<PAGE>
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Sec.240.14a-12
/ / Confidential for Use of the Commission Only (as permitted by
Rule 14a-b (e) (2))
HEALTHGATE DATA CORP.
(Name of Registrant as Specified in its charter)
HEALTHGATE DATA CORP.
(Name of Person (s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number or the
Form or Schedule and the date of its filing.
1. Amount previously paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
[LOGO]
HEALTHGATE DATA CORP.
25 CORPORATE DRIVE, SUITE 310
BURLINGTON, MASSACHUSETTS 01803
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 5, 2000
Notice is hereby given that the Annual Meeting of Stockholders of HealthGate
Data Corp. (the "Company") will be held on Thursday, October 5, 2000 commencing
at 10:00 A.M., local time, at the Boston Marriott Burlington, Routes 128 and 3A,
One Mall Road, Burlington, Massachusetts for the following purposes:
1. To elect two Class I Directors to the Board of Directors of the Company
to serve for three year terms until the 2003 annual meeting of
stockholders;
2. To approve an amendment to the Company's 1994 Stock Option Plan to
increase the number of shares of the Company's common stock issuable
under the Plan from 3,599,997 to 4,480,000; and
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The stock transfer books will not be closed but only stockholders of record
at the close of business on August 21, 2000, will be entitled to notice of and
to vote at the meeting.
<TABLE>
<S> <C>
By order of the Board of Directors,
[LOGO]
Rick Lawson
Secretary
Burlington, Massachusetts
August 29, 2000
</TABLE>
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING AND VOTE YOUR SHARES. IN THE
EVENT YOU CANNOT ATTEND, PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE. A STOCKHOLDER WHO EXECUTES AND RETURNS A PROXY
IN THE ACCOMPANYING FORM HAS THE POWER TO REVOKE SUCH PROXY AT ANY TIME PRIOR TO
THE EXERCISE THEREOF.
<PAGE>
[LOGO]
HEALTHGATE DATA CORP.
25 CORPORATE DRIVE, SUITE 310
BURLINGTON, MASSACHUSETTS 01803
------------------------
PROXY STATEMENT
------------------------
PROXY SOLICITATION AND EXPENSE
The accompanying proxy is solicited by the Board of Directors of HealthGate
Data Corp. ("HealthGate" or the "Company"), for use at the Annual Meeting of
Stockholders to be held on Thursday, October 5, 2000, at 10:00 A.M., local time,
at the Boston Marriott Burlington, Routes 128 and 3A, One Mall Road, Burlington,
Massachusetts. Proxies in the accompanying form, properly executed and received
prior to the meeting and not revoked, will be voted. A stockholder who executes
and returns a proxy in the accompanying form has the power to revoke such proxy
at any time prior to exercise thereof by notice in writing received by the
Secretary of HealthGate, by executing a later dated proxy, or by attending the
meeting and voting in person. It is expected that proxy solicitation materials
will be mailed to stockholders on or about August 30, 2000.
The expense of soliciting proxies in the accompanying form will be borne by
HealthGate. HealthGate has engaged Corporate Investor Communications, Inc. to
assist in the solicitation of proxies from stockholders, at a fee of $3,500. In
addition, directors, officers, employees or agents of HealthGate may make some
solicitations by mail, telephone or personal interview.
OUTSTANDING VOTING SECURITIES
Only holders of record at the close of business on August 21, 2000 (the
"Record Date") will be entitled to vote at the meeting. On the Record Date there
were 17,912,482 shares of HealthGate's Common Stock, par value $0.01 per share,
("Common Stock") outstanding, each of which is entitled to one vote.
The presence, either in person or by proxy, of the holders of a majority of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
(as defined below) will be counted for purposes of determining the presence or
absence of a quorum.
Directors will be elected by a plurality of the votes cast by the holders of
HealthGate's Common Stock voting in person or by proxy at the Annual Meeting.
Generally, proposals must be approved by a majority of the votes properly
cast. If a broker indicates on the enclosed proxy or its substitute that it does
not have discretionary authority as to certain shares to vote on a particular
matter ("broker non-votes"), those shares will not be considered as voting with
respect to that matter. Accordingly, broker non-votes and abstentions will have
no effect on the outcome of the proposal to amend HealthGate's 1994 Stock Option
Plan. HealthGate believes that the tabulation procedures to be followed are
consistent with the general requirements of Delaware law concerning voting of
shares and determination of a quorum.
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
In accordance with HealthGate's Certificate of Incorporation, our Board of
Directors has been divided into three classes, denominated Class I, Class II and
Class III, with members of each class holding office for staggered three-year
terms. At each annual meeting of stockholders, the successors to the Directors
whose terms expire are elected to serve from the time of their election and
qualification until the third annual meeting of stockholders following their
election until a successor has been duly elected and qualified.
Each of David Friend and William G. Nelson has been nominated for election
at the 2000 Annual Meeting of Stockholders to serve as a director for a
three-year term expiring at our annual meeting of stockholders in 2003 or until
his respective successor has been duly elected and qualified. It is intended
that the persons named in the proxy will vote for the election of each of the
two nominees listed below to serve as Class I Directors for a three year term
until the 2003 annual meeting of stockholders and until their successors are
duly elected and qualified. Each of the nominees has indicated his willingness
to serve or to continue to serve as a member of the Board of Directors if
elected; however, in case any nominee should become unavailable for election to
the Board of Directors for any reason not presently known or contemplated, the
proxy holders will have discretionary authority in that instance to vote for a
substitute nominee.
Assuming a quorum is present, the two persons receiving the two highest
totals of votes cast in favor of his or her election will be elected as Class I
Directors.
DIRECTORS--NOMINEES FOR A TERM OF THREE YEARS EXPIRING IN 2003
The nominees for election at the annual meeting of stockholders as Class I
Directors are as follows:
DAVID FRIEND (age 52) has served as a member of our Board of Directors since
April 1995. In June 1999, Mr. Friend became Chief Executive Officer of eYak,
Inc., a teleconferencing company. From 1995 through December 1999, Mr. Friend
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.
