HEALTHGATE DATA CORP, 10-K405, 2000-03-23

HEALTHGATE DATA CORP
10-K405, 2000-03-23
BUSINESS SERVICES, NEC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
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)

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DELAWARE 04-3220927
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
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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

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.

Yes No X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K [X].

The aggregate market value of the common stock held by persons other than
affiliates of the registrant, as of March 1, 2000, was approximately $80,000,000
(based on the last sale price of the registrant's common stock on the NASDAQ
National Market System on that date).

The number of shares outstanding of the registrant's common stock as of
March 1, 2000 was 17,801,516.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information in the registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission relating to the registrant's
2000 Annual Meeting of Shareholders is incorporated by reference into Part III.
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TABLE OF CONTENTS

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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 25
Item 3. Legal Proceedings........................................... 25
Item 4 Submission of Matters to a Vote of Security Holders......... 26
Executive Officers of the Registrant........................ 27

PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters................................................... 29
Item 6. Selected Consolidated Financial Data........................ 32
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 33
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 41
Item 8. Financial Statements and Supplementary Data................. 42
Item 9. Changes In and Disagreement With Accountants on Accounting
and Financial Disclosure.................................. 42

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 43
Item 11. Executive Compensation...................................... 43
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 43
Item 13. Certain Relationships and Related Transactions.............. 43

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 44
Signatures............................................................ 47
Financial Statements.................................................. 48
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FORWARD-LOOKING STATEMENTS

This report on Form 10-K contains certain statements that are
forward-looking and actual results may differ materially from those contemplated
by the forward-looking statements. These forward looking statements reflect
management's current expectations, are based on many assumptions and are subject
to certain risks and uncertainties, including, among other things, HealthGate's
limited operating history; unpredictability of quarter-to-quarter results;
effectiveness of our marketing, brand promotion and business strategy;
competition; reliance on the continued growth of the Internet, computer systems
and software; and reliance on content providers and strategic alliances. Factors
that might cause or contribute to such differences include, but are not limited
to, those discussed in the sections "Business -- Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." You
should carefully review the risks described in the other documents we file from
time to time with the Securities and Exchange Commission, including our most
recent prospectus filed on January 26, 2000. You are cautioned not to place
undue reliance on the forward-looking statements, which appear elsewhere in this
report on Form 10-K. We do not intend to update or publicly release any
revisions to the forward-looking statements.

PART I

ITEM 1. BUSINESS

OVERVIEW

HealthGate is an Internet provider of technology solutions to hospitals,
institutions, businesses, publishers and individuals featuring reliable,
objective, comprehensive and up-to-date healthcare information. Our business to
business (B2B) solutions help physicians and other medical professionals,
patients and health-conscious consumers make better informed healthcare
decisions.

We distribute our content through a network of proprietary and affiliated
Web sites that comprise the HealthGate Network. The HealthGate Network includes
(1) customized, co-branded CHOICE(R) Web sites for institutions, principally
hospitals, and businesses, which carry both HealthGate's and an enterprise
client's name, are designed as a seamless component of an enterprise client's
Web site and, for certain institutions and businesses, complement the healthcare
information, products and services they already offer or sell through their own
Web sites; (2) our own Web sites, www.healthgate.com in the United States and
www.healthgate.co.uk in the United Kingdom; and (3) other third party co-branded
Web sites to which we provide our proprietary and licensed content.

To further broaden the HealthGate Network, we have established a Web portal
alliance with Snap! LLC, which is wholly-owned by NBC Internet. In March 2000,
Snap began featuring us on its www.snap.com Web portal site as the anchor
tenant, or most prominent provider of healthcare information, for seven of the
major content areas of Snap's Health Channel. Snap's Health Channel, which is
the area on the www.snap.com Web site to which users are linked when they click
on the word "Health" on the Snap Web Directory, also contains a link to a
co-branded Snap/HealthGate Web site.

We have aggregated and developed what we believe are the most extensive
health and medical libraries of any online provider, currently totaling
approximately 27 million different pages of health and medical information from
approximately 300 sources. This content includes internationally recognized
journals, authoritative government sources and extensive bibliographic databases
representing 27 independent content providers. We adapt and integrate this
diverse content through our internally developed software programs, which
include our proprietary ReADER(R) natural language searching software, designed
to facilitate the search and retrieval of relevant information in response to
each user's searching needs.

Given the depth and breadth of our content, we provide healthcare
information to a wide range of online users, including physicians and other
healthcare professionals, patients and health-conscious consumers. We facilitate
user-friendly access to our content libraries by segmenting them into
collections for these three principal user groups. Content from any collection
is available to any type of user under a variety of pricing

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structures, including free access, per transaction fee access and subscription.
Our online library targeted to physicians and other healthcare professionals
includes internationally recognized journals such as the New England Journal of
Medicine, bibliographic databases such as MEDLINE, handbooks such as the Drug
Information Handbook, decision support materials such as the Poisoning and
Toxicology Compendium and Continuing Medical Education programs from the Boston
University School of Medicine. Our patient focused online library includes
patient education materials such as a series of over 3,000 patient education
brochures published by the Clinical Reference Systems division of Access Health.
We have also created "Healthy Living" Webzines, a proprietary series of consumer
health magazines distributed exclusively through the Web, and have produced
Wellness Centers, which are compilations of selected information from our online
libraries for consumers, on 100 of the most prevalent illnesses, diseases and
medical conditions. In addition, we use our technology to provide text
conversion and Web site hosting services for traditional print publishers,
thereby increasing the number of online healthcare resources accessible through
our content libraries. While we aggregate and develop content with the goal of
meeting the specific needs of professionals, patients and health-conscious
consumers, we do not restrict access to the target audience, for instance,
giving patients and consumers access to more in-depth information like leading
medical journals written for medical professionals.

We currently generate revenue from the following activities:

- developing co-branded CHOICE Web sites for enterprise clients and
distributing content through these CHOICE Web sites;

- providing our activePress(TM) Web publishing services to traditional
print publishers;

- offering banner advertising and sponsorship of discrete portions of our
content libraries to pharmaceutical companies, other healthcare
advertisers and other businesses and organizations;

- participating in e-commerce opportunities, including selling articles
from full-text journals, monthly online subscriptions and medical text
books; and

- syndicating content to third party Web sites.

HealthGate was incorporated under the laws of the State of Delaware in
1994.

HealthGate has registered the trademarks "HealthGate," "HealthGate Data,"
"CHOICE," "MedGate," "ReADER" and the HealthGate logo in the United States and
has filed a trademark registration application for "activePress" in the United
States. All other trademarks, service marks or trade names referred to in this
Report are the property of their respective owners.

INDUSTRY BACKGROUND

During the past decade, the Internet has emerged as a significant global
communications medium and an effective alternative to many forms of traditional
media. The Internet enables consumers to instantly retrieve information,
communicate with others and engage in e-commerce. As a result, Internet use is
growing rapidly. According to Jupiter Communications, an industry research firm,
the number of Internet users in the United States is expected to grow from
approximately 63 million in 1998 to approximately 116 million by 2002.

The rapid growth of the Internet as a tool for communication, entertainment
and e-commerce has resulted in a proliferation of Web sites dealing with myriad
topics, products and services. Web sites such as America Online and Yahoo!
developed in response to Internet users' need for a simple means of navigating
the Internet. As the number of Internet users has increased, discrete user
groups have developed that share the same interests, such as people searching
for health and medical information, world and national news headlines and
personal investment information. These groups have, in turn, created a demand
for more focused subject specific Web sites. These subject specific Web sites
are a growing segment of the Internet. Among the most popular topics of these
types of Web sites is healthcare. A July 1999 research report published by Cyber
Dialogue, Inc., an industry research firm, estimates that approximately 25
million adults in the United States search online for health and medical
information, a number which Cyber Dialogue projects will grow to approximately
30 million in 2000.

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This demand for online healthcare content is creating many opportunities
for businesses to reach new consumers and expand their relationships with
existing customers. According to Cyber Dialogue, people that use the Internet to
retrieve online medical information are an attractive audience to businesses
because these individuals are typically older and more affluent than the general
online population. The Internet, unlike traditional media sources, allows
businesses to effectively target these consumers in an interactive manner.
Through banner ads and sponsorships, businesses are able to dynamically market
their goods and services in an efficient manner. According to Jupiter
Communications, online health and medical advertising in the U.S. is expected to
grow from $12.3 million in 1998 to $265.1 million in 2002. In addition to
providing a new marketing medium, the Internet has become a new distribution
channel for businesses, through which they can sell products to consumers.

We believe that the company that establishes a clear brand identity as a
reliable source of comprehensive online healthcare information and services will
have a significant opportunity to capture a leading share of the online health
audience as this industry continues to grow.

HEALTHGATE CONTENT

We believe we offer professionals, patients and consumers one of the most
reliable, objective, comprehensive and up-to-date collections of health and
medical information available on the Internet, currently totaling approximately
27 million different pages of healthcare information from approximately 300
sources. Our content libraries are updated regularly with the latest available
health and medical information, on a daily, weekly or monthly basis, or as
appropriate. We segment our content libraries into appropriate collections to
facilitate access for professionals, patients and consumers. However, content
from any collection is available to any type of user under a variety of pricing
structures. For example, a patient who might typically access one of our free
Healthy Living Webzines for general information about a particular medical
condition, illness or disease is also able to access relevant articles in the
professionally-oriented New England Journal of Medicine for a one time
transaction fee in order to explore the most recent and authoritative scientific
studies of that condition, illness or disease.

Generally, certain licensed content, including MEDLINE, CANCERLIT and
AIDSLINE, is free to users throughout the HealthGate Network. Other licensed
content, including PsycINFO, CINAHL and the EMBASE Cardiology Consultant, is
accessible for a fee on a transaction specific basis or through subscription
plans. In order to meet the needs of their communities of users, CHOICE Web site
clients and licensees of our syndicated content pay us to make selected portions
of our libraries available to their users.

We compile our online libraries in three ways: (1) licensing content from
healthcare and medical information providers; (2) developing proprietary
in-house content; and (3) licensing content from our activePress publishing
clients in conjunction with providing these clients with Web site development
and hosting services. These categories of content are described in the following
table:

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CONTENT
PROVIDER DESCRIPTION REPRESENTATIVE SOURCES DISTRIBUTION CHANNELS
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Independent Well known, authoritative - MEDLINE (National - healthgate.com
Licensors content sources licensed Library of Medicine) - CHOICE Web sites
from government agencies, - Adult Health Advisor - Syndicated third party
professional (Clinical Reference Web sites
associations, Systems) - healthgate.co.uk
not-for-profit - Continuing Medical
organizations, medical Education (Boston
centers, publishers and University School of
other third parties. Medicine)
- Reuters Medical News
(Reuters Health)
- EMBASE Cardiology
Consultant (Elsevier
Science B.V.)
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HealthGate Eleven different consumer - Healthy After 50 - healthgate.com
health magazines - Healthy Athlete - CHOICE Web sites
developed by HealthGate - Healthy Eating - Syndicated third party
specifically for - Healthy Man Web sites
Web-based distribution. - Healthy Mind - healthgate.co.uk
Updated weekly with new - Healthy Parenting
articles, written or - Healthy Rx
purchased by HealthGate. - Healthy Sexuality
- Healthy Traveler
- Healthy Woman
- Alternative Health
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activePress Full-text journals and - New England Journal of - nejm.org
Clients similar content from Medicine (Massachusetts - blackwell-synergy.com
traditional print Medical Society) - healthgate.com
publishers, converted for - British Journal of - CHOICE Web sites
Web access and hosted by Surgery (Blackwell - Syndicated third party
HealthGate's activePress Science) Web sites
unit for a fee. - healthgate.co.uk
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Licensed Content

This category includes well known, independent and authoritative health and
medical content licensed by us for distribution via the HealthGate Network. This
content is typically peer-reviewed and many of our licensed content sources are
recognized by healthcare professionals and academia for their high quality.
Content in this category includes the following types of information and
representative sources:

- bibliographic databases, such as MEDLINE, produced by the National
Library of Medicine; CANCERLIT, produced by the National Cancer
Institute; and EMBASE Drugs and Pharmacology, produced by Elsevier
Science B.V.;

- patient education and consumer health materials, such as the Merriam
Webster Medical Dictionary, the Advisor Series of over 3,000
informational brochures from Clinical Reference Systems and compilations
of information that we prepare on 100 of the most prevalent medical
conditions, illnesses and diseases and make available through our
Wellness Centers;

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- Continuing Medical Education programs, such as those produced by Boston
University School of Medicine;

- decision support materials, such as the Poisoning and Toxicology
Compendium published by Lexi-Comp, Inc.; and

- newsfeeds, such as Reuters Medical News and the Los Angeles Times
Syndicate.

All licensed content must meet certain criteria prior to being added to our
content libraries. The criteria used to evaluate the content include the content
provider's own review process, comparison with comparable sources and the
frequency of updates.

HealthGate Proprietary Content

This category currently includes eleven Web-based consumer health magazines
we produce called Healthy Living. The Webzines in the Healthy Living series
cover subjects such as men's health, women's health, parenting, nutrition,
travel medicine, sexuality, sports medicine, mental health, prescription and
over-the-counter drugs, alternative health and aging. Articles for these
publications are written by medical writers, physicians, dentists, dieticians
and nurses exclusively for us. These articles discuss current health trends,
newly published research findings, health-related lifestyle issues and late
breaking topics recommended by the Healthy Living Editorial Board. This
Editorial Board is comprised of five physicians affiliated with institutions
including Harvard University School of Medicine, Boston University School of
Medicine, Massachusetts General Hospital and Dana Farber Cancer Institute. In
order to assure accurate and high quality content, all articles are reviewed
prior to publication by medical editors and by our Editorial Board. Several
Healthy Living Webzines have been recognized for their quality by the American
Medical Writers Association, Tufts University School of Nutrition, Lycos and the
Disney Go Network.

activePress Content

This category currently includes the New England Journal of Medicine,
published by the Massachusetts Medical Society, and all medical, scientific and
technical journals published by the worldwide publishing units of Blackwell
Science. Through our activePress service, we convert these journals for delivery
through the Internet and provide access to the converted journals by developing
and hosting these publishers' Web sites. In addition to being paid a fee for our
activePress development, implementation and hosting services, we receive the
right to distribute these journals through our www.healthgate.com and
www.healthgate.co.uk Web sites. We are also able to distribute the Blackwell
Science journals throughout the rest of the HealthGate Network.

STRATEGIC AFFILIATIONS AND RELATIONSHIPS

We believe that strategic affiliations and relationships enable us to
acquire content more rapidly, develop and further distribute our products and
services, generate additional traffic on our own Web sites and CHOICE Web sites,
enhance the HealthGate brand and capitalize on additional revenue opportunities.
We have entered into strategic affiliations and relationships for healthcare
content, related products and services, marketing and online distribution and
syndication with the following companies:

Marketing and Distribution

Columbia Information Systems, Inc. In November 1999, we entered into a
three-year development agreement with Columbia Information Systems, Inc., a
subsidiary of Columbia/HCA Healthcare Corporation, to design, develop and
maintain customized, co-branded CHOICE Web sites for up to 280 Columbia/ HCA
hospitals and affiliates. In addition, we will design, develop and maintain a
health portal site for Columbia Information Systems. We will also provide
content and services to both Columbia Information Systems' health portal site
and its customized, co-branded CHOICE Web site product. The agreement provides
for an annual license fee of $3.5 million to be paid by Columbia Information
Systems for all products and services that we provide under the agreement. The
annual license fee is subject to prospective adjustment in certain events,
including the delivery by us of fewer than 200 or more than 280 customized,
co-branded

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CHOICE Web sites. However, if we deliver fewer than 200 customized, co-branded
CHOICE Web sites, the adjustment is limited to a minimum annual license fee of
$2.5 million. In addition, we will share advertising and sponsorship revenues
and certain e-commerce revenues. The agreement may be terminated without cause
by Columbia Information Systems on June 1, 2001, upon payment of a $1.0 million
termination fee to HealthGate. We began delivering customized co-branded CHOICE
Web sites pursuant to this agreement in December 1999 and we expect to have the
health portal site operational in 2000.

