<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 0-28701
HEALTHGATE DATA CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 04-3220927
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
25 CORPORATE DRIVE, SUITE 310, BURLINGTON, MASSACHUSETTS 01803
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 685-4000
The registrant hereby amends the following items, financial statements exhibits
or other portions of its Annual Report for the fiscal year ended December 31,
1999 on Form 10-K as set forth in the pages attached hereto:
Items 10, 11, 12, and 13. Directors and Executive Officers of the
Registrant, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management, and Certain Relationships and Related
Transactions, respectively. The information required by these items is
filed herewith by amendment pursuant to Rule 12b-15.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding our directors
and executive officers.
NAME AGE POSITION
---- --- --------
William S. Reece........ 34 Chairman of the Board of Directors,
President and Chief Executive Officer
Mary B. Miller.......... 42 Chief Financial Officer and Treasurer
Mark A. Israel.......... 31 Chief Technology Officer
Richard J. Fecher....... 40 Vice President of Sales
Rick Lawson............. 40 Vice President of Content and Secretary
Tina M. H. Blair, M.D.(1) 51 Director
Jonathan J. G. Conibear(1) 48 Director
Edson D. de Castro(2)... 61 Director
David Friend(2)......... 52 Director
Chris H. Horgen(1),(2).. 53 Director
- ----------------
(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 1988 to 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, 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 1995 to 1997, Mr. Israel served as a system architect and director at
Individual Inc., an Internet news company. From 1992 to 1995, Mr. Israel served
as a Senior Consultant at Fusion Systems Group, a software consulting firm. From
1991 to 1992, Mr. Israel served as a Consultant at Cambridge Technology
Partners, a software consulting firm.
RICHARD J. FECHER has served as our Vice President of Sales since September
1999. From May 1999 to September 1999, Mr. Fecher served as our National Sales
Director. From 1995 to 1999, Mr. Fecher held various sales management and sales
positions within the healthcare, commercial and financial divisions of Data
General Corporation. From 1994 to 1995, Mr. Fecher was an Account Manager with
SiliconGraphics Computer Systems. From 1993 to 1994, Mr. Fecher was a Regional
Manager with Kendall Square Research. From 1986 to 1993, Mr. Fecher held various
management and sales positions with Data General Corporation.
RICK LAWSON is a founder of HealthGate and has served as our Vice President
of Content and Secretary since November 1994. From 1987 to 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.
2
<PAGE> 3
JONATHAN J. G. CONIBEAR has served as a member of our board of directors
since December 1996. Since 1986, Mr. Conibear has served as Executive Director
of Blackwell Science, Ltd., the largest publisher of medical societies' journals
and one of the world's largest medical publishers, with headquarters in Oxford,
UK. From 1985 to 1997, Mr. Conibear had other responsibilities with Blackwell
Science, including President, Blackwell Science Inc., Blackwell's U.S.
subsidiary, Chair, Blackwell's Asian subsidiary, and Sales Director. From 1974
to 1985, Mr. Conibear served in various positions with Oxford University Press.
EDSON D. DE CASTRO has served as a member of our board of directors since
December 1994. Since 1997, Mr. de Castro has been a self-employed business
consultant. From 1992 to 1997, Mr. de Castro was Chairman of Xenometrix, Inc., a
biotechnology company. From 1989 to 1990 Mr. de Castro was Chairman of the Board
of Directors of Data General Corporation. From 1968 to 1989, Mr. de Castro
served as President and Chief Executive Officer of Data General. Mr. de Castro
is a director of Boston Life Sciences, Inc., a biotechnology company, AVAX
Technologies, Inc., a biopharmaceutical company, 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 School of Management. Mr. de Castro is also a
Member of the Corporation of Partners Healthcare System Inc.
DAVID FRIEND has served as a member of our board of directors since April
1995. In June 1999, Mr. Friend became Chief Executive Officer of eYak, Inc., a
teleconferencing company. 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.