WILLIAM G. NELSON (age 66) has served as the Chairman of the Board of
Directors of GEAC Computer Corporation, Limited since 1996; from September 1996
until April 1999, he also served as its Chief Executive Officer and President.
Mr. Nelson has been a director of GEAC Computer Corporation, Limited since 1989.
Mr. Nelson has also served as a director of Manugistics Group, Inc. (a provider
of intelligent supply chain optimization solutions for enterprises and evolving
eBusiness trading networks) since 1986. From March 1994 until December 1998, Mr.
Nelson also served as a director of Project Software & Development, Inc. From
December 1991 to December 1994, Mr. Nelson was President and Chief Executive
Officer of Pilot Software, Inc.
HEALTHGATE'S BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" EACH
NAMED NOMINEE.
2
<PAGE>
CURRENT DIRECTORS TO CONTINUE IN OFFICE UNTIL 2001
The current Class II Directors of the Company, who are not standing for
re-election at this year's annual meeting and whose terms will expire at our
annual meeting of stockholders in 2001, are as follows:
GERALD E. BISBEE, JR., PH.D. (age 57) was elected a Class II Director of
HealthGate in August 2000. Since 1998 Dr. Bisbee has been Chairman, President
and CEO of ReGen Biologics, Inc., a company that designs, engineers and
manufactures tissue engineered products for orthopedic applications. He is also
Chairman of The Health Management Academy, a health care education and marketing
firm. Since 1989 Dr. Bisbee has been a director of APACHE Medical Systems, Inc.,
a software decision support and content management company for hospitalized
critical care patients (where he served as Chairman and Chief Executive Officer
from 1989 through 1997). Dr. Bisbee has served as a director of Cerner
Corporation since February 1988.
JONATHAN J. G. CONIBEAR (age 48) 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, U.K. 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.
CHRIS H. HORGEN (age 53) has served as a member of our Board of Directors
since October 1995. In November 1999, Mr. Horgen became the Senior Managing
Director for Southeastern Technology Venture Fund. From 1991 to November 1999,
Mr. Horgen 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.
DIRECTORS TO CONTINUE IN OFFICE UNTIL 2002
The current Class III Directors of the Company, who are not standing for
re-election at this year's annual meeting and whose terms will expire at our
annual meeting of stockholders in 2002, are as follows:
EDSON D. DE CASTRO (age 61) has served as a member of our Board of Directors
since December 1994. Since 1997, Mr. de Castro has been a self-employed business
consultant. From 1992 to 1997, Mr. de Castro was Chairman of Xenometrix, Inc., a
biotechnology company. From 1989 to 1990, Mr. de Castro was Chairman of the
Board of Directors of Data General Corporation. From 1968 to 1989, Mr. de Castro
served as President and Chief Executive Officer of Data General. Mr. de Castro
is a director of AVAX Technologies, Inc., a biopharmaceutical company, Eprise
Corporation, a provider of advanced content management software for Web sites,
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 Graduate School of
Management Advisory Council. Mr. de Castro is also a Member of the Corporation
of Partners Healthcare System Inc.
WILLIAM S. REECE (age 34) 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 1988 to 1994, Mr. Reece served in several
positions, including Vice President, Sales and Marketing, Manager of U.S.
3
<PAGE>
Sales and Marketing Representative at PaperChase, a medical literature retrieval
software company owned by Beth Israel Hospital in Boston.
BOARD OF DIRECTORS AND COMMITTEES
During 1999, in addition to ten actions by unanimous written consent of the
HealthGate Board of Directors, there were three meetings of the Board of
Directors. In 1999, each director attended at least 75% of the aggregate of all
meetings of the Board of Directors and all meetings held by all committees of
the Board on which such director served, except that Mr. Friend did not attend
one Board of Directors meeting and one Audit Committee meeting.
The Board of Directors of the Company has standing Audit, Compensation and
Nominating Committees.
The Audit Committee consists of Messrs. de Castro, Friend and Horgen. The
Audit Committee provides assistance to the Board of Directors in fulfilling
their responsibility to the stockholders, potential stockholders, and the
investment community relating to HealthGate's corporate accounting, reporting
practices, and the quality and integrity of the Company's financial reports. The
Audit Committee's responsibilities include recommending the independent auditors
to be selected to audit the Company's financial statements; reviewing the scope
of the proposed audit for the current year and the audit procedures to be
utilized; reviewing the results of the audit, including recommending actions in
response to any comments or recommendations of the independent auditors;
reviewing with the independent auditors and management the adequacy and
effectiveness of the Company's accounting and financial controls; reviewing the
financial statements to be filed quarterly with the Securities and Exchange
Commission with management and the independent auditors; reviewing the financial
statements contained in the annual report to stockholders with management and
the independent auditors to determine that the independent auditors are
satisfied with the disclosure and content of the financial statements to be
presented to the stockholders. The Audit Committee held two meetings in 1999.
The Compensation Committee consists of Dr. Blair and Messrs. Conibear and
Horgen. The Compensation Committee makes recommendations to the Board of
Directors concerning salaries and incentive compensation for our employees and
consultants, including all executive officers and the Chief Executive Officer.
The Nominating Committee consists of Messrs. Conibear, de Castro and Reece.
The Nominating Committee advises and makes recommendations to the Board
concerning the selection of candidates as nominees for election as Directors.
The committee recommended this year's Class I director candidates. In
recommending candidates for election to HealthGate's Board of Directors, the
Committee considers, among other factors, experience, employment history,
education and personal attributes. Stockholders who wish to recommend qualified
candidates as Directors should write to: HealthGate Data Corp., 25 Corporate
Drive, Suite 310, Burlington, MA 01803, Attn: Secretary, stating the
qualifications of such persons for consideration by the committee.