In November 1999, we entered into a separate three-year marketing and
reseller agreement with Columbia Information Systems under which Columbia
Information Systems agreed to endorse us as the preferred provider of patient
and consumer oriented health content for Web sites owned or operated by
Columbia/HCA hospitals and affiliates. We believe as an endorsed preferred
provider, it is more likely that Columbia/HCA hospitals and affiliates will use
our products and services. The agreement provides us, among other things, the
right to make a first offer to provide services for adding content to the
Columbia Information Systems' health portal site and any Web site owned or
operated by or affiliated with Columbia Information Systems or Columbia/HCA. We
also have the exclusive right to host on the Internet content provided to us by
healthcare providers owned, controlled or operated by any entity owned or
controlled by Columbia/HCA Healthcare Corporation. As of December 31, 1999, we
have delivered 34 customized co-branded CHOICE websites to Columbia/HCA
hospitals. To date, we have not hosted Columbia/HCA content. Further, Columbia
Information Systems may, for a commission, market and sell our CHOICE Web site
product to entities unaffiliated with Columbia/HCA, subject to our approval. In
connection with this agreement we issued a warrant to CIS Holdings for the
purchase of shares of our common stock.

Snap! LLC and Xoom.com, Inc. In October 1999, we entered into a three-year
strategic alliance agreement with Snap! LLC and Xoom.com Inc. Snap and Xoom.com
recently combined with certain assets of NBC to form NBC Internet and are now
both wholly-owned by NBC Internet. Under our strategic alliance agreement, Snap
will provide the services, described below, to promote our name, our
enterprise-based CHOICE Web sites, our www.healthgate.com Web site, 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. Beginning in March 2000, Snap
is featuring us on its www.snap.com Web site as the anchor tenant, giving us the
exclusive right to be the most prominent content provider, for seven of the
major content areas within the Health Channel. Both Snap's Health Channel and
the co-branded Snap/HealthGate Web site contain portions of our content
libraries and link to our www.healthgate.com Web site. If Snap adds new content
areas to its Health Channel, we have a right of first offer to provide
health-related content to the new areas as long as our content continues to be
of at least the same quality as that of our top competitors. We also have the
exclusive right to sell advertising on the co-branded Snap/HealthGate Web site.
Snap will display various promotions for us, at discounted rates, designed to
deliver click-throughs to the co-branded Snap/HealthGate Web site, our
enterprise-based CHOICE Web sites and our www.healthgate.com Web site from
Snap's www.snap.com Web site and other Web sites affiliated with Snap. Snap has
agreed to deliver a minimum number of these promotions during each year of the
agreement, but it also will be able to satisfy these minimums by displaying them
within the six months following the relevant year. If these minimums are not
delivered within those six months, Snap must refund a pro rata portion of the
fee paid by us under the agreement. In addition, Snap is running a series of
television ads on the NBC television network, featuring the health-related
content areas of its Web sites and our name, brand or services.

As part of this agreement, Xoom.com shall have the right to use information
we collect on users of the co-branded Snap/HealthGate Web site and, with our
consent, users of our www.healthgate.com Web site for Xoom.com's direct
marketing efforts. In exchange, Xoom.com will send up to one promotional email
per month for us. Xoom.com will also pay us a fee for each unique user who
purchases a product via e-commerce as a result of a Xoom.com email to
individuals for whom we provided user information to Xoom.com from our user
database.

GE Medical Systems. In June 1999, we entered into a development and
distribution agreement with GE Medical Systems, the medical diagnostic equipment
and services division of General Electric Company. Under the terms of this
agreement, we will develop and host GE Medical Systems branded enhanced versions
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of our CHOICE Web site product. GE Medical Systems will have an exclusive
worldwide right to sell these enhanced CHOICE Web sites to hospitals and other
patient care facilities. GE Medical Systems will also have the exclusive right
to sell our standard CHOICE Web site product to a select group of hospitals and
other patient care facilities. In addition, GE Medical Systems will have the
non-exclusive right to sell our standard CHOICE Web site product to other
healthcare institutions, subject, in certain cases, to our prior consent. GE
Medical Systems has a worldwide customer base of hospitals and other patient
care institutions and a sales and marketing organization dedicated to
healthcare. GE Medical Systems' customer base presents an attractive audience
for both our own CHOICE Web sites and the enhanced GE Medical Systems branded
versions of our CHOICE Web sites. Revenue derived from CHOICE Web sites sold by
GE Medical Systems will be shared by GE Medical Systems and us. The initial term
of our development and distribution agreement with GE Medical Systems is one
year and is renewable annually by mutual agreement. In connection with the
development and distribution agreement, we issued to General Electric Company a
warrant for the purchase of shares of our common stock.

Data General. We have a marketing relationship with Data General, an
information technology products and services company which was acquired by EMC
Corporation in October 1999. Data General has a current customer base of
approximately 2,500 hospitals and healthcare institutions worldwide and a sales
and marketing group dedicated to healthcare. Data General's healthcare customer
base presents an attractive target market for our CHOICE Web sites. As a value
added reseller, Data General offers our co-branded CHOICE Web site product to
complement the suite of products and services that it currently offers to its
customers, which products and services include electronic medical records
services, imaging and archival software and Web-authoring tools. Data General
distributes our CHOICE Web site product to its customers by purchasing it from
us and then reselling it to specific enterprises based on a CHOICE end-user
license agreement entered into between HealthGate and the specific enterprise.
We have granted Data General an exclusive right to resell our CHOICE Web site
product to a defined group of its current customers until March 31, 2000. This
exclusive right may be extended if Data General achieves sales targets, to be
determined by mutual agreement, by that date. Data General has agreed that,
during the term of the agreement, it will not market any other products or
services that are similar to our CHOICE Web site product. The initial term of
our agreement with Data General runs through June 2001 and is renewable for one
additional year by mutual agreement.

Content

Blackwell Science Ltd. Through our activePress service, we are the
exclusive developer on the Web of a collection of 270 full text journals for
Blackwell Science. Blackwell Science is the largest publisher of medical
societies' journals and one of the world's largest medical publishers. We have
converted and currently offer online 234 peer reviewed journal titles covered by
our initial agreement with Blackwell Science. As part of this service, we link
these journals with the MEDLINE bibliographic database and make them available
to Blackwell Science's individual and institutional subscribers through the
www.blackwell-synergy.com Web site, developed and hosted by us. Our hosting
services include storing, maintaining and updating all converted journals on our
computer system, providing links between these journals and other relevant
databases, providing secure transaction processing through the Web site and
managing advertising and sponsorship for the Web site. In addition to the
revenue derived from the development and hosting of the www.blackwell-
synergy.com Web site, we receive a fee for each online subscriber to a Blackwell
journal and a transactional fee for each Blackwell journal article purchased
through the HealthGate Network. We have the right to syndicate these journals
throughout the HealthGate Network and share revenue from syndication with
Blackwell Science. In September 1999, we entered into a new two-year activePress
agreement to expand and extend our activePress relationship with Blackwell
Science through December 2001.

New England Journal of Medicine. In April 1999, we entered into an
agreement with the Massachusetts Medical Society, publisher of the New England
Journal of Medicine, the most cited publication in medicine, to be the exclusive
developer and host of an enhanced Web site for the Journal using our activePress
service. Through this enhanced Web site, developed using our activePress
service, the Journal will offer electronic subscriptions and be able to provide
individual article delivery and links to the MEDLINE

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bibliographic database, thereby improving reader access to this important
resource. As part of this agreement, when this enhanced Web site is re-launched
we will have the right to distribute the Journal through our own Web sites,
through CHOICE Web sites, and, with the prior approval of the publisher, through
syndication to third party Web sites. In addition to the revenue derived from
the development and hosting of this Web site, we receive a fee for each online
subscriber to the Journal and a transactional fee for each Journal article
purchased by a non-subscriber. The initial term of our activePress agreement
with the Massachusetts Medical Society runs through April 2001 and is renewable
annually by mutual agreement. Until the Journal's enhanced Web site is
re-launched, which we currently expect to occur in the first half of 2000,
HealthGate users and Journal subscribers are able to access the Journal's
existing Web site through a link from HealthGate's own Web site. During this
interim period, HealthGate users will be able to access various portions of the
Journal's existing Web site, but only Journal subscribers will be able to access
the past issues of the Journal available online.

Consumer Version of the New England Journal of Medicine. In June 1999, we
entered into an agreement with the Massachusetts Medical Society to create a
Web-based consumer version of the New England Journal of Medicine. Under this
agreement, we will be the exclusive distributor of this unique version of the
Journal, although, beginning six months after delivering the first issue to us,
the Society may make this version of the Journal available on its own Web sites
as well. We will pay an annual fee of $500,000 for the Society to re-write all
original articles appearing each week in the Journal in common, non-technical
language. We, in turn, plan to use our technology platform to adapt and
integrate this content and to link it to MEDLINE, to drug databases, to other
content sources and to relevant sites on the Web. We currently intend to make
the publication available through subscription. We plan to sell both targeted
advertising and sponsorship on these pages. Revenue derived from the consumer
version of the Journal will be shared by the Society and us. We expect to
release the consumer version of the Journal in the first half of 2000. The
initial term of this agreement is two years from the date on which the Society
delivers the first issue to us and is renewable for two additional 18 month
periods by mutual agreement.

Products and Services

Boston University School of Medicine. We have an agreement with Boston
University School of Medicine to distribute Continuing Medical Education
programs developed by the School of Medicine through our own Web sites, through
our CHOICE Web sites and through licensees of our syndicated content. Boston
University is accredited by the Accreditation Council for Continuing Medical
Education to offer Category 1 CME credit. We include 34 different CME programs
from Boston University in our content libraries. We plan to develop additional
programs with Boston University through this relationship.

HealthStream, Inc. In September 1999, we entered into a continuing
education services agreement with HealthStream, Inc., a provider of computer and
Web-based education and training services for the healthcare industry. Under
this agreement we have created a Web site, hosted by HealthStream and co-branded
by both HealthStream and HealthGate, that allows us to distribute HealthStream's
Category 1 CME programs and other accredited continuing education programs for
nursing and allied health professionals to users of our www.healthgate.com Web
site and our enterprise-based CHOICE Web sites. We will share the revenue
generated from physicians and other healthcare professionals purchasing these
online programs. As part of this agreement, HealthStream will pay us a minimum
of $250,000 annually for, among other things, sponsorship on our own Web sites
and on our enterprise-based CHOICE Web sites. The initial term of our continuing
education services agreement with HealthStream is two years and is renewable
annually by mutual agreement. Pursuant to a separate marketing services
agreement with HealthStream, we have committed to spend $100,000 annually to
promote the co-branded HealthStream/HealthGate Web site. We have also agreed to
purchase a minimum of $150,000 of CME courses annually from HealthStream for
distribution to healthcare professionals for promotional purposes.

Physicians take CME courses in order to: (1) comply with state licensure
requirements; (2) qualify for lower insurance premiums; and (3) fulfill
membership requirements of professional associations. Generally, Category 1 CME
courses are considered by most physicians to be more valuable than other types
of CME

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courses. Approximately 20 hours of Category 1 credit is required annually by
most states for physician re-licensure.

Syndication

We have a syndication relationship with InteliHealth, a health-related Web
site, to distribute portions of our content libraries through a licensing
agreement. In addition to providing licensing fees to us, this agreement
provides for sharing advertising and sponsorship revenue generated through
InteliHealth's Web site. Through licensed syndication, we are able to leverage
the user base of this HealthGate Network Web site to drive additional traffic to
our content libraries in order to further increase awareness of the HealthGate
brand and develop additional advertising and sponsorship and e-commerce revenue
opportunities. Our name, embedded with a link to our www.healthgate.com Web
site, is displayed on each page viewed by the user accessing our syndicated
content through InteliHealth's Web site.

HEALTHGATE'S PRODUCTS AND SERVICES

We have established four distinct product and service offerings: (1) CHOICE
Web sites; (2) activePress services; (3) our own Web sites; and (4) content
syndication. The target groups for these products and services cover a broad
spectrum of customers and users, providing multiple revenue sources, as
summarized in the following chart.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
TARGET CUSTOMER AND
PRODUCTS AND SERVICES USER GROUPS REVENUE SOURCE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CHOICE Web sites Enterprises - Services
- Hospitals - Annual hosting fees
- Healthcare institutions - Development fees
- Integrated Delivery Networks - Licensing fees
- Businesses - Advertising and sponsorship
- Colleges and universities - E-commerce
- ----------------------------------------------------------------------------------------------
activePress service Publishers - Services
- Blackwell Science - Annual hosting fees
- Massachusetts Medical - Development fees
Society - E-commerce
- ----------------------------------------------------------------------------------------------
www.healthgate.com Individuals - Advertising and sponsorship
www.healthgate.co.uk - Professionals - E-commerce
- Patients
- Consumers
- ----------------------------------------------------------------------------------------------
Content Syndication Third party health information - Services
Web sites - Annual hosting fees
- InteliHealth - Development fees
- Licensing fees
- Advertising and sponsorship
- E-commerce
- ----------------------------------------------------------------------------------------------
</TABLE>

In addition, we have established an alliance with Snap and Xoom.com, to
supply portions of our content libraries to users of the Snap Web portal site
and to design, develop and host a co-branded Snap/HealthGate Web site. We
anticipate that our relationship with Snap will drive traffic to the co-branded
Snap/HealthGate Web site, resulting in additional traffic to our own
www.healthgate.com Web site and our enterprise-based CHOICE Web sites that we
host for hospitals. We believe that additional traffic to these sites will
increase awareness of the HealthGate brand and develop additional advertising,
sponsorship and e-commerce revenue opportunities.

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<PAGE> 12

Co-branded CHOICE Web sites for Enterprise Clients

Our CHOICE Web sites are customized, co-branded Web sites linked to an
enterprise's own Web site to provide an enterprise with the ability to offer
online healthcare information to its communities of users. We market CHOICE Web
sites to the following types of enterprises:

- Healthcare Institutions -- Healthcare Institutions include hospitals,
managed care organizations and physician groups. These institutions may
wish to provide online healthcare information to their staff and patients
and better market their services to the local community.

- Integrated Delivery Networks -- Integrated Delivery Networks are networks
of hospitals and clinics. Integrated Delivery Networks can utilize CHOICE
Web sites as part of their suite of services to achieve better brand
recognition while still maintaining the personalized level of service
from each individual component in their network.

- Corporate Entities -- Our CHOICE Web sites enable businesses to license
our content to complement their own information that they distribute on
the Web and the products and services they sell on the Web. In addition,
our CHOICE Web sites enable any business to provide its employees health
and wellness information through corporate intranets and extranets. By
providing information for health and wellness programs, businesses may be
able to lower their direct healthcare costs, reduce sick days and
increase worker productivity.

- Colleges and Universities -- Students, faculty and staff can use our
CHOICE Web sites to access information needed for research papers,
theses, dissertations and for information concerning their own health.

We establish co-branded Web sites customized for our CHOICE clients to
provide healthcare information from our content libraries and related services
tailored to the needs of the specific enterprise's users. Our content and
services are offered to the CHOICE client in separate modules so that the
enterprise client can choose to have all or individual segments of our content
libraries and services available through its CHOICE Web site. The three basic
content modules divide our content libraries into:

- a professional series, which offers clinically oriented content such as
MEDLINE;

- a patient series, which includes 3,000 different condition-specific
informational brochures; and

- a consumer series, featuring general introductory magazine articles from
our Healthy Living Webzines.

We are continually developing additional service modules for our CHOICE
clients. For example, in 1999 we added the following new module options:

- Printing Module for Patient Brochures. Allows printing of customized
patient information brochures using content from our content libraries
with a signature look and feel unique to the specific CHOICE customer,
using customized headers and footers, including organization name, logo,
physician name, contact information and other appropriate information.

- Resource Locator Module, with Content Sensitive Links. Allows
information retrieval on any of the hospital's physicians, facilities,
special services or programs, using the hospital's or independent
information databases, such as OneSource, a database of physicians.