CHRIS H. HORGEN 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.
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.
3
<PAGE> 4
Effective with the closing of our initial public offering in January 2000,
our board of directors was divided into three classes, each of whose members
serve for staggered three-year terms. 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 presently serve in the class whose term expires at the
annual meeting of stockholders in 2000; Mr. Horgen and Mr. Conibear presently
serve in the class whose term expires at the annual meeting of stockholders in
2001; and Mr. Reece and Mr. de Castro presently 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.
ITEM 11. 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 ($) (8)
- --------------------------- ---- ---------- --------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
William S. Reece 1999 200,000 140,000 (4) 128
President and Chief Executive Officer 1998 138,583 66,500 (5) 257,790 (6)
1997 105,417 39,660 (9)
Mark A. Israel (11) 1999 150,000 30,000 (4) 96
Chief Technology Officer 1998 126,000 32,000 (5) 118,980
1997 57,312 7,500 (10) 123,937
Rick Lawson 1999 120,000 50,000 (4) 76
Vice President of Content and Secretary 1998 93,750 30,000 (5) 79,320
1997 75,000 15,000 (10)
Hamid Tabatabaie (1) 1999 138,750 38,750 (7) 54,334
Vice President of Sales and Marketing 1998 151,846 162,606
Mary B. Miller (2) 1999 130,016 34,000 (4) 203,011 112
Chief Financial Officer and Treasurer
Richard J. Fecher (3) 1999 106,033 50,000 (7) 118,980 95
Vice President of Sales
</TABLE>
- -----------------
(1) Mr. Tabatabaie resigned from HealthGate in August 1999.
(2) Ms. Miller was elected by the board of directors to serve as Chief
Financial Officer and Treasurer in April 1999.
(3) Mr. Fecher was hired by HealthGate in May 1999 and was elected by
the board of directors to serve as Vice President of Sales in
September 1999.
(4) Represents amounts awarded in February 2000 for bonuses earned in 1999.
(5) Represents amounts awarded in January 1999 for bonuses earned in 1998.
(6) 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.
(7) Includes commissions paid during 1999.
(8) Represents payments made by the Company in 1999 for term life insurance
premiums on behalf of the Named Executive Officers.
(9) Represents a non-incentive stock option granted in January 1998,
awarded as a bonus for services rendered in 1996 and 1997.
(10) Represents amounts awarded in January 1998 for bonuses earned in 1997.
(11) Mr. Israel was hired by HealthGate in July 1997.
4
<PAGE> 5
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
our 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 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, we granted options to purchase an aggregate of 1,317,254
shares of common stock.
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 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 0 0 0 203,011 0 $ 266,627
Richard J. Fecher 0 0 0 118,980 0 $ 237,960
Hamid Tabatabaie 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.
5
<PAGE> 6
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.
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.
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 our non-employee directors was granted stock options for the purchase of
9,915 shares of our common stock under our 1994 Stock Option Plan. These options
have an exercise price of $.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.
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.
6
<PAGE> 7
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of our common stock as of March 31, 2000 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>
NUMBER OF
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
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) 2,170,957 12.0%
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 10.9%
One Park Plaza
Nashville, Tenessee 37203
Nichols Research Corporation 1,831,208 9.8%
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 5.4%
225 Bush Street
San Francisco, CA 94104
Rick Lawson (9) 872,520 4.9%
David Friend (10) 432,683 2.4%
Tina M. H. Blair, M.D. (10) 348,754 2.0%
Mark A. Israel (11) 161,943 *
Edson D. de Castro (12) 137,024 *
Chris H. Horgen 36,355 *
Mary B. Miller (13) 67,670 *
Hamid Tabatabaie (14) 54,334 *
Richard Fecher (15) 15,220 *
Executive officers and directors as a group (11 persons) (16) 6,355,787 34.4%
</TABLE>
- ---------------
* Less than one percent of outstanding shares.