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to or earned by our
Chief Executive Officer and our four other most highly compensated executive
officers (the "Named Executive Officers") for services rendered to HealthGate in
all capacities during the years ended December 31, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ---------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)(9)
--------------------------- -------- ---------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William S. Reece.................. 1999 200,000 140,000 (5) 257,790(7) 128
President and Chief Executive 1998 138,583 66,500 (6) 39,660(10)
Officer 1997 105,417
Mark A. Israel(1)................. 1999 150,000 30,000 (5) 118,980 96
Chief Technology Officer 1998 126,000 32,000 (6) 123,937
1997 57,312 7,500 (11)
Rick Lawson....................... 1999 120,000 50,000 (5) 79,320 76
Vice President of Content and 1998 93,750 30,000 (6)
Secretary 1997 75,000 15,000 (11)
Hamid Tabatabaie(2)............... 1999 138,750 38,750 (8) 54,334
Vice President of Sales and 1998 151,846 162,606
Marketing
Mary B. Miller(3)................. 1999 130,016 34,000 (5) 203,011 112
Chief Financial Officer and
Treasurer
Richard J. Fecher(4).............. 1999 106,033 50,000 (8) 118,980 95
Vice President of Sales
</TABLE>
------------------------
(1) Mr. Israel was hired by HealthGate in July 1997 and resigned from
HealthGate in May 2000.
(2) Mr. Tabatabaie resigned from HealthGate in August 1999.
(3) Ms. Miller was elected by the Board of Directors to serve as Chief
Financial Officer and Treasurer in April 1999 and resigned from
HealthGate in June 2000.
(4) Mr. Fecher was hired by HealthGate in May 1999 and elected by the Board
of Directors to serve as Vice President of Sales in September 1999.
(5) Represents amounts awarded in February 2000 for bonuses earned in 1999.
(6) Represents amounts awarded in January 1999 for bonuses earned in 1998.
(7) Excludes a non-incentive stock option granted in January 1998 for 39,660
shares of our common stock, awarded as a bonus for services rendered in
1996 and 1997.
(8) Includes commissions paid during 1999.
(9) Represents payments made by the Company in 1999 for term life insurance
premiums on behalf of the Named Executive Officers.
(10) Represents a non-incentive stock option granted in January 1998, awarded
as a bonus for services rendered in 1996 and 1997.
(11) Represents amounts awarded in January 1998 for bonuses earned in 1997.
5
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
The following table sets forth information concerning the individual grants
of stock options to each of the Named Executive Officers who received grants
during the fiscal year ending December 31, 1999. All options were granted under
HealthGate's 1994 Stock Option Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
---------------------------------------- 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>
Mary B. Miller(3)...... 176,574 13.4 9.49 4/21/04 $462,961 $1,023,024
26,437 2.0 11.35 4/21/04 $ 82,901 $ 183,190
Richard J. Fecher...... 118,980 9.0 9.00 11/18/04 $295,848 $ 653,746
</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 1999, HealthGate granted options to purchase an aggregate of 1,317,254
shares of common stock.
(3) Ms. Miller resigned from HealthGate in June 2000.
AGGREGATED OPTION EXERCISES IN 1999 AND 1999 YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
number and value of option exercises in 1999 and unexercised options held by the
Named Executive Officers on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William S. Reece............ 0 0 125,523 171,927 $1,144,770 $1,567,974
Mark A. Israel(2)........... 19,830 208,802 102,453 120,634 $1,022,909 $1,158,435
Rick Lawson................. 0 0 79,320 39,660 $ 723,398 $ 361,699
Mary B. Miller(2)........... 0 0 0 203,011 0 $ 266,627
Richard J. Fecher........... 0 0 0 118,980 0 $ 237,960
Hamid Tabatabaie(2)......... 54,334 556,574 0 0 0 0
</TABLE>
------------------------
(1) There was no public trading market for the common stock on December 31,
1999. Accordingly, for purposes of this table, the values in these columns
have been calculated using the initial public offering price of $11.00 per
share (rather than a determination of the fair market value of the common
stock on December 31, 1999), less the aggregate exercise price of the
options.
(2) Mr. Israel, Ms. Miller and Mr. Tabatabaie have each resigned from
HealthGate.
6
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
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 was $200,000, and, pursuant to his employment agreement, he was awarded a
bonus of $140,000, as determined by the Board of Directors for 1999 services.
HealthGate 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.
HealthGate does not have employment agreements with any of our other
employees or executive officers.
COMPENSATION OF DIRECTORS
Directors of HealthGate who are also our employees did not receive
additional compensation for serving as Directors.
As compensation for their services in 1999 through 2001, in January 1999,
each of HealthGate's non-employee Directors was granted stock options for the
purchase of 9,915 shares of our common stock under our 1994 Stock Option Plan.
These options have an exercise price of $.89 per share, vest in three equal
annual installments in January 1999, 2000, and 2001 based on continuing service
as a director through each applicable period and expire in January 2004.
In 1999, our Directors did not receive cash remuneration for their services
as Directors. We reimbursed our non-employee Directors for the out-of-pocket
expenses they incur in connection with rendering services as Directors.
Beginning in February 2000, each of HealthGate's non-employee Directors will
receive $3,000 per quarterly Board of Directors' meeting attended, $500 per
Committee meeting attended, and $500 per monthly Board of Directors' conference
call attended and will be reimbursed, upon request, for expenses incurred in
attending each Board of Directors' meeting.
In August 2000, the number of options issued to non-employee Directors for
their services was increased from 3,305 per year to 10,000 per year for the
three year period through the second quarter
7
<PAGE>
of 2003. Accordingly, in August 2000, Dr. Bisbee was granted stock options for
30,000 shares of HealthGate's common stock and stock options for 25,043 shares
(which when combined with the January 1999 grants provides for 10,000 shares
annually) were granted for the continuing services of each of Messrs. Conibear,
de Castro, Friend and Horgen. The August 2000 options were granted under
HealthGate's 1994 Stock Option Plan, have an exercise price of $1.375 per share,
vest quarterly over three years based on continuing service as a director and
expire in August 2005.