We further customize the CHOICE Web site by designing it to be a seamless
component of the enterprise's existing Web site. We have developed a number of
templates for CHOICE Web site design from which we are able to conform the
design with the enterprise's own Web site. Because we use a standard format for
our content and have developed flexible Web site templates, we are generally
able to bring CHOICE Web sites online within 10 to 15 business days of signing
an agreement with a CHOICE client.

activePress Service for Publishers

Our activePress service, which was launched in 1998, provides a full
service Web-based solution to publishers and other parties that wish to offer
Web-based access to print materials or databases. Through this
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<PAGE> 13

service, healthcare publishers can reach an Internet audience through Web sites
that we develop and host. The activePress service utilizes our existing
technology platform and expertise to develop and host Web sites, convert the
publisher's information for the Internet and link the published information with
relevant databases, such as MEDLINE, enabling the publisher to deliver an
enhanced electronic version of the print publication to subscribers,
institutions and authorized third parties. As a result of these relationships,
we also hold Web hosting rights to these publications, requiring anyone seeking
an online article from one of these journals to access the publication either
through the activePress enabled site or through the HealthGate Network.

activePress service revenue includes fees for converting, hosting and
storing information and providing development, support and maintenance.
Additionally, transactional revenue is derived from fees associated with users'
access to the publisher's content. These fees, which may be paid by the user or
the publisher, are derived on a per subscriber, per page or per article basis.

Blackwell Science and Massachusetts Medical Society, the publisher of the
New England Journal of Medicine, are currently clients of our activePress
service. See "-- Strategic Affiliations and Relationships -- Content," above.

The www.healthgate.com and www.healthgate.co.uk Web Sites

We provide healthcare information, products and services through our own
Web sites, www.healthgate.com in the United States and www.healthgate.co.uk in
the United Kingdom. The www.healthgate.com Web site, targeted to a wide range of
users, was the first to provide free Web access to the complete MEDLINE
database. This site provides a range of medical information, from basic
background information on general health matters, wellness, illnesses and
diseases to in-depth scientific research on specific medical conditions, from a
variety of licensed and proprietary content sources. The content available on
this site is divided into collections targeted to professionals, patients or
consumers. However, content from all collections is available to any type of
user. For example, a patient can access an article on a specific medical
condition in the professionally oriented New England Journal of Medicine.
Content sources include patient education and wellness information,
bibliographic databases, Continuing Medical Education programs and decision
support materials.

The healthgate.co.uk site, launched in May 1998, is our first
country-specific Web site. In addition to internationally recognized sources of
medical information, such as MEDLINE, this site provides access to content of
specific interest to users in the United Kingdom. We use our existing technology
platform to provide easy access to the information on this site. We also use our
technology platform to conform our content to local cultural and language
nuances.

Users may access portions of our content libraries on our own Web sites for
free. Other licensed content, such as PsycINFO, CINAHL, the EMBASE Cardiology
Consultant, and articles from the journals we make available, are available for
a fee on a transaction specific basis.

Content Syndication

We selectively syndicate portions of our content libraries to InteliHealth,
a health-related Web site, pursuant to a licensing agreement. Through
syndication, we are able to drive additional traffic to the HealthGate Network
in order to further increase awareness of the HealthGate brand and develop
additional advertising, sponsorship and e-commerce revenue opportunities. Our
name, embedded with a link to our www.healthgate.com Web site, is displayed on
each page viewed by the user accessing our syndicated content through
InteliHealth's Web site. In addition to generating revenue from licensing fees
for the syndication of our content, this syndication arrangement provides for
sharing advertising and sponsorship revenue generated through InteliHealth's Web
site. To date, however, we have only realized revenue from licensing fees and
have not recognized any revenue from advertising and sponsorship or e-commerce
on InteliHealth's Web site.

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<PAGE> 14

Snap Web Portal Alliance

We provide access to selected portions of our content libraries to users of
www.snap.com, a Web portal site. Web portal sites aggregate content from various
sources and make the content, or links to the content, available on a single Web
site, organized into related groupings of content, typically called channels.
Beginning in March 2000, HealthGate is the anchor tenant, or most prominent
provider of healthcare information, for seven of the major content areas of
Snap's Health Channel. Our name is prominently displayed throughout the Snap
Health Channel. Users of the Snap Health Channel see selected portions of our
content libraries on the Snap Web site. When Snap users wish to access a
complete article, not just the portion available on the Snap Web site, they link
from the Snap Health Channel to a co-branded Snap/HealthGate Web site that we
have designed, developed and host on our www.healthgate.com Web site.

We anticipate that our relationship with Snap will drive traffic to the
co-branded Snap/HealthGate Web site, resulting in additional traffic to our own
www.healthgate.com Web site and our enterprise-based CHOICE Web sites that we
host for hospitals. We believe that additional traffic to these sites will
increase awareness of the HealthGate brand and develop additional advertising,
sponsorship and e-commerce revenue opportunities. In addition to promoting the
HealthGate brand, we have exclusive rights to sell advertising on the co-branded
Snap/HealthGate Web site.

ADVERTISING AND SPONSORSHIP

The depth and breadth of our content and the variety of our distribution
channels developed for specific audiences of healthcare consumers offer
advertisers and sponsors opportunities to target their messages to particular
user groups. Advertisers may target groups by demographics such as gender and
geographic location or advertise more broadly to the general population of
health information users. The HealthGate Network's underlying technology
platform recognizes a wide range of information about individual users. This, in
turn, allows us to selectively target banner advertisements to users viewing
specific topics or content sources. For example, we can place a banner
advertisement for Tylenol on users' screens searching our content for
information on headaches. We also intend to offer advertisers the opportunity to
employ one-to-one advertising or niche marketing. This type of advertising, done
after we first obtain the user's permission, will allow advertisers to target
individual users based on registration details, both through banner advertising
and through e-mail.

We track banner advertising impressions and click-through rates for these
advertisements and issue a NetGravity Traffic Report weekly to our advertisers.
Statistics provided to both potential and current advertisers about our traffic
patterns are audited by Audit Bureau of Circulation Interactive to assure
accuracy.

We offer sponsorship opportunities to companies that wish to target
specific topics, content sources or CHOICE Web sites. Sponsorships are designed
to support broad marketing objectives, including branding and product
introductions, generally on an exclusive basis. For example, sponsorships allow
businesses to have their name, message or products appear together with a link
to their own Web site in every page of a Healthy Living Webzine, a CHOICE Web
site or a condition specific Wellness Center. Sponsorships are sold for specific
periods of time and portions of the Web site.

Medical Self Care Agreement

In December 1999 we entered into an E-Commerce/Sponsorship Agreement with
Medical Self Care, Inc., the owner of the www.selfcare.com Web site that sells
health-related products and services. Under the agreement we have jointly
developed a co-branded HealthGate/SelfCare Web site which provides all the
features and functionality of SelfCare's Web site. For the 37 month term of the
agreement, we have agreed to provide on our www.healthgate.com Web site a
minimum number of promotions which will link directly to the HealthGate/SelfCare
Web site. Additionally, we have agreed to include on a number of our CHOICE Web
sites promotions which will also link directly to the HealthGate/SelfCare Web
site. SelfCare will be the preferred e-commerce provider for these selected
CHOICE Web sites. The agreement provides for SelfCare to make annual cash
payments to us of $1.0 million in the first year, $7.1 million in the second
year and $8.4
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<PAGE> 15

million in the third year. In addition, for our first year services, SelfCare
issued to us shares of its stock. The payments are subject to reduction or
credits for future periods for failure to deliver the minimum number of CHOICE
Web site promotions for the HealthGate/SelfCare Web site.

E-COMMERCE

Currently, we use e-commerce to provide portions of our licensed content,
including PsycINFO, CINAHL, the EMBASE Cardiology Consultant and full-text
journals via the activePress service on a pay per view or transaction fee basis.
In addition, we provide users the opportunity to purchase textbooks and other
print products from Amazon.com, a Web-based bookstore, and photocopies of
articles not available from our collection of full-text journals from
Infotrieve, a document delivery service. Also, users can subscribe to certain
fee-based content sources on a monthly basis.

We believe that significant opportunities exist to provide additional
healthcare related products to professionals, patients and consumers using our
technology platform and the HealthGate Network. In order to pursue these
opportunities, we are exploring options for expanding the products and services
currently offered using e-commerce. For example, as part of our agreement with
SelfCare, we will share in e-commerce revenues generated from sales on the
co-branded HealthGate/SelfCare Web site after we have provided a specific number
of click-throughs to this Web site. We will continue to explore further
opportunities in this area.

SALES AND MARKETING

We sell our products and services through our own direct sales force and
through value added resellers. Our direct sales force consists of two teams: (1)
CHOICE Web site sales; and (2) advertising and sponsorship sales. We divide the
United States and Canada into seven direct sales regions for CHOICE Web site
sales and assign direct sales representatives to each region. Our CHOICE Web
site sales team consists of two groups, outside sales and inside sales. The
outside sales group is responsible for delivering focused and targeted marketing
for CHOICE Web sites, content syndication customers and other customers,
increasing consumer awareness of the HealthGate brand and establishing campaigns
to develop brand loyalty. Our inside sales group is responsible for facilitating
the entire sales process, identifying leads through telemarketing and supporting
our customers. The inside sales group's support functions include maintenance of
customer and prospect databases, online demonstration sessions, preparation of
presentations and proposals and development of relationships with current and
future clients. Our advertising and sponsorship sales efforts are conducted from
our headquarters in Burlington, Massachusetts.

In addition to our direct sales force, we have established a value added
reseller relationship with Data General. Through this relationship, we leverage
the cross selling opportunities offered by Data General's worldwide healthcare
sales force in their sales calls to their customer base of approximately 2,500
hospitals and healthcare institutions worldwide.

In June 1999, we entered into a development and distribution relationship
with GE Medical Systems pursuant to which GE Medical Systems will be able to
sell our CHOICE Web site product and GE Medical Systems branded enhanced
versions of our CHOICE Web site product through its worldwide sales force into
its worldwide customer base of hospitals and other patient care facilities. See
"-- Strategic Affiliations and Relationships -- Marketing and Distribution,"
above.

We presently market our products and services through traditional means,
including direct mail, print advertising and telemarketing. We also use
Web-based banner advertising and sponsorship on our own Web sites, portions of
the HealthGate Network and other third-party sites, targeted linking on the
HealthGate Network and e-mail alerts to registered users of our own Web sites.
Additionally, we have agreed to purchase a significant amount of advertising and
sponsorship on Snap.com and related Web sites as part of our strategic alliance
agreement with Snap, as described under "-- Strategic Affiliations and
Relationships -- Marketing

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<PAGE> 16

and Distribution," above. We intend to purchase additional advertising and
sponsorship on certain CHOICE Web sites. We are also considering adding radio
and television advertising to our marketing efforts.

CUSTOMER SERVICE

We are committed to providing a high level of service and support to our
clients and users. We believe that customer service is important to our ability
to attract and retain clients and users. We provide service and support via a
toll-free telephone number, e-mail and, on the Web site itself, through help
screens and Frequently Asked Questions (FAQ) areas. The customer service staff
includes medical librarians who are experienced in medical information
retrieval.

TECHNOLOGY PLATFORM

Our technology, consisting of internally developed and commercially
available software programs, is designed to leverage the benefits of modular
components so that all elements of our various content libraries and other
databases can be channeled into one unified platform. From this platform, we can
quickly and easily adapt all of this content and other data for numerous online
applications, such as: (1) standardizing the appearance of disparate content
sources; (2) integrating advertising and sponsorship; and (3) facilitating
information retrieval for our customers and users. In addition, the modular
composition of our technology platform enables us to reuse, update, scale,
extend and replace components as needed. As content is added to our technology
platform and moves through the various modules during processing, each
individual module adds specific and unique features and functionality to the
content.

There are three specific groups of modules: (1) Content Standardization;
(2) Content Enhancement; and (3) Content Delivery. Unless otherwise noted, all
modules are either available through the HealthGate Network or through our
activePress service. We plan to integrate modules presently available only
through our activePress service into the HealthGate Network.

Content Standardization

Content Normalization. The content normalization module converts original
content, regardless of format supplied by the content provider, into a single,
consistent Extensible Markup Language (XML) format. XML is a markup language
used to identify structures and their roles within a document. For example,
words within a document are classified as structures. The specific words in the
document's footnotes are indicative of the role these words, or structures, have
in the document. Meta-information, or information describing the content
supplied by the provider, is retained. However, this module adds additional
tagging to the provider-supplied meta-information for use in the searching,
topics and dynamic formatting modules. The use of XML in the content
normalization module enables us to offer, through other modules, multiple
product offerings with different features, while using the same content from the
same repository.

Content Analysis. The content analysis module attaches value-added
information to content. For example, footnotes, endnotes or bibliographies from
journal articles are linked to abstracts or more detailed information found in
other content sources such as MEDLINE. Features under development include the
linking of drug trade names to a pharmaceutical source, identifying company
names and providing appropriate links to other sources and associating content
with various conditions, illnesses or related topics.

Content Matching. The content matching module integrates three separate
databases enabling them to interact and relay information to each other as a
user moves through our various content sources. The different databases are
Users, Content Sources and Usage. The content matching module tracks individual
users (Users) through the HealthGate Network, recording what content they use
(Content Source), and recording the transaction for later use (Usage).

Content Enhancement

Authentication, Access Control and E-commerce. The authentication, access
control and e-commerce module confirms a user's identity, allows the user access
to the various content sources and records any

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transaction or usage for that user. This module is analogous to a content store,
offering access to content on a fee per use basis. These sales can be via a
one-time credit card transaction or through institutional access. This module
allows us to package content through different methods to different user groups
using various pricing models. For example, information from a particular journal
can be sold to the user by year, by the issue, by the article, or even by the
page.

Searching. The searching module, using our ReADER(R) search software that
provides a natural language searching tool, enables professionals, patients and
consumers access to content without regard for the level of their expertise,
knowledge of medical terms, or knowledge of specific database searching
commands. For example, if a user searches the MEDLINE database for the common
concept "CAT Scan," the ReADER tool would translate that phrase into a search
for the medical term "Tomography, X-Ray Computed" yielding more relevant
results.

Topics. The topics module creates topic hierarchies or organizes specific
content for the professionals, patients, or consumers according to pre-defined
algorithms. Topics are created using both searching and keyword technologies.
Patient and consumer topics are organized by medical condition. Professional
topics are organized by medical specialty. Topics allow for quick access to the
latest information without requiring the user to search multiple content
sources.

Advertising. The advertising module enables us to target specific
advertisements to individuals or groups based on demographic information, user
registration, or specific content sources. For example, a user searching for
information on headaches could be shown an advertisement for Tylenol. This
module also handles scheduling of advertisements, reporting of results to
advertisers and the placement and screening of advertisements.

Personalization. The personalization module enables content to be
customized for the individual user. Among the features provided through this
module are user-managed subscriptions and commerce, e-mail updates and saved
searches. A new feature under development will allow a user to create a
customized Web page displaying only information based upon a user provided
profile.

Relevant Information Linking. The relevant information linking module
enables dynamic cross-referencing or linking among related content and features.
For example, content targeted for the physician can be linked to corresponding
patient education materials, enabling the physician to produce a customized
brochure handout, written specifically for the patient, without accessing
multiple content sources.

Community Building. Currently under development, the community building
module will enable users to interact and establish relationships with other
users possessing similar health-oriented interests. For example, discussion
groups can be formed around specific conditions, individual journal articles, or
treatment options. An option currently available called "Send to a Friend"
enables users to send e-mail, with a link to a specific article from content
available from HealthGate, to friends or colleagues.

Content Delivery

Dynamic Formatting. The dynamic formatting module allows for active layout
of content for presentation to the user. Formatting can be based upon a specific
user's registration information, the type of content the user is viewing, the
CHOICE Web site and access point. The utilization of Extensible Style Language
(XSL) allows for quick and efficient formatting modifications. For example, XSL
converts or transforms information stored in XML into other data formats, such
as Hypertext Markup Language (HTML), used to construct most Web pages. This
module gives us the option of having multiple product offerings with different
features, while using the same content from the same repository.

COMPETITION

The market for Internet services and products is relatively new, intensely
competitive and rapidly changing. With no substantial barriers to entry, over
15,000 Web sites presently offer users healthcare content and products and
services, and we expect that competition will continue to grow. We compete,
directly and

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<PAGE> 18

indirectly, for subscribers, consumers, content and service providers,
advertisers, sponsors and acquisition candidates with a variety of companies.
Presently, our competitors include the following types of companies:

- publishers and distributors of traditional print media targeted to
healthcare professionals, patients and health-conscious consumers, many
of which have established or may establish their own Web sites;

- large healthcare information systems companies, such as McKesson HBOC and
Shared Medical Systems;

- online services or Web sites targeted to the healthcare industry
generally, such as Healtheon/WebMD, Medscape, InteliHealth and
drkoop.com;

- public sector and non-profit Web sites that provide healthcare
information without advertising or commercial sponsorships, such as the
National Library of Medicine and the American Medical Association;

- Web sites, such as Yahoo!, America Online and Lycos, which provide access
to healthcare related information and services; and

- vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging.