(1) Percentage ownership is based on 17,834,602 shares outstanding as of
March 31, 2000. Shares of common stock subject to options and warrants
currently exercisable or exercisable within 60 days of March 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
7
<PAGE> 8
property laws where applicable.
(2) Includes 1,189,800 shares issuable pursuant to a warrant granted to
General Electric Company in connection with our development and
distribution agreement with GE Medical Systems, an operating unit of
General Electric Company, 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.
(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 142,113 shares of common stock issuable upon exercise of stock
options.
(12) Includes 6,611 shares of common stock issuable upon exercise of stock
options.
(13) Includes 67,670 shares of common stock issuable upon exercise of stock
options.
(14) Mr. Tabatabaie resigned from HealthGate in August 1999.
(15) Includes 13,220 shares of common stock issuable upon exercise of stock
options and 2,000 shares owned by Mr. Fecher's spouse.
(16) Includes 629,386 shares of common stock issuable upon exercise of stock
options.
8
<PAGE> 9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1998, we 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, 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 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, we
issued and sold 546,028 shares of our Series E preferred stock to GE Capital
Equity Investments for an aggregate consideration of $6,250,000 in cash.
In June 1999, we entered into a development and distribution agreement with
GE Medical Systems pursuant to which we will develop GE Medical Systems branded
enhanced versions of our CHOICE 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 Investments, a principal stockholder of HealthGate, is a wholly
owned indirect subsidiary of General Electric.
On October 27, 1999, we 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.
In the fourth quarter of 1999, we rendered consulting services to GE Medical
Systems relating to their development of a demonstration Web site for a total of
$108,000.
In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. Under this agreement, Snap will provide
various services to us to promote our name, our www.healthgate.com Web site, our
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 areas 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, we
issued and sold 340,909 shares of our common stock to GE Capital Equity
Investments, at $11 per share in a private sale.
9
<PAGE> 10
In January 2000, pursuant to the terms of a Stock Purchase Agreement, we
issued and sold 454,545 shares of our common stock to NBC Internet, at $11 per
share in a private sale.
In November 1999, we entered into a three-year development agreement with
Columbia Information Systems. Under this agreement, we will design, develop, and
maintain a health portal site for Columbia Information Systems and design,
develop and maintain customized, co-branded CHOICE Web sites for up to 280
Columbia/HCA hospitals and affiliates. The agreement provides for an annual
license fee of $3.5 million to be paid by Columbia Information Systems for all
products and services that we provide under the agreement. The annual license
fee is subject to prospective adjustment in certain events, including the
delivery by us to fewer than 200 or more than 280 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, we also entered into a separate three-year marketing and
reseller agreement with Columbia Information Systems, under which Columbia
Information Systems agreed to endorse us as the preferred provider of patient
and consumer oriented health content for Web sites owned or operated by
Columbia/HCA hospitals and affiliates. The agreement provides us, among other
things, the right to make a first offer to provide services for adding content
to the Columbia Information Systems health portal site and any Web sites owned
or operated by or affiliated with Columbia Information Systems or Columbia/HCA.
We also have the exclusive right to host on the Internet content provided to us
by healthcare providers owned, controlled or operated by any entity owned or
controlled by Columbia/HCA Healthcare Corporation. In addition, Columbia
Information Systems may, for a commission, market and sell our CHOICE Web site
product to entities unaffiliated with Columbia/HCA, subject to our approval. In
connection with this agreement, we have issued to CIS Holdings, Inc., an
indirect, wholly owned subsidiary of Columbia/HCA HealthCare Corporation and an
affiliate of Columbia Information Systems, a warrant for the purchase of up to
1,941,035 shares of our common stock. The warrant has a term of three years, an
exercise price 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.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTHGATE DATA CORP.
Dated: April 27, 2000 By: /s/ William S. Reece
-------------------------------
William S. Reece
Chief Executive Officer
Dated: April 27, 2000 By: /s/ Mary B. Miller
-------------------------------
Mary B. Miller
Chief Financial Officer
11