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.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee has provided the following report*:
HealthGate Data Corp.'s Compensation Committee is responsible for
establishing HealthGate's philosophy of structuring executive compensation
packages to enable HealthGate to attract and retain qualified executives and to
motivate such individuals to maximize their efforts on behalf of HealthGate. The
Compensation Committee makes recommendations regarding executive compensation,
including base salaries and bonus awards. HealthGate also awards stock option
grants to its officers and employees.
HealthGate's compensation philosophy is based on the belief that competitive
compensation is essential to attract, motivate and retain highly qualified
employees. The Compensation Committee recommends total compensation for
HealthGate's executive officers by following a policy of basing such executive's
compensation upon the executive's individual performance and contribution to the
development and financial success of HealthGate. In addition, when determining
the baseline for executives' compensation packages, the Compensation Committee
considers the compensation packages provided by companies within its industry
and by companies outside the industry with which HealthGate competes for
executive talent.
Annual compensation for HealthGate's executives consists of base salary and
bonus. Additionally, equity in the form of stock option grants may be awarded.
Cash Compensation. Annual cash compensation consists of base salary and
bonus. In recommending salaries for HealthGate's executive officers, the
Compensation Committee considers a number of factors, including: experience,
personal performance, development and implementation of short term and long term
planning objectives, the salary levels for similar positions within the industry
in which HealthGate competes and in other industries, and company-wide salary
compatibility. The weight given to each of these factors differs from individual
to individual, as the Compensation Committee may deem appropriate. In order to
have a portion of each executive officer's compensation contingent upon
HealthGate's performance, the Compensation Committee also considers awarding
performance-based cash bonuses to executive officers.
Equity Ownership. Total compensation at the executive level also includes
long-term incentives afforded by the grant of stock options. The purpose of
HealthGate's stock ownership program is to assist in the attraction and
retention of key executives, to align the interest of each executive officer
------------------------
* The material in this report is not "soliciting material," is not deemed filed
with the SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933 Act, as amended, or the Securities
Exchange Act of 1934, as amended.
8
<PAGE>
with HealthGate's stockholders and to provide each executive officer with a
significant incentive to manage HealthGate from the perspective of an owner with
an equity stake in HealthGate. When issued, stock option grants to executive
officers have exercise prices equal to the fair market value at grant and vest
in installments over a period of years, conditional upon the executive officer's
continued service with HealthGate. Therefore, the stock options will provide a
value to the executive officer only if the executive officer remains in service
with HealthGate during the vesting period.
Chief Executive Officer 1999 Compensation. The compensation arrangements for
Mr. Reece with respect to the 1999 fiscal year were primarily based upon the
terms of his existing employment contract with HealthGate. Pursuant to the 1995
Employment Agreement, Mr. Reece is entitled to an annual minimum base salary,
subject to annual review by the Board of Directors. In addition, Mr. Reece is
eligible to participate in any bonus programs adopted by the Board.
In applying the goals of the Compensation Committee, the Compensation
Committee recommended Mr. Reece's total 1999 annual compensation, including
compensation derived from HealthGate's bonus program, be at a level that it
believed to be competitive with other companies in the industry. Mr. Reece's
annual base salary for fiscal year 1999 was increased to $200,000. He was
awarded a bonus of $140,000 for fiscal 1999, which represented 100% of the
eligibility target set for Mr. Reece by the Compensation Committee for fiscal
1999 (based on a target bonus of between 30% and 70% of 1999 base salary, such
bonus to be based 75% on performance compared to 1999 revenue and profit targets
based on then current projections and 25% based on other subjective factors).
The Compensation Committee determined the 1999 bonus in recognition, among other
factors, of the fact that under Mr. Reece's leadership HealthGate met or
exceeded the revenue and profit targets established for 1999 and, based on 1999
efforts, HealthGate successfully completed an initial public offering of its
stock in early 2000.
The Compensation Committee of HealthGate
Data Corp.
Chris H. Horgen, Chairman
Tina M. H. Blair
Jonathan J.G. Conibear
STOCK PRICE PERFORMANCE GRAPH
HealthGate closed upon its initial public offering of its common stock in
January 2000. HealthGate's common stock has been traded on the Nasdaq National
Market under the symbol "HGAT" since January 26, 2000. Prior to that date, there
was no public market for our common stock and, therefore, no quoted market
prices for our common stock are available for the year ended December 31, 1999.
Because there were no quoted market prices for our common stock for the year
ended December 31, 1999, information regarding cumulative total stockholder
return on HealthGate's common stock for that period, whether presented on a
stand-alone basis or in comparison with the Nasdaq Composite Index or other
indices, would not be meaningful.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownerhsip of our common stock as of July 31, 2000 by: (a) each person who we
know owns beneficially more than 5% of our common stock; (b) each of our
Directors and nominees; (c) each of the Named Executive Officers; and (d) all of
our Directors, nominees 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>
BENEFICIAL OWNER OWNED OWNED(1)
---------------- --------- --------
<S> <C> <C>
General Electric Company(2)................................. 3,696,256 19.4%
2135 Easton Turnpike
Fairfield, CT 06431
William S. Reece(3)......................................... 2,200,957 12.2%
Blackwell Science, Ltd.(4).................................. 2,058,327 11.5%
Oxney Mead, Oxford
OX2 OEL, United Kingdom
Jonathan J. G. Conibear(5).................................. 2,058,327 11.5%
Columbia/HCA Healthcare Corporation(6)...................... 1,941,035 9.8%
One Park Plaza
Nashville, Tenessee 37203
Nichols Research Corporation................................ 1,831,208 10.3%
4040 Memorial Parkway, S.
Huntsville, AL 35802
Barry M. Manuel, M.D.(7).................................... 1,210,009 6.8%
65 Wellesley Road
Belmont, MA 02478
NBC Internet, Inc.(8)....................................... 954,545 5.3%
225 Bush Street
San Francisco, CA 94104
Rick Lawson(9).............................................. 877,520 4.9%
David Friend(10)............................................ 432,683 2.4%
William G. Nelson........................................... 396,328 2.2%
Tina M. H. Blair, M.D.(10).................................. 348,754 2.0%
Edson D. de Castro(11)...................................... 137,024 *
Hamid Tabatabaie(12)........................................ 54,334 *
Chris H. Horgen............................................. 51,355 *
Richard Fecher(13).......................................... 41,660 *
Mark A. Israel(14).......................................... 19,830 *
Gerald E. Bisbee, Jr.(15)................................... 0 0
Mary B. Miller(16).......................................... 0 0
Executive officers, directors and nominees as a group (10 6,618,772 36.1%
persons)(17)..............................................