Many of our competitors enjoy significant competitive advantages including:
greater resources that can be devoted to the development, promotion and sale of
their products and services; longer operating histories; greater brand
recognition; and larger customer bases.

We believe that the principal competitive factors in our target markets are
comprehensiveness of content, integration with existing technologies, brand name
recognition, performance, ease of use, pricing, features and quality of support.
We also believe that we are the only provider among our competitors to serve all
of our target markets and that the combination of the depth and breadth of our
content libraries and the flexibility of our technology platform allows us to
compete favorably in each of our target markets. See "-- Risk Factors -- We face
intense competition in providing our Internet-based healthcare information
products and services and we may not be able to compete effectively," below.

We presently syndicate portions of our content to other competing health
related Web sites, including InteliHealth. We believe that the benefits of
content syndication, including additional traffic to the HealthGate Network,
increased awareness of the HealthGate brand and additional advertising and
sponsorship and e-commerce opportunities, outweigh the disadvantages of a
potential increase in competition that may result from our content syndication
to these competitors. See "-- HealthGate's Products and Services -- Content
Syndication," above.

GOVERNMENTAL REGULATION

Currently, there are a number of laws that regulate communications or
commerce on the Internet. Federal, state, local and foreign governments and
agencies are considering laws and regulations that address issues such as user
privacy, pricing, online content regulation, taxation and the characteristics
and quality of online products and services. In addition, several
telecommunications carriers have petitioned the Federal Communications
Commission to regulate Internet service providers and online service providers
in a manner similar to long distance telephone carriers and to impose access
fees on these providers. Regulation of this type, if imposed, could
substantially increase the cost of communicating on the Internet.

Internet user privacy has become an issue both in the United States and
abroad. The Federal Trade Commission and government agencies in some states and
countries have been investigating certain Internet companies regarding their use
of personal information. Any regulations imposed to protect the privacy of
Internet users may affect the way in which we currently collect and use personal
information.

As is typical with most Web sites, our Web sites place "cookies" on a
user's hard drive without the user's knowledge or consent. Although we do not
currently do so, this technology enables Web site operators to target specific
users with a particular advertisement and to limit the frequency with which a
user is shown a
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particular advertisement. Certain currently available Internet browsers allow
users to modify their browser settings to remove cookies at any time or to
prevent cookies from being stored on their hard drives. If this technology is
reduced or limited, the Internet may become less attractive to advertisers and
sponsors.

It may take years to determine the extent to which existing laws related to
issues such as intellectual property ownership and infringement, libel,
obscenity and personal privacy are applicable to the Internet and for new laws
to be adopted. Any new laws or regulations relating to the Internet, or the
application or interpretation of existing laws, could slow the growth in the use
of the Internet, decrease demand for our Web sites or otherwise materially
adversely affect our business. See "-- Risk Factors," below.

INTELLECTUAL PROPERTY

We regard our intellectual property as important to our business, and we
rely upon trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
strategic partners and others to protect our rights in this property. Effective
trademark, copyright and trade secret protection may not be available in every
country in which our products and media properties are distributed or made
available through the Internet. Therefore, we can not guarantee that the steps
we have taken to protect our proprietary rights will be adequate to prevent
infringement or misappropriation by third parties or will be adequate under the
laws of some foreign countries which may not protect our proprietary rights to
the same extent as do the laws of the United States.

We license almost all of our content from third parties. Although under
most of our license agreements, the licensor has agreed to defend and indemnify
us for losses with respect to third-party claims that the licensed content
infringes third-party proprietary rights, we can not assure investors that these
provisions will be adequate to protect us from infringement claims.

We also rely on a variety of technologies that are licensed from third
parties, including our database and Internet server software, which is used for
our Web sites to perform key functions. These third-party licenses may not be
available to us on commercially reasonable terms in the future. The loss of or
inability to maintain any of these licenses could delay the introduction of
software enhancements, interactive tools and other features until equivalent
technology can be licensed or developed. See "-- Risk Factors -- Our business
may suffer if we are not able to effectively protect our intellectual property
rights," below.

EMPLOYEES

As of December 31, 1999, we had a total of 87 full-time employees. Of these
employees, 43 serve in research and development, 11 serve in administration and
33 serve in sales and marketing. None of our employees is represented by a labor
union. We consider our relations with employees to be good.

RISK FACTORS

HealthGate's business involves significant risks and uncertainties,
including those described below.

RISKS RELATED TO OUR BUSINESS

Our quarterly operating results may fluctuate significantly which may
affect the market price of our common stock in a manner unrelated to our
long-term performance. We expect our quarterly revenue, expenses and operating
results to fluctuate significantly in the future, which could affect the market
price of our common stock in a manner unrelated to our long-term operating
performance. Quarterly fluctuations could result from a number of factors,
including:

- the amount and timing of costs to expand our operations;

- addition of new content providers or changes in our relationships with
our most important content providers, which may require more expenditures
in the early stages of these relationships;

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- the level of usage of the HealthGate Network which could impact, among
other things, recognition of revenue in connection with advertising and
sponsorship sales that are tied to the number of times advertisement or
sponsorship banners are displayed to users;

- seasonality of spending by the advertising industry, which is generally
lower in the first and third calendar quarters; and

- the amount and timing of expenses required to integrate operations and
technologies from acquisitions, joint ventures or other business
combinations or investments.

We expect to increase the level of activity and spending in our operations,
particularly in sales and marketing and research and development. We base our
expense levels in part upon our expectations concerning future revenue and these
expense levels are predominantly fixed in the short-term. If we have lower
revenue than expected, we may not be able to reduce our spending in the
short-term in response. Any shortfall in revenue would have a direct impact on
our results of operations. In this event, the price of our common stock may
fall. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," below.

Our business prospects will suffer if we are not able to successfully build
recognition for the HealthGate brand. We believe that increasing awareness of
the HealthGate brand is important to our ability to attract additional users,
customers, advertisers, sponsors and strategic partners. We believe the
importance of brand recognition will increase in the future as the number of Web
sites providing healthcare information products and services increases. We plan
to allocate significant resources to develop and build brand recognition by
expanding the reach of the HealthGate Network, primarily through increasing the
number of CHOICE Web sites, promoting these CHOICE Web sites and our own Web
sites and through our alliance with Snap and Xoom.com. However, we can not
assure you that our efforts to build brand awareness will be successful.

We face intense competition in providing our Internet-based healthcare
information products and services and we may not be able to compete
effectively. The market for Internet services and products is relatively new,
intensely competitive and rapidly changing. Since the Internet's
commercialization in the early 1990s, the number of Web sites on the Internet
competing for users' attention has proliferated with no substantial barriers to
entry. There are more than 15,000 Web sites offering users healthcare content,
products and services, and we expect that competition will continue to grow.
With low barriers to entry in a relatively new and rapidly evolving industry,
the types of entities against which we compete, directly and indirectly, for
subscribers, consumers, content and service providers, advertisers, sponsors and
acquisition candidates ranges from traditional healthcare print publishers and
distributors, to health focused and general Web sites, to large healthcare
information companies.

We also compete with other Web sites, traditional print media and other
sources of healthcare information for a share of total advertising budgets. If
advertisers perceive the Internet or the HealthGate Network to be limited or
ineffective advertising media, they may be reluctant to devote a portion of
their advertising budget to Internet advertising or to advertising on the
HealthGate Network. See "Business -- Competition," above.

The success of our business will depend on our ability to sell a
substantial number of co-branded CHOICE Web sites. A key element of our
strategy is to expand the HealthGate Network by establishing co-branded CHOICE
Web sites. We commercially introduced our CHOICE Web site product in early 1999
and as of December 31, 1999 had delivered 84 CHOICE Web sites to enterprise
clients, including 34 to Columbia Information Systems. We cannot guarantee that
we will be successful in selling advertising or sponsorship on these or
additional sites in the future.

Our CHOICE product is relatively new and unproven and we can not assure you
that we will be able to sell additional CHOICE products without lowering the
price of the product. Our CHOICE product is an

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important part of our business model and if we are unable to sell a substantial
number of CHOICE Web sites, our business prospects, results of operations and
the market price of our common stock could be materially adversely affected.

Our business is expanding rapidly and our business prospects may suffer if
we are not able to effectively manage the growth of our operations and
successfully attract and retain key personnel. Since we began our business in
1994, we have significantly expanded our operations over a short period of time.
We have grown from three employees at the end of 1994 to 87 full-time employees
as of December 31, 1999, and we expect to add a significant number of additional
personnel in the near future. Several members of our senior management joined us
in 1999, including Mary B. Miller, our Chief Financial Officer, and Richard J.
Fecher, our Vice President of Sales. We believe the successful integration of
our senior management will be critical to our ability to effectively manage our
growth. Our rapid growth has placed a substantial strain on our management,
operational and financial resources and systems. Our future success will depend
in large part on our ability to implement, improve and effectively utilize our
operational, management, marketing and financial resources and systems and train
and manage our employees. We can not guarantee that our management team will be
able to effectively manage the growth of our operations or that our systems,
procedures and controls will be adequate to support our expanding operations.

Our future success also depends on our ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, editorial,
marketing and customer service personnel. Competition for highly-skilled
personnel is intense. In particular, skilled technical employees are highly
sought after in the Boston area, and we can not guarantee that we will be able
to attract or retain these employees.

We may not be able to successfully implement our growth and acquisition
strategy. Key elements of our growth strategy include making acquisitions of,
or significant investments in, complementary companies, products or technologies
to increase our content libraries, technological capabilities and customer base
and entering into other strategic affiliations. To date, we have not made any
major acquisitions or investments. For our acquisition strategy to be
successful, we will need to identify content sources, technologies and
businesses that are complementary to ours, integrate disparate technologies and
corporate cultures and possibly manage a geographically dispersed company. We
may also lose key employees while integrating any new companies. For these
reasons, we may not be successful in integrating any acquired businesses or
technologies and may not achieve anticipated revenue and cost benefits.
Simultaneously pursuing acquisitions, strategic affiliations and other elements
of our growth strategy could be expensive, time consuming and may strain our
resources. If we are not successful in implementing our growth and acquisition
strategy, our business, results of operations and the market price of our common
stock could be adversely affected.

In addition, we may be required to amortize significant amounts of goodwill
and other intangible assets in connection with future acquisitions, which could
adversely affect our results of operations and the market price of our common
stock.

The success of our business will depend on our ability to sell advertising
on the HealthGate Network. We derived approximately 20% of our revenue in the
year ended December 31, 1999 from the sale of general and targeted banner
advertising and sponsorships of discrete topic areas on the HealthGate Network.
Under our sponsorship arrangements, a sponsor's name or a message selected by
the sponsor is included on each page of the topic area together with a
click-through link to the sponsor's Web site.

Our future success depends on our ability to generate and increase revenue
from advertising and sponsorship which will depend on a number of factors,
including:

- the development of the Internet as an advertising medium;

- the amount of traffic on the HealthGate Network and the number of
registered and unique users of our content; and

- our ability to achieve and demonstrate registered and unique user
demographic characteristics that are attractive to sponsors and
advertisers.

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The performance of our Web sites and computer systems is critical to our
business and our business will suffer if we experience system failures. The
performance of our Web sites and computer systems is critical to our reputation
and ability to attract and retain users, customers, advertisers and subscribers.
We provide products and services based on sophisticated computer and
telecommunications software and systems, which often experience development
delays and may contain undetected errors or failures when introduced into our
existing systems. Although we have only experienced one minor unscheduled
service interruption of approximately four hours since the beginning of 1998, we
can not guarantee that we will not experience more significant service
interruptions in the future. We are also dependent upon Web browsers and
Internet service providers to provide Internet users access to our Web sites.
Many of them have experienced significant outages in the past and could
experience outages, delays and other difficulties in the future due to system
failures. We also depend on certain information providers to deliver information
and data feeds to us on a timely basis. Our Web sites could experience
disruptions or interruptions in service due to the failure or delay in the
transmission or receipt of this information. System errors or failures that
cause a significant interruption in the availability of our content or an
increase in response time on our Web sites could cause us to lose potential or
existing users, customers, advertisers or subscribers and could result in damage
to our reputation and brand name or a decline in our stock price.

In March 1999, we entered into an Internet Data Center Services Agreement
with Exodus Communications, Inc. to house all of our central computer facility
servers at Exodus's Internet Data Center in Waltham, Massachusetts. We do not
presently maintain fully redundant systems at separate locations, so our
operations depend on Exodus's ability to protect the systems in its data center
against damage from fire, power loss, water damage, telecommunications failure,
vandalism and similar events. Although Exodus provides comprehensive facilities
management services, including human and technical monitoring of all production
servers, Exodus does not guarantee that our Internet access will be
uninterrupted, error-free or secure. We have also developed a disaster recovery
plan to respond to system failures. We can not guarantee that our disaster
recovery plan is capable of being implemented successfully. We can not guarantee
that our insurance will be adequate to compensate us for all losses that may
occur as a result of any system failure.

We retain confidential customer information in our database and if we fail
to protect this information against security breaches we may lose customers. We
retain confidential customer information in our database. Therefore, it is
critical that our facilities and infrastructure remain secure and that they are
perceived by consumers to be secure. Despite the implementation of security
measures, our infrastructure may be vulnerable to physical break-ins, computer
viruses, programming errors or similar disruptive problems. A material security
breach could damage our reputation or result in liability to us. We believe that
maintaining the trust of our customers is important for us to be able to grow
our business and, therefore, we believe that any damage to our reputation or
liability arising from one or more security breaches could adversely affect our
business, results of operations and the market price of our common stock.

Our business prospects may suffer if we are not able to keep up with the
rapid technological developments in the Internet industry. The Internet
industry is characterized by rapid technological developments, evolving industry
standards, changes in user and customer requirements and frequent new service
and product introductions and enhancements. The introduction of new technology
or the emergence of new industry standards and practices could render our
systems and, in turn, our products and services, obsolete and unmarketable or
require us to make significant unanticipated investments in research and
development to upgrade our systems in order to maintain the marketability of our
products. To be successful, we must continue to license or develop leading
technology, enhance our existing products and services and respond to emerging
industry standards and practices on a timely and cost-effective basis. If we are
unable to successfully respond to these developments, particularly in light of
the rapid technological changes in the Internet industry generally and the
highly competitive market in which we operate, our business, results of
operations and the market price of our common stock could be adversely affected.

We may be subject to liability for information retrieved from our Web
site. As a publisher and distributor of online information, we may be subject
to third party claims for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of information
supplied on our Web sites. We could also become liable if confidential
information is disclosed inappropriately. These types of
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claims have been brought, sometimes successfully, against online service
providers in the past. We could be subject to liability with respect to content
that may be accessible through our Web sites or third party Web sites linked
from our Web sites. For example, claims could be made against us if material
deemed inappropriate for viewing by children could be accessed through our Web
sites or if a professional, patient or consumer relies on healthcare information
accessed through our Web sites to their detriment. Even if any of the kinds of
claims described above do not result in liability to us, we could incur
significant costs in investigating and defending against them and in
implementing measures to reduce our exposure to this kind of liability. Our
insurance may not cover potential claims of this type or may not be adequate to
cover all costs incurred in defense of potential claims or to indemnify us for
all liability that may be imposed.

We depend on our content providers, as the success of our business depends
on our ability to provide a comprehensive library of healthcare
information. With the exception of our Healthy Living series of Webzines, we
license all of our content from third parties. With a few exceptions, these
licenses are generally non-exclusive, have an initial term of one year and are
renewable. In addition, a significant number of these licenses permit
cancellation by the content provider upon 30 to 90 days notice. We can not
guarantee that we will be able to continue to license our present content or
sufficient additional content to provide a diverse and comprehensive library. In
the future, we may not be able to license content at reasonable cost. In
addition, one or more of our publishers or other content providers may grant one
of our competitors an exclusive arrangement with respect to a significant
database or periodical, or elect to compete directly against us by making its
content exclusively available through its own Web site. Presently, we believe it
would be difficult to replace the New England Journal of Medicine and the
journals made available by Blackwell Science with other journals of the same
reputation. These sources are committed to us through April 2001 and December
2001, respectively, but if either of them chooses not to renew the agreements
they have with us, our business could be adversely affected because the quality
of our content is important in attracting online users, advertisers and CHOICE
customers.

