCHANGE-RATE> 1.0 1.0 1.0
<CASH> 960,831 29045 1155726
<SECURITIES> 0 0 0
<RECEIVABLES> 362189 291828 63818
<ALLOWANCES> 20000 3500 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 1560888 422839 1274161
<PP&E> 806793 324689 485416
<DEPRECIATION> 921057 600515 243724
<TOTAL-ASSETS> 2370979 780543 1791235
<CURRENT-LIABILITIES> 1561354 1289521 689091
<BONDS> 0 0 0
0 0 0
6889431 6294602 4762605
<COMMON> 11469 11456 229
<OTHER-SE> (9746763) (6831963) (3739934)
<TOTAL-LIABILITY-AND-EQUITY> 2370979 780543 1791235
<SALES> 0 0 0
<TOTAL-REVENUES> 2434124 1284636 408244
<CGS> 0 0 0
<TOTAL-COSTS> 4974776 3820021 3119932
<OTHER-EXPENSES> 9777 0 0
<LOSS-PROVISION> 20000 3500 0
<INTEREST-EXPENSE> 327100 5773 14497
<INCOME-PRETAX> (2877529) (2541158) (2726185)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (2877529) (2541158) (2726185)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 594829 539644 263641
<CHANGES> 0 0 0
<NET-INCOME> (3472358) (3080802) (2989826)
<EPS-PRIMARY> (3.03) (2.69) (2.61)
<EPS-DILUTED> (3.03) (2.69) (2.61)
</TABLE>
<PAGE>
EXHIBIT 99.1
HEALTHGATE DATA CORP.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS END OF PERIOD
- -------------------------------------------------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
December 31, 1996..................................... -- -- -- --
December 31, 1997..................................... -- $ 3,500 -- $ 3,500
December 31, 1998..................................... $ 3,500 $ 20,000 $ (3,500)(1) $ 20,000
</TABLE>
- ------------------------
(1) Writeoff of uncollectable accounts and other reductions, net of recoveries.
SCH-1