</TABLE>
------------------------
* Less than one percent of outstanding shares.
(1) Percentage ownership is based on 17,863,686 shares outstanding as of July
31, 2000. Shares of common stock subject to options and warrants currently
exercisable or exercisable within 60 days of July 31, 2000 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.
10
<PAGE>
(2) Includes 1,189,800 shares issuable pursuant to a warrant granted to General
Electric Company in connection with our development and distribution
agreement with GE Medical Systems, an operating unit of General Electric
Company, 2,165,547 shares owned by GE Capital Equity Investments, Inc., a
wholly-owned subsidiary of General Electric Capital Corporation and an
affiliate of General Electric Company, and 340,909 shares of our common
stock owned by GE Capital Equity Investments. GE Capital Equity Investments
shares beneficial ownership of the 2,165,547 outstanding shares with
General Electric Capital Corporation and GE Medical Systems with respect to
all shares held of record by GE Capital Equity Investments. This amount
does not include any shares of our common stock, beneficially owned by NBC
Internet, Inc. We understand that National Broadcasting Company, a
subsidiary of General Electric Company, owns a significant minority equity
interest in NBC Internet, Inc.
(3) Includes 211,387 shares of common stock issuable upon the exercise of stock
options
(4) Includes 36,355 shares of common stock issuable upon the exercise of stock
options and 266,277 shares owned by Blackwell Wissenschafts-Verlag GmbH, a
wholly owned subsidiary of Blackwell Science.
(5) Includes 36,355 shares of common stock issuable to Blackwell Science upon
the exercise of stock options, 1,755,695 shares of common stock owned by
Blackwell Science and 266,277 shares owned by Blackwell
Wissenschafts-Verlag GmbH. Mr. Conibear is Executive Director of Blackwell
Science. Mr. Conibear disclaims beneficial ownership of all shares issuable
to or owned, directly or indirectly, by Blackwell Science.
(6) Includes 1,941,035 shares issuable pursuant to a warrant issued to CIS
Holdings, Inc., an indirect, wholly owned subsidiary of Columbia/HCA
HealthCare Corporation and an affiliate of Columbia Information Systems,
Inc., in connection with our marketing and reseller agreement with Columbia
Information Systems. Columbia/HCA HealthCare Corporation is now known as
HCA-The Healthcare Company.
(7) Includes 850,690 shares owned by Dr. Manuel, 337,110 shares held in trusts
for which Dr. Manuel serves as trustee for the benefit of his children and
grandchildren and 22,209 shares issuable to Dr. Manuel upon the exercise of
stock options. Dr. Manuel disclaims beneficial ownership of the 337,110
shares held in trust for the benefit of his children and grandchildren.
(8) Includes 500,000 shares of common stock owned by Snap! LLC, a wholly owned
subsidiary of NBC Internet, Inc. and 454,545 shares of our common stock
owned by NBC Internet, Inc.
(9) Includes 79,320 shares of common stock issuable upon exercise of stock
options.
(10) Includes 36,355 shares of common stock issuable upon exercise of stock
options.
(11) Includes 6,611 shares of common stock issuable upon exercise of stock
options.
(12) Mr. Tabatabaie resigned from HealthGate in August 1999.
(13) Includes 39,660 shares of common stock issuable upon exercise of stock
options and 2,000 shares owned by Mr. Fecher's spouse.
(14) Mr. Israel resigned from HealthGate in May 2000.
(15) Excludes 2500 vested options granted in August 2000 for services as a
Director.
(16) Ms. Miller resigned from HealthGate in June 2000.
(17) Includes 446,043 shares of common stock issuable upon exercise of stock
options.
11
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
HealthGate's Directors and officers, and persons who own more than 10% of
HealthGate's common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission (the "SEC") and
the Nasdaq Stock Market. These persons are required by SEC regulations to
furnish HealthGate with copies of all Section 16(a) forms that they file.
HealthGate's Directors and officers and 10% stockholders were not subject to
the requirements of Section 16 of the Securities Exchange Act of 1934 until
January 25, 2000, the effective date of HealthGate's registration statement for
its initial public offering. Therefore, no Section 16(a) forms were filed for
the year ended December 31, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1998, HealthGate entered into an Electronic Journal Software
Development and Management Agreement with Blackwell Science. Blackwell Science
was the holder, together with Blackwell Wissenshafts-Verlag GmbH, a wholly owned
subsidiary of Blackwell Science, of all of our issued and outstanding Series D
preferred stock, which converted into 1,328,997 shares of common stock in
January 2000. Jonathan Conibear, one of our Directors, is an Executive Director
of Blackwell Science. Pursuant to this agreement, we have agreed to develop and
host a Web site for Blackwell Science's journals and other publications. We
completed the development of this Web site in 1998. Blackwell Science has paid a
total of $1,600,000 for the development and hosting of the Web site through
December 1999. During 1999, 1998, and 1997, our revenue from Blackwell Science
represented 24%, 44%, and 18% of our total revenue for those respective years.
In September 1999, we entered into a new activePress Journal Hosting and
Delivery Agreement with Blackwell Science pursuant to which the term of our
services relating to hosting and maintaining Blackwell Science's Web site was
extended through December 2001 and the scope of our services to be provided to
Blackwell Science were expanded beginning January 1, 2000. Total fees payable to
us during the extended term are expected to be in excess of $750,000 annually.