The majority of our revenue has historically been derived from a few
customers and the loss of any of these customers could adversely affect our
business. Historically, we have generated a substantial portion of our revenue
from a few customers. For the year ended December 31, 1999, two customers,
Blackwell Science, one of our largest stockholders, Columbia/HCA Healthcare
Corporation, also one of largest stockholders, accounted for 24% and 18%,
respectively, of our total revenue. We expect to continue to generate a
substantial portion of our revenue in the near future from these customers and
the loss of either of them could adversely affect our business. Our most recent
agreement with Blackwell Science runs through December 2001.

Our business may be adversely affected if we are not able to effectively
protect our intellectual property rights. We regard our trademarks, service
marks, copyrights, trade secrets and similar intellectual property as important
to our business, and we rely upon trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with our employees,
customers, strategic partners and others to protect our rights in this property.
We have registered our "HealthGate," "HealthGate Data," "CHOICE," "MedGate,"
"ReADER" and our HealthGate logo trademarks in the U.S. and we have pending a
U.S. application for our "activePress" trademark. Effective trademark, copyright
and trade secret protection may not be available in every country in which our
products and services are distributed or made available through the Internet.
Therefore, we can not guarantee that the steps we have taken to protect our
proprietary rights will be adequate to prevent infringement or misappropriation
by third parties or will be adequate under the laws of some foreign countries
which may not protect HealthGate's proprietary rights to the same extent as do
the laws of the United States.

Although we believe that our proprietary rights do not infringe on the
intellectual property rights of others, other parties may assert infringement
claims against us or claim that we have violated a patent or infringed a
copyright, trademark or other proprietary rights belonging to them. These
claims, even if they are without merit, could result in our spending a
significant amount of time and money to dispose of them. In July 1999, we
received a letter from TechSearch L.L.C. claiming ownership of a patent that
claims exclusive rights to all electronic methods of on-demand remote retrieval
of graphic and audiovisual information. The letter asserted that the use of our
Web site, www.healthgate.com, infringes the patent. In the letter, TechSearch
offered to license the patent perpetually and retroactively to us for a one-time
fee of between
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$50,000 and $150,000 depending upon the number of "hits" per day on our web
site. We are currently investigating this matter. At this time, however we are
unable to predict its outcome.

Our business may be adversely affected if we are unable to continue to
license software that is necessary for the development of product and service
enhancements. We rely on a variety of technologies that are licensed from third
parties, including our database software and Internet server software, which is
used in our Web sites to perform key functions. These third party licenses may
not be available to us on commercially reasonable terms in the future. The loss
of or inability to maintain any of these licenses could delay the introduction
of software enhancements, interactive tools and other features until equivalent
technology could be licensed or developed.

RISKS RELATED TO OUR INDUSTRY

Our business prospects are uncertain, as the market for online healthcare
information and services is still developing. The online healthcare information
market is in the early stages of development, is rapidly evolving and is
characterized by an increasing number of market entrants who have introduced
competing products and services. As is typical in the case of a new and rapidly
evolving industry, demand and market acceptance for recently introduced products
and services are subject to a high level of uncertainty and risk. Therefore, it
is difficult to predict with any assurance the size of the market for online
healthcare information or its growth rate. We can not guarantee that physicians,
hospitals and other healthcare providers and consumers will view obtaining
healthcare information through the Internet as an acceptable way to address
their healthcare information needs.

Our business prospects depend on the use of the Internet as an advertising
medium. Most potential advertisers and their advertising agencies have only
limited experience with the Internet as an advertising medium and have not
devoted a significant portion of their advertising expenditures to
Internet-based advertising. Therefore, it is too early to know whether
advertisers or advertising agencies will be persuaded to allocate portions of
their budgets to Internet-based advertising or, if so persuaded, whether they
will find Internet-based advertising to be an effective means of promoting their
products and services relative to traditional print and broadcast media.
Acceptance of the Internet among advertisers and advertising agencies will
depend, to a large extent, on the level of use of the Internet by consumers and
upon growth in the commercial use of the Internet, neither of which has yet been
proven. Additionally, there is intense competition for advertising revenue on
high-traffic Web sites which has resulted in significant price competition.

Government regulation of the Internet may result in increased costs of
using the Internet which could adversely affect our business. Currently, there
are a number of laws that regulate communications or commerce on the Internet.
Several telecommunications carriers have petitioned the Federal Communications
Commission to regulate Internet service providers and online service providers
in a manner similar to long distance telephone carriers and to impose access
fees on these providers. Regulation of this type, if imposed, could
substantially increase the cost of communicating on the Internet and adversely
affect our business, results of operations and the market price of our common
stock.

Privacy-related regulation of the Internet could adversely affect our
business. Internet user privacy has become an issue both in the United States
and abroad. The Federal Trade Commission and government agencies in some states
and countries have been investigating certain Internet companies regarding their
use of personal information. Any regulations imposed to protect the privacy of
Internet users may affect the way in which we currently collect and use personal
information.

The European Union (EU) has adopted a directive that imposes restrictions
on the collection and use of personal data, guaranteeing citizens of EU member
states certain rights, including the right of access to their data, the right to
know where the data originated and the right to recourse in the event of
unlawful processing. We can not assure you that this directive will not
adversely affect our activities in EU member states.

As is typical with most Web sites, our Web sites place certain information
(cookies) on a user's hard drive without the user's knowledge or consent.
Although we do not currently do so, this technology enables

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Web site operators to target specific users with a particular advertisement and
to limit the frequency with which a user is shown a particular advertisement.
Some currently available Internet browsers allow users to modify their browser
settings to remove cookies at any time or to prevent cookies from being stored
on their hard drives. In addition, some Internet commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of
cookies. If this technology is reduced or limited, the Internet may become less
attractive to advertisers and sponsors.

A feature of our own Web sites includes the retention of personal
information about our users. We have a stringent privacy policy covering this
information. However, if third parties were able to penetrate our network
security and gain access to, or otherwise misappropriate, our users' personal
information, we could be subject to liability. Such liability could include
claims for misuses of personal information, such as for unauthorized marketing
purposes or unauthorized use of credit cards. These claims could result in
litigation, our involvement in which, regardless of the outcome, could require
us to expend significant financial resources. We could incur additional expenses
if new regulations regarding the use of personal information are introduced or
if any regulator chooses to investigate our privacy practices.

Tax treatment of companies engaged in Internet commerce may adversely
affect the Internet industry and our company. Tax authorities on the federal,
state, and local levels are currently reviewing the appropriate tax treatment of
companies engaged in Internet commerce. New state tax regulations may subject us
to additional state sales, income and other taxes. A recently passed federal law
places a temporary moratorium on certain types of taxation on Internet commerce.
We can not predict the effect of current attempts at taxing or regulating
commerce over the Internet. It is also possible that the governments of other
states and foreign countries also might attempt to regulate our transmission of
content on our Web sites and throughout the rest of the HealthGate Network. Any
new legislation, regulation or application or interpretation of existing laws
would likely increase our cost of doing business and may adversely affect our
results of operations and the market price of our common stock.

We may be subject to liability for claims that the distribution of medical
information to consumers constitutes practicing medicine over the
Internet. States and other licensing and accrediting authorities prohibit the
unlicensed practice of medicine. We do not believe that our publication and
distribution of healthcare information online constitutes practicing medicine.
However, we can not guarantee that one or more states or other governmental
bodies will not assert claims contrary to our belief. Any claims of this nature
could result in our spending a significant amount of time and money to defend
and dispose of them.

ITEM 2. PROPERTIES

HealthGate's principal executive and corporate offices and development and
network operations are located in Burlington, Massachusetts, in approximately
20,600 square feet of space occupied under a lease which expires on June 30,
2000. We have entered into a new lease for a total of 31,800 square feet at our
Burlington, Massachusetts location. The new lease expires on June 30, 2005. In
addition to the Burlington space, our central computer facility is located at an
Exodus Communications, Inc. Internet Data Center in Waltham, Massachusetts. We
believe that current space is adequate and that additional space will be
available for expansion if needed.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to or aware of any material legal proceedings
involving us.

In July 1999, we received a letter from TechSearch L.L.C. claiming
ownership of a patent that claims exclusive rights to all electronic methods of
on-demand remote retrieval of graphic and audiovisual information. The letter
asserted that the use of our Web site, www.healthgate.com, infringes the patent.
In the letter, TechSearch offered to license the patent perpetually and
retroactively to us for a one-time fee of between $50,000 and $150,000 depending
upon the number of "hits" per day on our web site. We are currently
investigating this matter. At this time, however, we are unable to predict its
outcome.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

By stockholders written consent action dated November 19, 1999,
HealthGate's stockholders approved and adopted (1) an amendment to Healthgate's
Certificate of Incorporation (a) to increase the authorized capital stock of
HealthGate to 100,834,629 shares, consisting of 100,000,000 shares of common
stock and 834,629 shares of preferred stock, and (b) to effect a 3.966 for one
common stock split; and (2) an amendment to HealthGate's 1994 Stock Option Plan
to increase the number of shares of common stock issuable under the Plan to
3,599,997 (post-split) shares.

<TABLE>
<S> <C> <C>
Votes for: 12,446,399 (on an as-converted basis)
Votes against: 0
Abstentions: 249,073 (on an as-converted basis)
</TABLE>

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EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding our executive
officers, key employees and directors as of December 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William S. Reece..................... 34 Chairman of the Board of Directors, President and Chief
Executive Officer
Mary B. Miller....................... 42 Chief Financial Officer and Treasurer
Mark A. Israel....................... 31 Chief Technology Officer
Richard J. Fecher.................... 40 Vice President of Sales
Rick Lawson.......................... 40 Vice President of Content and Secretary
Tina M. H. Blair, M.D.(1)............ 51 Director
Jonathan J. G. Conibear(1)........... 48 Director
Edson D. de Castro(2)................ 61 Director
David Friend(2)...................... 51 Director
Chris H. Horgen(1),(2)............... 53 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

WILLIAM S. REECE is a founder of HealthGate and has served as a member of
our board of directors and our President and Chief Executive Officer since our
inception in 1994. Mr. Reece has served as the Chairman of our board of
directors since December 1994. From June 1988 to May 1994, Mr. Reece served in
several positions, including Vice President, Sales and Marketing, Manager of
U.S. Sales and Marketing Representative at PaperChase, a medical literature
retrieval software company owned by Beth Israel Hospital in Boston.

MARY B. MILLER has served as our Chief Financial Officer and Treasurer
since April 1999. From 1998 to 1999, Ms. Miller was self-employed as a financial
consultant for small and medium sized high technology firms. From 1996 to 1998,
Ms. Miller was Vice President of Finance and Chief Financial Officer of
Multilink, Inc., a communications company. From 1988 to 1996, Ms. Miller held
several positions at Progress Software Corporation, a publicly-traded computer
software company, including Director of Finance and Administration and Chief
Accounting Officer, U.S. Controller and Assistant Controller. Ms. Miller is a
Certified Public Accountant.

MARK A. ISRAEL has served as our Chief Technology Officer since July 1997.
From September 1995 to July 1997, Mr. Israel served as a system architect and
director at Individual Inc., an Internet news company. From September 1992 to
September 1995, Mr. Israel served as a Senior Consultant at Fusion Systems
Group, a software consulting firm. From 1991 to September 1992, Mr. Israel
served as a Consultant at Cambridge Technology Partners, a software consulting
firm.

RICHARD J. FECHER has served as our Vice President of Sales since September
1999. From May 1999 to September 1999, Mr. Fecher served as our National Sales
Director. From August 1995 to April 1999, Mr. Fecher held various sales
management and sales positions within the healthcare, commercial and financial
divisions of Data General Corporation. From 1994 to 1995, Mr. Fecher was an
Account Manager with SiliconGraphics Computer Systems. From 1993 to 1994, Mr.
Fecher was a Regional Manager with Kendall Square Research. From 1986 to 1993,
Mr. Fecher held various management and sales positions with Data General
Corporation.

RICK LAWSON is a founder of HealthGate and has served as our Vice President
of Content and Secretary since November 1994. From November 1987 to November
1994, Mr. Lawson served in several positions, including Vice President, Account
Services/Operations, Director of User Services and Manager of Customer Service
at PaperChase, a medical literature retrieval software company owned by Beth
Israel Hospital in Boston.

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TINA M. H. BLAIR, M.D. has served as a member of our board of directors
since March 1995. Since 1995, Dr. Blair has served as a partner and Director of
Emergency Medicine for Emergency Medical Associates of New Jersey, based at
Mountainside Hospital in Montclair, New Jersey. From 1992 to 1995, Dr. Blair
served as a physician on the staff at Addison Gilbert Hospital in Gloucester,
Massachusetts.

JONATHAN J. G. CONIBEAR has served as a member of our board of directors
since December 1996. Since 1986, Mr. Conibear has served as Executive Director
of Blackwell Science, Ltd., the largest publisher of medical societies' journals
and one of the world's largest medical publishers, with headquarters in Oxford,
UK. From 1985 to 1997, Mr. Conibear had other responsibilities with Blackwell
Science, including President, Blackwell Science Inc., Blackwell's U.S.
subsidiary, Chair, Blackwell's Asian subsidiary, and Sales Director. From 1974
to 1985, Mr. Conibear served in various positions with Oxford University Press.

EDSON D. DE CASTRO has served as a member of our board of directors since
December 1994. Since 1997, Mr. de Castro has been a self-employed business
consultant. From 1992 to 1997, Mr. de Castro was Chairman of Xenometrix, Inc., a
biotechnology company. From 1989 to 1990 Mr. de Castro was Chairman of the Board
of Directors of Data General Corporation. From 1968 to 1989, Mr. de Castro
served as President and Chief Executive Officer of Data General. Mr. de Castro
is a director of Boston Life Sciences, Inc., a biotechnology company, AVAX
Technologies, Inc., a biopharmaceutical company, and of UOL Publishing Inc., a
publisher of educational courseware for Internet training programs. Mr. de
Castro is also a trustee of Boston University and a Member of the Visiting
Committee of Clark University School of Management. Mr. de Castro is also a
Member of the Corporation of Partners Healthcare System Inc.

DAVID FRIEND has served as a member of our board of directors since April
1995. In June 1999, Mr. Friend became Chief Executive Officer of eYak, Inc., a
teleconferencing company. 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.

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<PAGE> 29

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

HealthGate's common stock began trading on the NASDAQ National Market under
the symbol "HGAT" on January 26, 2000 in connection with HealthGate's initial
public offering. 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 years ended December 31, 1999 and 1998.

On March 1, 2000, there were 51 holders of record of our common stock.
Because many of such shares are held by brokers and other institutions on behalf
of stockholders, we are unable to estimate the total number of stockholders
represented by these record holders.

The market price of our common stock has fluctuated since the date of our
initial public offering and is likely to fluctuate in the future. Factors that
may have a significant effect on the market price of our common stock include:

- changes in the market valuations of other Internet or online service
companies;

- actual or anticipated quarterly fluctuations in our operating results;

- changes in expectations of future financial performance or changes in
estimates of securities analysts;

- announcements of technological innovations;

- announcements relating to strategic relationships, acquisitions or
industry consolidation;

- customer relationship developments; and

- conditions affecting the Internet or healthcare industries.

The trading price of our common stock may be volatile. The stock market in
general, and the market for technology and Internet-related companies in
particular, has experienced extreme volatility that often has been unrelated to
the operating performance of particular companies. These broad market and
industry fluctuations many adversely affect the trading price of our common
stock, regardless of our actual operating performance.

In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. If this were to happen to HealthGate, litigation would be expensive
and would divert management's attention.

We have never declared or paid any cash dividends on our common stock or
other securities and we do not anticipate paying cash dividends in the
foreseeable future.