In January 2000, Blackwell paid us $550,000 in connection with the development
and hosting of the Web site. In April 1999, we paid Blackwell Science $68,000 as
a referral fee for their assistance in adding several additional journals to our
online libraries. In addition, pursuant to the terms of a Stock Purchase
Agreement dated as of December 20, 1996 between HealthGate and Blackwell
Science, in the event we attempt to expand into Europe or Asia, we have agreed
to negotiate in good faith with Blackwell Science to determine in what manner
Blackwell Science may serve as our primary strategic alliance partner in
connection with such expansion.
In September 1998, HealthGate 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 shares of 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. Upon conversion, all accrued and unpaid interest due on this loan
was paid to Blackwell Science in cash.
In April 1999, pursuant to the terms of a Stock Purchase Agreement,
HealthGate issued and sold 546,028 shares of our Series E preferred stock to GE
Capital Equity Investments for an aggregate consideration of $6,250,000 in cash.
In June 1999, HealthGate entered into a development and distribution
agreement with GE Medical Systems pursuant to which we will develop GE Medical
Systems branded enhanced versions of our CHOICE Web site product. In connection
with this agreement, we issued to General Electric a warrant for the purchase of
up to 1,189,800 shares of our common stock. The warrant has a term of five
years, is immediately exercisable, and has an exercise price of $3.46 per share.
GE Capital Equity
12
<PAGE>
Investments, a principal stockholder of HealthGate, is a wholly owned indirect
subsidiary of General Electric.
On October 27, 1999, HealthGate issued and sold 96,505 shares of our common
stock, pursuant to an option exercise, for an aggregate consideration of
$81,565.50 in cash to Edson de Castro, one of our Directors.
HealthGate rendered services to GE Medical Systems relating to their
development of a demonstration Web site. HealthGate was paid $108,000 in 1999
and $274,000 in 2000 for such services.
In October 1999, HealthGate entered into a three-year strategic alliance
agreement with Snap! LLC and Xoom.com, Inc. Under this agreement, Snap (now
known as part of NBCi.com) will provide various services to us to promote our
name, our www.healthgate.com Web site, our CHOICE Web sites and the products and
services we offer, and we will design, develop, and host a co-branded Snap/
HealthGate Web site, which will provide the features and functionality of our
www.healthgate.com Web site. In March 2000, Snap began featuring us as the
anchor tenant within the Health Channel, which is part of Snap's Web site
located at www.snap.com. In exchange for the services provided by Snap during
the first year of the agreement, we have paid Snap a minimum fee of $10.0
million, plus a $250,000 production and content integration fee in cash and on
November 3, 1999, issued 500,000 shares of HealthGate common stock to Snap. We
have agreed to pay Snap minimum fees of $15.0 million in each of the second and
third years of the agreement for the services provided to us by Snap in those
years. We have also agreed to pay Snap up to an additional $5.0 million in the
first year, $10.0 million in the second year, and $15.0 million in the third
year of the agreement if Snap delivers more than certain minimum click-throughs
threshold to the co-branded Snap/HealthGate Web site in the respective years.
Snap and Xoom.com are both wholly owned by NBC Internet, which is owned
partially by National Broadcasting Company, a subsidiary of General Electric.
In January 2000, pursuant to the terms of a Stock Purchase Agreement,
HealthGate issued and sold 340,909 shares of our common stock to GE Capital
Equity Investments, at $11 per share in a private sale.
In January 2000, pursuant to the terms of a Stock Purchase Agreement,
HealthGate issued and sold 454,545 shares of our common stock to NBC Internet,
at $11 per share in a private sale.
In November 1999, HealthGate entered into a three-year development agreement
with Columbia Information Systems. Under this agreement, we will design,
develop, and maintain a health portal site for Columbia Information Systems and
design, develop and maintain customized, co-branded CHOICE Web sites for up to
280 Columbia/HCA hospitals and affiliates. The agreement provides for an annual
license fee of $3.5 million to be paid by Columbia Information Systems for all
products and services that we provide under the agreement. The annual license
fee is subject to prospective adjustment in certain events, including the
delivery by us to fewer than 200 customized, co-branded CHOICE Web sites.
However, if we deliver fewer than 200 or more than 280 customized, co-branded
sites, the adjustment is limited to a minimum annual license fee of $2.5
million. In addition, we will share advertising and sponsorship revenues and
certain e-commerce revenues. The agreement may be terminated without cause by
Columbia Information Systems on June 1, 2001, upon payment of a $1 million
termination fee to HealthGate. In 1999, Columbia Information Systems paid us a
total of $875,000 under this agreement which represented 18% of our revenue for
the year.
In November 1999, HealthGate also entered into a separate three-year
marketing and reseller agreement with Columbia Information Systems, under which
Columbia Information Systems agreed to endorse us as the preferred provider of
patient and consumer oriented health content for Web sites owned or operated by
Columbia/HCA hospitals and affiliates. The agreement provides us, among other
things, the right to make a first offer to provide services for adding content
to the Columbia Information Systems health portal site and any Web sites owned
or operated by or affiliated with
13
<PAGE>
Columbia Information Systems or Columbia/HCA. We also have the exclusive right
to host on the Internet content provided to us by healthcare providers owned,
controlled or operated by any entity owned or controlled by Columbia/HCA
Healthcare Corporation (now known as HCA-The Healthcare Company). In addition,
Columbia Information Systems may, for a commission, market and sell our CHOICE
Web site product to entities unaffiliated with Columbia/HCA, subject to our
approval. In connection with this agreement, we have issued to CIS Holdings,
Inc., an indirect, wholly owned subsidiary of Columbia/HCA HealthCare
Corporation (now known as HCA-The Healthcare Company) and an affiliate of
Columbia Information Systems, a warrant for the purchase of up to 1,941,035
shares of our common stock. The warrant has a term of three years, an exercise
price of $11 per share and became exercisable in January 2000 upon our initial
public offering.
In January 2000, HealthGate completed an initial public offering of its
common stock. In conjunction with this initial public offering, all outstanding
shares of redeemable convertible stock converted into 7,530,556 shares of common
stock. Upon the conversion of Series E preferred stock, we paid a total of
$465,000 in cash for accrued dividends on Series E preferred stock. The Series E
dividend amount included payments of $116,000 to Blackwell Science Ltd. and
$349,000 to GE Capital Equity Investments Inc., both of which are principal
stockholders of HealthGate.
PROPOSAL 2
AMENDMENT TO HEALTHGATE'S 1994 STOCK OPTION PLAN
HealthGate's 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 Company's 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 the Company and our
stockholders by encouraging and enabling eligible employees and other persons
affiliated with HealthGate to acquire stock in HealthGate. The Company believes
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.
Presently, the total number of shares of HealthGate's Common Stock for which
options may be granted under the 1994 Stock Option Plan is 3,599,997. As of July
31, 2000, options for a total of 2,764,825 shares of common stock are
outstanding under the 1994 Stock Option Plan. In addition, 240,945 shares of
common stock have been purchased under the 1994 Stock Option Plan pursuant to
exercises of options. Without amendment, a total of only 594,227 shares remain
available for issuance under the 1994 Stock Option Plan.
The Board of Directors has adopted an amendment to the 1994 Stock Option
Plan, subject to approval by the stockholders, to increase the aggregate number
of shares for which options may be granted under the 1994 Stock Option Plan from
3,599,997 to 4,480,000 to ensure that a sufficient number of shares is available
to allow the Company to continue to use option grants to pursue the general
purposes of the 1994 Stock Option Plan.
The affirmative vote of at least a majority of the shares of the Company's
Common Stock represented in person or by proxy at the meeting and voting
(provided a quorum is present) is required for the approval of this amendment to
the 1994 Stock Option Plan.
HEALTHGATE'S BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1994 STOCK OPTION PLAN.
14
<PAGE>
SUMMARY DESCRIPTION OF THE 1994 STOCK OPTION PLAN
The 1994 Stock Option Plan is administered by the Company's Board of
Directors, which 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. Only employees of the Company
may be granted Incentive Stock Options ("ISOs"). Non-employee Directors,
employees, consultants and any other persons may be granted non-qualified stock
options ("non-ISOs"). Consistent with Section 422 of the Internal Revenue Code,
the 1994 Stock Option Plan provides that the exercise price of ISOs shall equal
or exceed the fair market value of the stock on the date of grant. ISOs granted
pursuant to the 1994 Stock Option Plan are not transferable, other than by will
or by the laws of descent and distribution, and may only be exercised while the
optionee is an employee of the Company or during the three-month period
following termination of employment; provided, however, that if the termination
is due to total and permanent disability, the ISOs may be exercised for a period
of twelve months after the termination. The 1994 Stock Option Plan does not
require that non-ISOs be subject to the limitations on price and transferability
which are required of ISOs. 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. Since
grants of stock options under the 1994 Stock Option Plan are made in the
discretion of the Board of Directors, potential future stock option grants are
not reasonably ascertainable. The 1994 Stock Option Plan is scheduled to
terminate in 2004.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of an optionee's participation in the
1994 Stock Option Plan are complex and subject to change. The following
discussion is only a summary of the general rules applicable to stock options.
The tax consequences of a stock option under the 1994 Stock Option Plan
depend on whether the stock option is an ISO or a non-ISO. An optionee will not
recognize income at the time of a grant or exercise of an ISO and the Company
may not deduct the related expense at those times. However, for purposes of the
alternative minimum tax, the difference between the exercise price and the fair
market value of the stock will be included in the optionee's alternative minimum
tax income. The optionee has a taxable event only upon a later sale or
disposition of the stock acquired pursuant to the exercise of the ISO. The tax
treatment of the disposition of the stock will depend on when the optionee
disposes of the stock. An optionee who sells stock acquired pursuant to the
exercise of an ISO within one year from the date of exercise or within two years
of the date of grant will recognize capital gain on the sale of the stock and
ordinary income equal to the difference between the ISO's exercise price and the
fair market value of the stock. An optionee who disposes of stock after a date
that is both two years after the grant and one year after its exercise will
recognize capital gain equal to the difference between the amount received on
disposition and the adjusted basis in the stock.
A different set of rules govern non-ISOs. There are no federal income tax
consequences to the optionee or the Company upon the grant of non-ISOs with
exercise prices equal to fair market value on the date of grant. Upon exercise
of a non-ISO, the optionee will recognize ordinary income in the amount by which
the fair market value of the stock option exceeds the exercise price of the
stock option. The Company is allowed a deduction for federal income tax purposes
equal to the amount of ordinary income recognized by the optionee at the time of
exercise of non-ISOs. The optionee's holding period for purposes of determining
whether any subsequently realized gain or loss will be long-term or short-term
will begin at the time the optionee recognizes ordinary income.
15
<PAGE>
ANNUAL REPORT
The Company's Annual Report on Form 10-K with respect to the year ended
December 31, 1999, which includes the Company's audited financial statements,
accompanies this Proxy Statement.
ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE
FURNISHED AT NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED
UPON RECEIPT OF A WRITTEN OR ORAL REQUEST OF SUCH PERSON ADDRESSED TO:
TREASURER, HEALTHGATE DATA CORP., 25 CORPORATE DRIVE, BURLINGTON, MASSACHUSETTS,
01803 (TELEPHONE: (781) 685-4000).
RELATIONSHIP WITH CERTIFIED PUBLIC ACCOUNTANTS
The accounting firm of PricewaterhouseCoopers LLP served as HealthGate's
independent auditors for 1999. A representative of PricewaterhouseCoopers LLP is
expected to be present at the stockholders' meeting with the opportunity to make
a statement and to respond to appropriate questions from stockholders. The Board
of Directors of HealthGate has requested that the Audit Committee recommend an
accounting firm to serve as HealthGate's independent auditors for the year 2000.