USE OF PROCEEDS

On January 31, 2000, HealthGate closed upon its initial public offering of
3,750,000 shares of its common stock. The managing underwriters in the offering
were SG Cowen Securities Corporation, Prudential Securities Incorporated and
Warburg Dillon Read LLC. The shares sold in the offering were registered under
the Securities Act of 1933, as amended, on a Registration Statement on Form S-1
(No. 333-76899). This Registration Statement was declared effective by the
Securities and Exchange Commission on January 25, 2000.

The initial public offering price was $11.00 per share for the aggregate
initial public offering proceeds of $41,250,000. There were a total of
$2,887,500 in underwriting discounts and commissions. In addition, the following
table itemizes the estimated expenses incurred in connection with the offering,
other than underwriting discounts and commissions. None of the amounts shown was
paid directly or indirectly to any

29
<PAGE> 30

director or officer of HealthGate or their associates, persons owning 10 percent
or more of any class of equity securities of HealthGate or an affiliate of
HealthGate.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....... $ 13,188
NASD filing fee........................................... 6,848
Nasdaq National Market listing fee........................ 95,000
Printing and engraving expenses........................... 831,000
Professional fees and expenses............................ 1,300,000
Blue Sky fees and expenses................................ 29,000
Transfer agent fees....................................... 3,500
Miscellaneous............................................. 421,464
----------
Total............................................. $2,700,000
==========
</TABLE>

After deducting the underwriting discounts and commissions and the offering
expenses, the net proceeds to HealthGate from the initial public offering were
approximately $35.7 million. In February 2000, we applied a total of
approximately $12,715,000 from the net proceeds to the following items.

<TABLE>
<S> <C>
First year fees to Snap! LLC.............................. $10,250,000
Repayment of long-term note............................... 2,000,000
Series E dividends........................................ 465,000
-----------
Total............................................. $12,715,000
===========
</TABLE>

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. Other proceeds from the offering have
been invested in interest-bearing, investment grade securities.

RECENT SALES OF UNREGISTERED SECURITIES

During 1999, we sold the following securities in transactions exempt from
the registration requirements of the Securities Act of 1933 pursuant to Section
4(2) or Rule 701 promulgated under Regulation S-K described below.

On February 3, 1999, we issued and sold 79 shares of our common stock for
an aggregate consideration of $56.80 in cash to a former employee who exercised
an outstanding stock option.

On April 7, 1999, we issued and sold 87,364 shares of our Series E
Convertible Preferred Stock to GE Capital Equity Investments, Inc. for an
aggregate consideration of approximately $1,000,000 in cash and 174,729 shares
of our Series E Convertible Preferred Stock to Blackwell Science, Ltd. for an
aggregate consideration of $2,000,000, paid by means of Blackwell's conversion
of the principal amount due under a convertible promissory note issued by us to
Blackwell on September 29, 1998 in the principal amount of $2,000,000. In
connection with our sale of our Series E Convertible Preferred Stock to GE
Capital Equity Investments, we paid Dain Rauscher Wessels a placement agent
commission of $40,000 in cash.

On April 21, 1999, we issued and sold 458,664 shares of our Series E
Convertible Preferred Stock to GE Capital Equity Investments for an aggregate
consideration of approximately $5,250,000 in cash. In connection with this sale,
we paid Dain Rauscher Wessels a placement agent commission of $250,000 in cash.
In addition, in connection with this sale and the April 7, 1999 sale of Series E
Convertible Preferred Stock to GE Capital Equity Investments, we issued Dain
Rauscher Wessels a warrant to purchase 21,654 shares of our common stock for
$2.89 per share and reimbursed them approximately $50,000 in cash for their out
of pocket expenses. In addition, we incurred approximately $111,000 in other
issuance-related expenses.

On May 14, 1999, we issued and sold 19,830 shares of our common stock for
an aggregate consideration of $9,328 in cash to an executive officer who
exercised an outstanding stock option.

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<PAGE> 31

On June 17, 1999, we issued a warrant to purchase 1,189,800 shares of our
common stock to General Electric Company in connection with a development and
distribution agreement we entered into with GE Medical Systems.

On October 27, 1999, we issued and sold 96,504 shares of our common stock
for an aggregate consideration of $81,565.50 in cash to a director who exercised
outstanding stock options.

On November 2, 1999, we issued a warrant to purchase 1,941,035 shares of
our common stock to CIS Holdings, Inc. in connection with a marketing and
reseller agreement we entered into with Columbia Information Systems, an
affiliate of CIS Holdings, Inc.

On November 3, 1999, we issued and sold 500,000 shares of our common stock
to Snap! LLC in exchange for services to be performed by Snap under a strategic
alliance agreement.

On December 2, 1999, we issued and sold 54,334 shares of our common stock
for an aggregate consideration of $41,100 in cash to a former executive officer
who exercised an outstanding stock option.

Additionally, on January 31, 2000, HealthGate completed a private placement
of 795,454 shares of common stock, at a purchase price of $11.00 per share, to
NBC Internet, Inc. and GE Capital Equity Investments, Inc. in a transaction
exempt from the registration requirements of the Securities Act of 1933 pursuant
to Section 4(2).

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<PAGE> 32

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with our financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," appearing elsewhere in this report. The consolidated statement of
operations data for the years ended December 31, 1997, 1998 and 1999 and the
consolidated balance sheet data as of December 31, 1998 and 1999, are derived
from, and qualified by reference to, our audited financial statements included
elsewhere in this filing. The consolidated statement of operations data for the
years ended December 31, 1995 and 1996, and the consolidated balance sheet data
as of December 31, 1995, 1996 and 1997, are derived from our audited financial
statements that do not appear in this filing. The historical results are not
necessarily indicative of the operating results to be expected in the future.

Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1998 1999
----- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenue............................. $ 1 $ 408 $ 1,285 $ 2,434 $ 3,242
Total costs and expenses.................. 812 3,120 3,820 4,975 19,532
Loss from operations...................... (811) (2,712) (2,535) (2,541) (16,290)
Net loss.................................. (815) (2,726) (2,541) (2,878) (16,732)
Net loss attributable to common
stockholders............................ $(880) $(2,990) $(3,081) $(3,472) $(25,469)
Basic and diluted net loss per share
attributable to common stockholders..... $(.20) $ (.66) $ (.68) $ (.76) $ (5.46)
Shares used in computing basic and diluted
net loss per share attributable to
common stockholders..................... 4,300 4,543 4,543 4,548 4,662
Unaudited pro forma basic and diluted net
loss per share.......................... $ (1.47)
Shares used in computing unaudited pro
forma basic and diluted net loss per
share................................... 11,369
</TABLE>

The following table contains a summary of our balance sheet:

- on an actual basis;

- on a pro forma basis at December 31, 1999 to reflect (a) HealthGate's
initial public offering of common stock in January 2000, (b) the private
sale of 795,454 shares of common stock in January 2000, (c) the
application of proceeds from the initial public offering and concurrent
private sale to repay a long-term note payable and to pay Series E
preferred stock dividends, and (d) the conversion of all outstanding
shares of redeemable preferred stock into common stock in connection with
the initial public offering.

<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 PRO FORMA
----- ------- ------- ------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents...... $ 105 $ 1,156 $ 29 $ 961 $ 579 $42,902
Total assets................... 612 1,791 781 2,371 27,163 67,431
Long-term debt and capital
lease obligations............ 172 79 17 3,655 1,957 440
Redeemable convertible
preferred stock.............. 845 4,763 6,295 6,889 15,627 --
Common stock and other
stockholders'
equity(deficit).............. (757) (3,740) (6,821) (9,735) 1,801 60,817
</TABLE>

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<PAGE> 33

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto. The following
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those discussed in "Business -- Risk Factors" and elsewhere in this report.

OVERVIEW

HealthGate is an Internet provider of technology solutions to hospitals,
institutions, businesses, publishers and individuals featuring reliable,
objective, comprehensive and up-to-date healthcare information content. Our
solutions help physicians and other healthcare professionals, patients and
health-conscious consumers make better informed healthcare decisions.

We distribute our content through a network of proprietary and affiliated
Web sites that comprise the HealthGate Network. The HealthGate Network includes
(1) customized, co-branded CHOICE(R) Web sites for institutions, principally
hospitals and businesses, which carry both HealthGate's and an enterprise
client's name, are designed as a seamless component of an enterprise client's
Web site and, for certain institutions and businesses, complement the healthcare
information, products and services they already offer or sell through their own
Web sites; (2) our own Web sites, www.healthgate.com in the United States and
www.healthgate.co.uk in the United Kingdom; and (3) other third party co-branded
Web sites to which we provide our proprietary and licensed content.

REVENUE

We derive revenue primarily from (1) services and (2) online advertising,
sponsorship and e-commerce.

Services Revenue

Services revenue has been derived principally from development,
implementation and hosting fees associated with our CHOICE Web sites,
activePress service and, to a lesser extent, from syndicating our content to
third party Web sites. Revenue from CHOICE Web sites, activePress services and
content syndication is recognized ratably over the terms of the agreements which
generally range from one to three years.

We commercially introduced our CHOICE Web site product in early 1999 and as
of December 31, 1999 had delivered 84 CHOICE Web sites to enterprise clients.

Under our CHOICE Web site arrangements, we are generally paid an upfront
fee for developing, implementing and hosting a CHOICE Web site for our customer.
In addition, the arrangements typically provide the opportunity for us to place
third party advertising and sponsorship on the customer's CHOICE Web site. We
collect the fees for this advertising and sponsorship from the third party and
pay a commission to the customer. However, as part of our agreements with 14 of
our initial CHOICE customers, we guaranteed that we will pay minimum advertising
and sponsorship commissions to these customers in amounts approximately equal to
the fees paid to us by the customer for the initial term of their CHOICE
agreements and, in a few cases, in amounts that exceed those fees. Once these
customers have paid the upfront fee to us or, if applicable, our authorized
reseller, we are obligated to pay these guaranteed commissions to the customer,
generally on a quarterly basis, regardless of whether or not we have actually
sold any advertising or sponsorship on the CHOICE Web site. We have entered into
these types of arrangements for promotional purposes to establish our CHOICE Web
site product but, beginning in July 1999, have discontinued the use of these
arrangements as a standard practice.

Revenue from fees received for CHOICE Web site development, implementation
and hosting is recognized ratably over the term of the underlying agreement
between us, our CHOICE customer and, if applicable, our authorized reseller,
which generally ranges from one to three years. For those arrangements in which
we have guaranteed advertising and sponsorship commissions, we do not recognize
revenue unless the
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<PAGE> 34

guaranteed commissions are less than the fees paid to us. Rather, we recognize
payments made to us as a customer deposit. Any excess of fees paid to us over
guaranteed commissions is recognized as revenue ratably over the term of the
agreement. If the advertising and sponsorship commissions that we guarantee to
the customer exceed the fees paid to us, we recognize the excess as expense upon
signing the agreement. For arrangements in which we sell through a reseller, we
do not recognize any revenue until an agreement between us, our CHOICE customer
and our authorized reseller has been finalized and the CHOICE Web site has been
delivered. As we sell advertising or sponsorship on these CHOICE Web sites to
third parties, we will recognize advertising revenue from these CHOICE Web
sites. As of December 31, 1999, we have sold advertising or sponsorship on only
five CHOICE Web sites. Payments made to customers under advertising and
sponsorship commission guarantees are recorded as reductions of the related
customer deposit.

In September 1999, we entered into a continuing education services
agreement with HealthStream, Inc., a provider of computer and Web-based
education and training services for the healthcare industry. We will share the
revenue generated from physicians and other healthcare professionals purchasing
these online programs. As part of this agreement, HealthStream will pay us a
minimum of $250,000 annually for, among other things, sponsorship on our own Web
sites and on our enterprise-based CHOICE Web sites. The initial term of our
continuing education services agreement with HealthStream is two years and is
renewable annually by mutual agreement. We have also agreed to purchase a
minimum of $150,000 of CME courses annually from HealthStream for distribution
to healthcare professionals for promotional purposes. Revenue from this
agreement, net of the committed CME course purchases from HealthStream, is
recognized ratably over the term of the agreement.

In November 1999, we entered into a three-year development agreement with
Columbia Information Systems, Inc., a subsidiary of Columbia/HCA Healthcare
Corporation, to design, develop and maintain customized, co-branded CHOICE Web
sites for up to 280 Columbia/HCA hospitals and affiliates. In addition, we will
design, develop and maintain a health portal site for Columbia Information
Systems. We will also provide content and services to both Columbia Information
Systems' health portal site and its customized, co-branded CHOICE Web site
product. The agreement provides for an annual license fee of $3.5 million to be
paid by Columbia Information Systems for all products and services that we
provide under the agreement. The annual license fee is subject to prospective
adjustment in certain events, including the delivery by us of fewer than 200 or
more than 280 customized, co-branded CHOICE Web sites. However, if we deliver
fewer than 200 customized, co-branded CHOICE Web sites, the adjustment is
limited to a minimum annual license fee of $2.5 million. In addition, we will
share advertising and sponsorship revenues and certain e-commerce revenues. As
of December 31, 1999, we have delivered 34 customized co-branded CHOICE Web
sites to Columbia/HCA hospitals. The annual license fees from this agreement are
recognized ratably over the annual period.

Online Advertising, Sponsorship and E-commerce Revenue

Advertising and sponsorship revenue includes revenue from banner
advertising and sponsorship of discrete portions of our content libraries.
Advertising revenue is derived principally from short-term advertising contracts
in which we typically guarantee a minimum number of impressions to be delivered
to users over a specified period of time for a fixed fee. Advertising revenue is
recognized in the period in which the advertisement is displayed at the lesser
of the ratio of impressions delivered over total guaranteed impressions or on a
straight line basis over the term of the contract, provided that we do not have
any significant obligations remaining. To the extent that minimum guaranteed
impressions are not met, we defer recognition of the corresponding revenue until
the guaranteed impressions are delivered. Sponsorship revenue is derived
principally from contracts ranging from one to six months. Sponsorships are
designed to support broad marketing objectives, including brand promotion,
awareness, product introductions, online research and the integration of
advertising with editorial content. Sponsorship revenue is generally recognized
ratably over the terms of the applicable agreements.

Advertising and sponsorship revenue also includes barter revenue, which
represents an exchange by us of advertising space on our own Web sites for
reciprocal advertising space on other Web sites. Revenue from barter
transactions is recognized during the period in which we display the
advertisements. Barter transactions
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<PAGE> 35

are recorded at the fair value of the advertisements provided. Barter expenses
are recognized when our advertisements are run on the reciprocal Web sites,
which is typically in the same period during which the advertisements are run on
our own Web sites. Barter expenses are included in sales and marketing expenses.
These barter transactions have no impact on our cash flows and, typically, no
significant impact on our results of operations. Beginning in the first quarter
of fiscal 2000, we plan to discontinue the practice of entering into revenue
generating barter transactions.

E-commerce revenue has been derived principally from individual user online
subscriptions and from transaction fees for fee-based access to portions of our
own Web sites. Revenue from user subscriptions is recognized ratably over the
subscription period, and revenue from transaction-based fees is recognized when
the related service is provided. E-commerce revenue declined during 1998 and
1999 as we elected to provide more content for free through our own Web sites in
order to attract additional users to our own Web sites. However, we expect that
transactional fees associated with our providing full-text journal articles from
our activePress clients, including additional Blackwell Science journals and the
New England Journal of Medicine, which is expected to be fully operational in
the first half of 2000, will result in an increase in e-commerce revenue in late
2000. Additionally, we are exploring other e-commerce opportunities to offer
products and services to our users.

Our business model is still in an emerging stage, and revenue and income
potential from our business is unproven. Our limited operating history makes an
evaluation of our business and our prospects difficult. Investors should not use
our past results as a basis to predict future performance. We have incurred net
losses since inception and had an accumulated deficit of approximately $35.9
million as of December 31, 1999. We intend to significantly increase our sales
and marketing efforts and expenditures. We also intend to continue to invest in
content development and licensing and advertising and brand promotion. As a
result, we expect to incur additional losses for the foreseeable future, and we
can not assure investors that we will ever achieve significant revenue or
profitability or, if either significant revenue or profitability is achieved,
that we will be able to sustain them.