During HealthGate's three most recent fiscal years, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which if not resolved to the satisfaction of PricewaterhouseCoopers
LLP would have caused the firm to make a reference to the subject matter of the
disagreement in connection with its report.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of the Company consistent with SEC Rule
14a-8, which in certain circumstances may require the inclusion of qualifying
proposals in HealthGate's Proxy Statement. For such proposals to be considered
for inclusion in the Proxy Statement and proxy relating to the Company's 2001
Annual Meeting of Stockholders, all applicable requirements of SEC Rule 14a-8
must be satisfied and such proposals must be received by HealthGate no later
than January 23, 2001.
In addition, under the Company's By-Laws, no business may be brought before
an annual meeting or nominations made for persons for election to the Board of
Directors except pursuant to the notice of the meeting (which includes
stockholder proposals that HealthGate sets forth in its proxy statement under
SEC Rule 14a-8), or as otherwise brought before the meeting by or at the
direction of the Board of Directors or by a stockholder who has delivered timely
written notice to HealthGate (containing certain information specified in the
By-Laws) not less than 60 days prior to the date of the annual meeting;
provided, in the event that the 2001 annual stockholders meeting is called for a
date prior to the fourth Tuesday in June and less than 70 days notice or prior
public disclosure of the date of the annual meeting is given or made, notice by
the stockholder in order to be timely must be received not later than the close
of business on the tenth day following the date on which notice of the date of
the annual meeting was mailed to stockholders or made public, whichever first
occurs. Accordingly, a stockholder who intends to present a nomination for
Director or a proposal at the 2001 Annual Meeting of stockholders without
inclusion of the proposal in the Company's proxy materials must provide written
notice of the nomination or other business they wish to propose to HealthGate no
later than April 27, 2001 (assuming an annual stockholders meeting on June 26,
2001) or as pursuant to the applicable formula described above if the annual
meeting is scheduled for another date.
16
<PAGE>
All notices of proposals by stockholders and all requests for copies of the
full text of the By-law provisions discussed above should be sent to HealthGate
Data Corp., 25 Corporate Drive, Suite 310, Burlington, Massachusetts, 01803,
Attention: Secretary.
The Company reserves the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
Management is not aware of any matters proposed to be presented to the
meeting by any other person. However, if any other business should properly come
before the meeting, it is the intention of the persons named in the enclosed
form of proxy to vote the proxy in accordance with their best judgment on such
business.
17
<PAGE>
HEALTHGATE DATA CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON OCTOBER 5, 2000
The undersigned hereby appoints William S. Reece and Rick
Lawson, and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, to vote all of the
shares of stock of HealthGate Data Corp. which the undersigned may
be entitled to vote at the Annual Meeting of Stockholders of
HealthGate Data Corp. to be held at the Boston Marriott Burlington,
Routes 128 and 3A, One Mall Road, Burlington, Massachusetts, on
Thursday, October 5, 2000 at 10:00 a.m. (local time), and at any
and all postponements, continuations and adjournments thereof, with
all powers that the undersigned would possess if personally
present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary
authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
-----------------------
| SEE REVERSE FOR |
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE) | VOTING INSTRUCTIONS |
-----------------------
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HEALTHGATE DATA CORP.
OCTOBER 5, 2000
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
<TABLE>
<S> <C>
----- PLEASE MARK YOUR |
A | X | VOTES AS IN THIS |
| | EXAMPLE. -----
-----
FOR all nominees WITHHOLD MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR
listed at right AUTHORITY DIRECTOR LISTED BELOW AND A VOTE FOR PROPOSAL 2.
(except as marked to to vote for all nominees
the contrary below) listed at right.
FOR AGAINST ABSTAIN
1. To elect two ----- ----- NOMINEES: David Friend 2. To approve an --- --- ---
Class I | | | | amendment to | | | | | |
Directors | | | | William G. Nelson HealthGate's 1994 --- --- ---
----- ----- Stock Option Plan
to increase the
number of shares of
the Company's common
stock issuable under
the Plan from 3,599,997
to 4,480,000.
TO WITHHOLD AUTHORITY TO VOTE FOR
ANY NOMINEE(S) WRITE SUCH NOMINEE(S)' NAME(S) THIS PROXY IS SOLICITED ON
_____________________________________________ BEHALF OF THE BOARD OF
DIRECTORS. IT MAY BE REVOKED
PRIOR TO ITS EXERCISE.
RECEIPT OF NOTICE OF THE
ANNUAL MEETING AND PROXY
STATEMENT IS HEREBY
ACKNOWLEDGED, AND THE TERMS
OF THE NOTICE AND PROXY
STATEMENT ARE HEREBY
INCORPORATED BY REFERENCE
INTO THIS PROXY. THE
UNDERSIGNED HEREBY REVOKES
ALL PROXIES HERETOFORE
GIVEN FOR SAID MEETING OR
ANY AND ALL ADJOURNMENTS,
POSTPONEMENTS AND
CONTINUATIONS THEREOF.
PLEASE VOTE, DATE, SIGN AND
PROMPTLY RETURN THIS PROXY
IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE
PREPAID IF MAILED IN THE
UNITED STATES.
Address Change? Mark Box ---
Indicate Changes Below | |
---
SIGNATURE(S) __________________________________________________________________________________________ Dated: ___________, 2000
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. IF THE STOCK IS REGISTERED IN THE NAMES OF TWO OR MORE PERSONS, EACH
SHOULD SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, GUARDIANS AND ATTORNEYS-IN-FACT SHOULD ADD THEIR TITLES. IF SIGNER IS A
CORPORATION, PLEASE GIVE FULL CORPORATE NAME AND HAVE A DULY AUTHORIZED OFFICER SIGN, STATING TITLE. IF SIGNER IS A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
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