In December 1999 we entered into an E-Commerce/Sponsorship Agreement with
Medical Self Care, Inc., under which we have jointly developed a co-branded
HealthGate/SelfCare Web site. For the 37 month term of the agreement, we have
agreed to provide on our www.healthgate.com Web site a minimum number of
promotions which will link directly to the HealthGate/SelfCare Web site.
Additionally, we have agreed to include on a number of our CHOICE Web sites
promotions which will also link directly to the HealthGate/ SelfCare Web site.
SelfCare will be the preferred e-commerce provider for these selected CHOICE Web
sites. The agreement provides for SelfCare to make annual cash payments to us of
$1.0 million in the first year, $7.1 million in the second year and $8.4 million
in the third year. In addition, for our first year services, SelfCare issued to
us shares of its stock. The payments are subject to reduction or credits for
future periods for failure to deliver the minimum number of CHOICE Web site
promotions for the HealthGate/SelfCare Web site. In 2000, we expect to begin
recognizing the cash payments and the fair market value of the stock received
under this agreement as revenue ratably over each annual period.

NON-CASH EXPENSES

We recorded deferred compensation of $2,307,000 in the year ended December
31, 1999, representing the difference between the exercise price of stock
options granted and the fair market value of the underlying common stock at the
date of grants. The difference is recorded as a reduction of stockholders'
equity and is being amortized over the vesting period of the applicable options,
typically three years. Of the total deferred compensation amount, $693,000 had
been amortized as of December 31, 1999, which was recorded as stock based
compensation. In addition, we recorded $41,000 for consultant stock options as
stock based compensation. During the year ended December 31, 1999, options to
purchase 24,000 shares of common stock were

35
<PAGE> 36

cancelled, and the related $611,000 deferred compensation was reversed. We
currently expect to amortize the following remaining amounts of deferred
compensation as of December 31, 1999 in the periods indicated:

<TABLE>
<S> <C>
January 1, 2000 - December 31, 2000............... $477,000
January 1, 2001 - December 31, 2001............... 477,000
January 1, 2002 - June 30, 2002................... 49,000
</TABLE>

In June 1999, we entered into a development and distribution agreement with
GE Medical Systems. Under the terms of this agreement, GE Medical Systems may
sell our standard CHOICE Web site product and GE Medical Systems branded
enhanced versions of our CHOICE Web site product through its worldwide sales
force into its worldwide customer base of hospitals and other patient care
facilities. We believe that this agreement will benefit us through the
association of the GE Medical Systems name with HealthGate in general, and our
CHOICE product in particular, and through the efforts of GE Medical Systems to
distribute both our standard CHOICE product and the GE Medical Systems enhanced
versions of our CHOICE product. Therefore, in connection with this agreement, in
June 1999, we issued a warrant to General Electric Company for the purchase of
up to 1,189,800 shares of our common stock. The warrant has a term of five
years, is immediately exercisable and had an original exercise price of $9.49
per share, which exercise price was adjusted to $3.46 per share on January 1,
2000. The fair value of this warrant was determined to be $10.3 million at the
time of issuance using the Black-Scholes option pricing model. This amount has
been recorded as marketing and distribution rights, and is being amortized on a
straight-line basis over the one year contractual term of the related
development and distribution agreement. During the year ended December 31, 1999,
we recorded amortization expense of $5,515,000. In connection with the exercise
price adjustment to $3.46 per share on January 1, 2000, the fair value of the
warrant increased by approximately $1.2 million. This incremental value will be
amortized over the remaining term of the development and distribution agreement.
See "Business -- Strategic Affiliations and Relationships -- Marketing and
Distribution."

In November 1999, we entered into a three-year marketing and reseller
agreement with Columbia Information Systems under which Columbia Information
Systems agreed to endorse us as the preferred provider of patient and consumer
oriented health content for Web sites owned or operated by Columbia/HCA
hospitals and affiliates. We believe that this agreement will benefit us,
generally, through the association of the Columbia Information Systems and
Columbia/HCA names with HealthGate and through their performance of the specific
terms of the agreement. Therefore, in connection with this agreement, we issued
a warrant to CIS Holdings, Inc. for the purchase of up to 1,941,035 shares of
our common stock. The warrant has a term of three years, an exercise price per
share equal to our initial public offering price of $11.00 and became
exercisable in January 2000 upon our initial public offering. The fair value of
this warrant was determined to be $13.5 million using the Black-Scholes option
pricing model. This amount has been recorded as marketing and distribution
rights, and is being amortized on a straight-line basis over the three-year
contractual term of the related agreement. During the year ended December 31,
1999, we recorded amortization expense of $750,000. See "Business -- Strategic
Affiliations and Relationships -- Marketing and Distribution."

In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. Under this agreement and following our
payments of fees to Snap, as described below, Snap will provide various services
to us to promote our name, our www.healthgate.com Web site, our enterprise-
based CHOICE Web sites and the products and services we offer. In exchange for
the services provided to us by Snap during the first year of the agreement, we
have agreed to pay Snap a minimum fee of $10.0 million plus a $250,000
production and content integration fee and have issued to Snap 500,000 shares of
our common stock. We have agreed to pay Snap minimum fees of $15.0 million in
each of the second and third years of the agreement for the services provided to
us by Snap in those years. We have also agreed to pay Snap up to an additional
$5.0 million in the first year, $10.0 million in the second year and $15.0
million in the third year of the agreement if Snap delivers more than a minimum
number of click-throughs to the co-branded Snap/ HealthGate Web site in the
respective years. The value of the shares issued to Snap was capitalized as
prepaid advertising. The value of 250,000 shares will be amortized as a sales
and marketing expense on a straight-line basis over the first year of the
related agreement, and the value of the other 250,000 shares will be recognized
based on the delivery of advertising impressions in the first year of the
agreement. The value of these shares

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<PAGE> 37

was $4.5 million at the time of issuance. See "Business -- Strategic
Affiliations and Relationships -- Marketing and Distribution."

In February 2000, HealthGate repaid its long term note payable, and
recorded the remaining unamortized discount of approximately $474,000 to current
period earnings.

RESULTS OF OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 1999 WITH YEAR ENDED DECEMBER 31, 1998

Revenue

Total revenue was $3,242,000 for the year ended December 31, 1999 compared
to $2,434,000 for the year ended December 31, 1998, an increase of $808,000 or
33%. Services revenue for the year ended December 31, 1999 increased to
$2,365,000 from $1,486,000 for the year ended December 31, 1998, due primarily
to an increase in the revenue derived from co-branded CHOICE Web sites for
hospitals, including Columbia Information Systems, and other enterprise clients.
Advertising and sponsorship revenue decreased by $7,000 to $658,000 in the year
ended December 31, 1999 from $665,000 in the year ended December 31, 1998.
Advertising and sponsorship paid for with cash increased by $355,000 to $584,000
in the year ended December 31, 1999 from $229,000 in the year ended December 31,
1998. Revenue barter advertising arrangements for the year ended December 31,
1999 decreased $362,000 to $74,000 from $436,000 for the year ended December 31,
1998. This decrease was due to our continued reduction in emphasis on barter
arrangements and increased focus on selling advertising for cash. Beginning in
the first quarter of fiscal 2000 we plan to discontinue the practice of entering
into revenue generating barter transactions. E-commerce revenue decreased to
$219,000 in the year ended December 31, 1999 from $283,000 in the year ended
December 31, 1998. This net decrease in e-commerce revenue was due primarily to
a decrease in subscription revenue resulting from a decrease in the number of
monthly subscriptions purchased by individuals. This decrease in monthly
subscriptions resulted in large part from our continued implementation of our
plan to provide more content for free through our own Web sites in order to
attract additional users to our own Web sites and generate additional
advertising revenue. In the year ended December 31, 1999, two customers
represented 42% of total revenue, Blackwell Science (24%) and Columbia
Information Systems (18%). In the year ended December 31, 1998, two customers
represented 62% of total revenue, Blackwell Science (44%) and WebMD (18%). In
early 1999, HealthGate commercially introduced the CHOICE Web site product which
resulted in a smaller proportion of our services revenue being recognized from
activePress. Beginning with the launch of the co-branded HealthGate/SelfCare Web
site, we expect a significant portion of our sponsorship revenue to be derived
from Medical Self Care, Inc.

Of the 84 CHOICE Websites that we have delivered as of December 31, 1999,
we have arrangements with 14 of these CHOICE customers under which we have
guaranteed advertising and sponsorship commissions in an amount approximately
equal to the fees paid by the customer, regardless of whether we sell any
advertising or sponsorship on the customer's CHOICE Web site. For any agreements
with guarantees, we have not recognized fees paid by the customer as revenue but
as a customer deposit, up to the amount of the applicable guarantee. We entered
into this type of arrangement for promotional purposes, but have discontinued
the use of this arrangement as a standard practice. For these CHOICE customers,
we recognize as revenue the excess of the fee paid over the guarantee owed
ratably over the terms of these customers' agreements.

Costs and Expenses

Cost of Revenue. Cost of revenue consists primarily of royalties
associated with licensed content, related equipment and software costs, web
hosting services, and salaries and related costs for personnel directly involved
with providing our Web services. Cost of revenue increased 97% to $2,327,000 in
1999 from $1,181,000 in 1998, due primarily to an increase of $945,000 in
royalty expense for expanded licensed content, and an increase of $183,000 in
depreciation costs related to additional equipment purchases. We expect these
expenses to continue to increase as HealthGate continues to expand its licensed
content and related product and service offerings.

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<PAGE> 38

Research and Development. Research and development expenses consist
primarily of salaries and related costs associated with the development and
support of our Web-based service offerings. Research and development expenses
increased 193% to $4,253,000 in 1999 from $1,450,000 in 1998, due primarily to
additional salaries and related costs from the hiring of technical and
development personnel. We anticipate that research and development expenses will
continue to increase as HealthGate develops and enhances its Web-based service
offerings, and hires additional technical and development personnel.

Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and related costs for sales and marketing personnel, as
well as the cost of advertising, marketing and promotional activities. Sales and
marketing expenses increased to $4,252,000 in 1999 from $1,414,000 in 1998. The
increase of $2,838,000 in sales and marketing expenses was primarily due to
additional salaries and related costs for newly hired sales and marketing
personnel, and increased advertising and brand promotion activities. We expect
that sales and marketing expenses will increase as we continue to expand our
sales, marketing and advertising activities and hire additional personnel for
our sales and marketing force.

Amortization of Marketing and Distribution Rights. During 1999, a non-cash
expense of $6,265,000 was recorded for the amortization of the warrants issued
General Electric Company and CIS Holdings, Inc. A warrant to purchase 1,189,800
shares of our common stock was issued to General Electric Company in June 1999
in connection with a development and distribution arrangement. The fair value of
this warrant was determined using the Black-Scholes option pricing model and is
being amortized on a straight-line basis over 12 months of the contractual
arrangement. In addition, we issued a warrant to purchase 1,941,035 shares of
our common stock to CIS Holdings, Inc. in connection with a marketing and
reseller agreement with Columbia Information Systems. The fair value of this
warrant was determined using the Black-Scholes option pricing model and is being
amortized on a straight-line basis over 36 months of the contractual
arrangement. No similar warrants were issued in 1998.

General and Administrative. General and administrative expenses consist
primarily of salaries and related costs for executive and administrative
personnel, as well as legal, accounting and insurance costs. General and
administrative expenses increased 83% to $1,701,000 in 1999 from $929,000 in
1998. This increase was due primarily to salaries and related costs for newly
hired administrative personnel, higher salaries and related costs for existing
personnel, and increased professional services fees. We expect that general and
administrative expenses will continue to grow as we increase our staffing to
support expanded operations and facilities, and incur expenses related to being
a public company.

Stock Based Compensation. During 1999, we recorded deferred compensation
amortization totaling $693,000, related to stock options granted during 1999
with an exercise price less than fair market value at date of issuance. See
further discussion under "Non-Cash Expenses," above. We also recorded expense of
$41,000 for the value of stock options issued to consultants in 1999. No similar
amounts were recorded in 1998.

Interest Expense, Net

Interest expense, net of interest income, increased to $435,000 in 1999
from $327,000 in 1998. The increase was due primarily to additional interest of
$99,000 incurred on a long-term note payable and additional interest of $38,000
associated with higher capital lease obligations, partially offset by higher
interest income of $32,000. Interest expense for the year ended December 31,
1999 also included debt discount and issuance cost amortization totaling $88,000
related to the note payable.

Income Taxes

As of December 31, 1999, we generated a net operating loss carryforward of
approximately $18,000,000. HealthGate's net operating loss carryforwards expire
beginning in 2010. Certain future changes in the share ownership of HealthGate,
as defined in the U.S. Internal Revenue Code, may restrict the utilization of
carryforwards. A valuation allowance has been recorded for the entire deferred
tax asset as a result of uncertainties regarding the utilization of the asset
due to HealthGate's lack of earnings history.

38
<PAGE> 39

COMPARISON OF YEAR ENDED DECEMBER 31, 1998 WITH YEAR ENDED DECEMBER 31, 1997

Revenue

Total revenue was $2,434,000 in 1998 compared to $1,285,000 in 1997, an
increase of $1,149,000 or 89%. Services revenue in 1998 was $1,486,000, which
was comprised primarily of revenue from our activePress arrangement with
Blackwell Science, one of our stockholders, and revenue from content syndication
arrangements. Services revenue in 1997 was not significant. Advertising and
sponsorship revenue decreased to $665,000 in 1998 from $863,000 in 1997, due
primarily to a decrease in revenue under barter advertising arrangements to
$436,000 in 1998 from $607,000 in 1997. In addition, advertising and sponsorship
revenue derived from cash sales decreased to $229,000 in 1998 from $256,000 in
1997, due to our editorial decision to eliminate sponsor-provided content areas.
During 1998, we began to place less emphasis on barter arrangements and focus
more on selling advertising for cash. E-commerce revenue decreased to $283,000
in 1998 from $333,000 in 1997. This decrease in e-commerce revenue was due
primarily to a decrease of $24,000 in transaction based fees resulting from a
decrease in the number of full text journal transactions and due to a decrease
of $26,000 in subscription revenue attributable to a decrease in the number of
subscriptions. During this time, we elected to provide more content for free
through our own Web sites in order to generate additional advertising revenue by
attracting additional users to our own Web sites. In 1998, two customers
represented 62% of total revenue, Blackwell Science (44%) and WebMD (18%). In
1997, two customers represented 37% of total revenue, Lycos (19%) and Blackwell
Science (18%).

Costs and Expenses

Cost of Revenue. Cost of revenue increased 29% to $1,181,000 in 1998 from
$912,000 in 1997. The increase was primarily attributable to higher royalty
expenses for licensed content.

Research and Development. Research and development expenses increased 63%
to $1,450,000 in 1998 from $891,000 in 1997, due primarily to salaries
associated with newly hired development personnel and related recruiting costs.

Sales and Marketing. Sales and marketing expenses decreased 5% to
$1,414,000 in 1998 from $1,496,000 in 1997, due primarily to a corresponding
decrease in expenses under barter advertising arrangements to $418,000 in 1998
from $617,000 in 1997. The decrease in barter advertising expenses was the
result of our entering fewer barter advertising arrangements in 1998. The
decrease in barter advertising expenses was partially offset by increased
salaries and related costs associated with newly hired sales and marketing
staff.

General and Administrative. General and administrative expenses increased
78% to $929,000 in 1998 from $521,000 in 1997. The increase was due primarily to
salaries and related costs associated with newly hired administrative personnel,
higher salaries and related costs attributable to existing personnel and
increased fees for professional services.

Interest Expense, Net

Interest expense, net of interest income, increased to $327,000 in 1998
from $6,000 in 1997. The increase was due primarily to interest incurred on a
$2,000,000 convertible note payable to Blackwell Science and a $2,000,000
subordinated note, both issued in 1998, and to an increase in interest expense
associated with capital leases. Interest expense in 1998 includes debt discount
and debt issuance cost amortization totaling $54,000 related to the subordinated
note.

LIQUIDITY AND CAPITAL RESOURCES

Since inception and prior to our January 2000 initial public offering and
concurrent private sale, we have financed our operations primarily by the
private placement of debt and equity securities. In the period 1994 through
1997, we received net proceeds of $4,434,000 from the issuance of several series
of redeemable convertible preferred stock. During 1998, we received net proceeds
of $3,929,000 through the issuance of a $2,000,000 convertible note payable to
Blackwell Science and a $2,000,000 subordinated note with detachable

39
<PAGE> 40

warrants. The $2,000,000 subordinated note, which we paid in full with a portion
of the proceeds of our January 2000 initial public offering, was secured by
substantially all of our tangible and intangible assets. We have generally
financed computer and related hardware needs through equipment lease financing
arrangements. In 1999, we utilized previously existing leasing arrangements to
finance approximately $35,000 in purchases of computer equipment and furniture
and fixtures. In addition, we entered into an equipment leasing arrangement for
up to $750,000 in financing for computer equipment and furniture and fixtures
and as of December 31, 1999, we had entered into leases for $651,000 under this
arrangement. As of December 31, 1999, we had approximately $579,000 of cash and
cash equivalents.

In April 1999, we issued 546,028 shares of Series E redeemable convertible
preferred stock for gross proceeds of $6,250,000. In connection with the
issuance of the Series E preferred stock, we paid $300,000 of fees and expenses
to a placement agent, paid $111,000 of other issuance costs and issued to the
placement agent warrants to purchase 21,654 shares of our common stock at an
exercise price of $2.89 per share with an ascribed value of $200,000. The
placement fee, other issuance costs and warrant value was reflected as a
reduction of the proceeds from the Series E preferred stock issuance. An
additional 174,729 shares of Series E preferred stock were issued upon
conversion of the $2,000,000 convertible note payable to Blackwell Science. The
Series E preferred stock accrued cumulative annual dividends at 7% of its
liquidation value of $8,250,000. In January 2000 in connection with our initial
public offering, the Series E preferred stock was converted into 2,858,522
shares of common stock. Upon conversion, we paid accrued dividends in cash on
the Series E preferred stock, totaling $465,000.

At the time of issuance, each share of Series E preferred stock was
convertible into 3.966 shares of common stock, which represented a discount from
the fair value of common stock on the date of the Series E issuance. The value
attributable to this conversion right which represents an incremental yield, or
a beneficial conversion feature, which was recognized as a return to the
preferred stockholders. This amount, equal to the proceeds from the Series E
offering, was reported as accretion of preferred stock to redemption value of
$7,639,000 in the consolidated statement of operations in the quarter ended June
30, 1999 and represents a non-cash charge in the determination of net loss
attributable to common stockholders.

For 1999, the cash used in operations was $5,729,000. Cash used during this
period was primarily due to the net loss of $16,732,000, offset partially by
depreciation and amortization of $6,934,000, stock based compensation expense of
$735,000, an increase of $367,000 in accounts receivable and unbilled accounts
receivable, an increase of $93,000 in prepaid expenses and other current assets,
an increase of $2,055,000 in deferred offering costs related to our initial
public offering, an increase of $128,000 in other assets, an increase of
$2,488,000 in accounts payable, an increase of $566,000 in accrued payroll, an
increase of $558,000 in customer deposits for CHOICE Web sites, an increase of
$1,054,000 in other accrued expenses (which consists primarily of $446,000 for
advertising and sponsorship commitments, $183,000 for professional fees and
$175,000 for commissions) and an increase of $1,323,000 in deferred revenue. For
1998, the cash used in operations was $2,484,000. Cash used during this period
was primarily due to the net loss of $2,878,000, offset partially by
depreciation and amortization of $417,000, a net increase of $83,000 in accounts
receivable and unbilled accounts receivable, an increase of $124,000 in prepaid
expenses and other current assets, a decrease of $30,000 in other assets, a
decrease of $38,000 in accounts payable, an increase of $151,000 in accrued
payroll, and a decrease of $117,000 in deferred revenue. Increases in operating
assets and liabilities were primarily due to the growth of our business and
operations during these periods.

Cash used for investing activities consisted primarily of purchases of
property and equipment of $280,000 and $278,000, during the years ended December
31, 1999 and 1998, respectively. We also entered into capital leases for
computer equipment totaling $785,000 and $577,000 during 1999 and 1998,
respectively.

Cash provided by financing activities during 1999 consisted primarily of
net proceeds received from the issuance of the Series E redeemable convertible
preferred stock and common stock of $5,969,000, partially offset by payments for
capital lease obligations of $343,000. During 1998, we received net proceeds
from the issuance of a subordinated note payable and warrants of $3,929,000
which was partially offset by payments for capital lease obligations of
$240,000. At December 31, 1999, we had outstanding commitments under capital
leases of $1,077,000 and under operating leases for equipment and office space
of $5,119,000. In addition,

40
<PAGE> 41

future minimum payments under content license agreements totaled $1,878,000 at
December 31, 1999. We expect our commitments under content licensing to increase
as we expand our content libraries.

In October 1999, we entered into a three-year strategic alliance agreement
with Snap! LLC and Xoom.com, Inc. In exchange for the services provided to us by
Snap during the first year of the agreement, we have agreed to pay Snap a
minimum fee of $10.0 million and 500,000 shares of our common stock, plus a
$250,000 production and content integration fee. The $10.3 million cash
component of the first year minimum fee was paid Snap in February 2000. We have
agreed to pay Snap minimum fees of $15.0 million in each of the second and third
years of the agreement for the services provided to us by Snap in those years.
We have also agreed to pay Snap up to an additional $5.0 million in the first
year, $10.0 million in the second year and $15.0 million in the third year of
the agreement if Snap delivers more than certain minimum click-throughs to the
co-branded Snap/HealthGate Web site in the respective years. If Snap terminates
the agreement based on certain material breaches caused by us, we have agreed to
continue to pay Snap 55% of all fees payable by us under the agreement for the
remaining term of the agreement.

Our future liquidity and capital requirements will depend upon numerous
factors, including the success of our existing and new application and service
offerings and competing technological and market developments. In January 2000,
HealthGate completed the initial public offering of its common stock and
concurrent private placement and realized net proceeds of approximately $44
million. HealthGate currently anticipates that the net proceeds from our initial
public offering and concurrent private placement, together with our available
cash resources and credit facilities, will be sufficient to meet our presently
anticipated working capital, capital expenditure and business expansion
requirements for at least the next 12 months. However, HealthGate may need to
raise additional funds to support expansion, develop new or enhanced
applications and services, respond to competitive pressures, acquire
complementary businesses or technologies or take advantage of unanticipated
opportunities. HealthGate may be required to raise additional funds through
public or private financing, strategic relationships or other arrangements.
There can be no assurance that additional funding, if needed, will be available
on terms acceptable to us, or at all.

YEAR 2000 COMPLIANCE READINESS DISCLOSURE

In late 1999, HealthGate completed its planning and testing of systems to
become year 2000 ready. As a result of those planning and implementation
efforts, HealthGate experienced no significant disruptions in critical
information technology and non-information technology systems or any significant
year 2000 related problems. To date, HealthGate has not incurred any material
costs in identifying or evaluating Year 2000 compliance issues, planning or
testing. We have also incurred some expenses related to the operating costs
associated with time spent by employees in the evaluation process and Year 2000
compliance and testing generally. We presently do not anticipate that future
expenditures will be material. HealthGate is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. HealthGate will continue to
monitor its products and systems and those of its suppliers and vendors
throughout the year 2000 for any latent Year 2000 matters that may arise.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. HealthGate does
not expect SFAS No. 133 to have a material effect on its financial position or
results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

HealthGate is not subject to any meaningful market risks related to
currency, commodity prices or similar matters. We are sensitive to short-term
interest rates fluctuations to the extent that such fluctuations impact the
interest income we receive from our investments. To minimize this risk, we
maintain our portfolio

41
<PAGE> 42

of cash equivalents and short-term investments in a variety of securities,
including commercial paper, other non-government debt securities and money
market funds. In general, money market funds are not subject to market risk
because the interest paid on such funds fluctuates with the prevailing interest
rate. In addition, we invest in relatively short-term securities. HealthGate
does not use derivative financial instruments in its investment portfolio. We
limit our default risk by purchasing only investment grade securities. As of
December of 31, 1999 all our investments were in money market funds which mature
in less than three months. Cash and cash equivalents were $579,000 at December
31, 1999 and had a weighted average interest rate of 1.85%. See Note 1 of Notes
to Consolidated Financial Statements for information on our investment policies
and portfolio.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14 for the financial statements and supplementary data of
HealthGate required by this item.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

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<PAGE> 43

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding HealthGate's current executive officers is included
at the end of Part I of this report.

Information regarding HealthGate's directors may be found in the definitive
Proxy Statement to be delivered to stockholders in connection with the 2000
Annual Meeting of Stockholders, which will be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 1999. This
information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item may be found in the definitive Proxy
Statement to be delivered to stockholders in connection with the 2000 Annual
Meeting of Stockholders. This information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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<PAGE> 44

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<C> <S>
(a)(1) Financial Statements. The financial statements, related
notes thereto and report of independent accountants required
by Item 8 are listed on page 48.
(2) Financial Statement Schedules. Financial Statement Schedule
II -- Valuation and Qualifying Accounts and Report of
Independent Accountants on Financial Statement Schedule are
filed as Exhibit 99.1 to this report. All other schedules
have been omitted from this section because the information
is not required.
(3) Exhibits. See the Index to Exhibits, below.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by
HealthGate during the fourth quarter of 1999.
(c) Index to Exhibits.
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1(3) Amended and Restated Certificate of Incorporation of the
Registrant, in the form filed on January 31, 2000.
3.2(3) Second Amended and Restated Bylaws of the Registrant,
effective January 31, 2000.
4.1(3) Specimen Common Stock certificate.
4.2(1) Registration Agreement dated March 16, 1995 by and between
the Registrant, David Friend and William Nelson.
4.3(1) Registration Agreement dated October 18, 1995 by and between
the Registrant and Nichols Research Corporation.
4.4(1) Registration Agreement dated August 21, 1996 by and between
the Registrant and certain investor signatories thereto.
4.5(1) Registration Agreement dated December 20, 1996 by and
between the Registrant and Blackwell Science, Ltd.
4.6(1) Registration Agreement dated March 26, 1998 by and between
the Registrant and Petra Capital, LLC.
4.7(1) Registration Agreement dated April 7, 1999 by and between
the Registrant, GE Capital Equity Investments, Inc.,
Blackwell Science, Ltd. and Blackwell Wissenschafts-Verlag
GmbH.
4.8(1) Amendment to Purchase Agreements and Registrations
Agreements dated as of March 23, 1998 by and among the
Registrant and certain stockholder signatories thereto.
4.10(4) Registration Agreement dated as of June 17, 1999 by and
between the Registrant and General Electric Company.
4.11(6) Registration Rights Agreement dated November 2, 1999 by and
between the Registrant and CIS Holdings, Inc.
4.12(6) Registration Rights Agreement dated November 3, 1999 by and
between the Registrant and Snap! LLC.
10.1(7) activePress Journal Hosting and Delivery Agreement effective
as of January 1, 2000 by and between Registrant, Blackwell
Science Limited and Munksgaard International Publishers
Limited.
10.2(10) Letter Amendment dated January 19, 2000 to activePress
Journal Hosting and Delivery Agreement effective as of
January 1, 2000 by and between Registrant, Blackwell Science
Limited and Munksgaard International Publishers Limited.
10.3(1) activePress Journal Hosting and Delivery Agreement dated
April 20, 1999 by and between Massachusetts Medical Society
and the Registrant.
10.4(7) Content Development and Distribution Agreement dated as of
June 15, 1999 by and between the Registrant and
Massachusetts Medical Society.
10.5(7) Content License Agreement dated as of October 1, 1998 by and
between Clinical Reference Systems, a division of Access
Health, Inc. and the Registrant.
</TABLE>

44
<PAGE> 45

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.6(1) Electronic Media License Agreement dated as of June 16, 1998
by and between Western Adventist Health Services, d/b/a
Cinahl Information Systems, and the Registrant.
10.7(7) Agreement dated as of June 18, 1998 by and between Data
General Corporation and the Registrant.
10.8(4) Amendment to Standard Distribution Agreement, Value Added
Reseller dated June 11, 1999 by and between the Registrant
and Data General Corporation.
10.9(7) Sub-Lease Agreement dated March 1, 1999 by and between
Synopsys, Inc. and the Registrant.
10.10* Lease Agreement dated February 10, 2000 by and between Riggs
& Co., a division of Riggs Bank N.A. and the Registrant
(excluding exhibits).
10.11(1) Internet Data Center Services Agreement dated as of December
30, 1998 by and between Exodus Communications, Inc. and the
Registrant.
10.12(1) 1994 Stock Option Plan of the Registrant, as amended.
10.13(11) Amendment to Registrant's 1994 Stock Option Plan dated
November 1999.
10.14(1) Form of Incentive Stock Option Agreement granted under 1994
Stock Option Plan of the Registrant.
10.15(1) Form of Non-Employee Director Option Agreement granted under
1994 Stock Option Plan of the Registrant.
10.16(1) Stock Option Agreement dated as of December 9, 1996 by and
between the Registrant and Edson D. de Castro.
10.17(1) Stock Option Agreement dated as of November 12, 1997 by and
between the Registrant and Edson D. de Castro.
10.18(1) Employment Agreement dated as of October 1, 1995 by and
between the Registrant and William S. Reece.
10.19* Form of Indemnification Agreement between Registrant and its
directors and officers.
10.20(7) Stock Purchase Agreement dated as of April 5, 1999 by and
between the Registrant, GE Capital Equity Investments, Inc.
and Blackwell Science, Ltd.
10.21(2) Stock Purchase Warrant dated as of April 21, 1999 issued by
the Registrant in favor of Dain Rauscher Wessels.
10.22(1) Standard Distribution Agreement dated as of July 28, 1998 by
and between the Registrant and InteliHealth, Inc.
10.23(1) Continuing Medical Education Programs License Agreement
dated as of April 1, 1996 between the Registrant and the
Trustees of Boston University.
10.24(7) Development and Distribution Agreement dated as of June 11,
1999 between Registrant and GE Medical Systems.
10.25(8) Letter of Engagement dated November 29, 1999 by and between
GE Medical Systems and the Registrant.
10.26(8) Amendment Number One dated December 22, 1999 to Development
and Distribution Agreement between GE Medical Systems and
Registrant.
10.27(7) Warrant Purchase Agreement dated as of June 11, 1999 by and
between the Registrant and General Electric Company.
10.28(4) Warrant to Purchase Common Stock of the Registrant dated
June 17, 1999 issued to General Electric Company.
10.29(6) Master Lease of Terms and Conditions for Lease dated as of
August 3, 1999 between TLP Leasing Programs, Inc. and
Registrant.
10.30(7) Continuing Education Services Agreement effective September
15, 1999 by and between Registrant and HealthStream, Inc.
10.31(6) Marketing Services Agreement effective September 29, 1999 by
and between Registrant and HealthStream, Inc.
10.32(7) Co-branded CHOICE Web Site Agreement dated as of November 2,
1999 by and between the Registrant and Columbia Information
Systems, Inc.
10.33(6) Marketing and Reseller Agreement dated as of November 2,
1999 by and between the Registrant and Columbia Information
Systems, Inc.
</TABLE>

45
<PAGE> 46

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.34(6) Warrant to purchase Common Stock of the Registrant dated
November 2, 1999 issued to CIS Holdings, Inc.
10.35(7) Strategic Alliance Agreement dated as of October 29, 1999 by
and between Snap! LLC, Xoom.com, Inc. and the Registrant.
10.36(7) Common Stock Purchase Agreement dated November 3, 1999 by
and between the Registrant and Snap! LLC.
10.37(8) E-Commerce/Sponsorship Agreement dated December 14, 1999 by
and between the Registrant and Medical Self Care, Inc.
10.38(8) Amendment dated December 14, 1999 to Snap Strategic Alliance
Agreement dated October 29, 1999 by and between Snap! LLC,
Xoom.com, Inc. and the Registrant.
10.39(9) Stock Purchase Agreement dated as of January 18, 2000 by and
between the Registrant, GE Capital Equity Investments, Inc.
and NBC Internet, Inc.
11.1* Loss per share
21.1* List of Subsidiaries
23.1* Consent of PricewaterhouseCoopers LLP, independent
accountants.
24.1 Power of Attorney contained in signature page of Form 10-K
27.1* Financial Data Schedule (EDGAR Version Only).
99.1* Schedule II-Valuation and Qualifying Accounts and Report of
Independent Accountants on Financial Statement Schedule.
</TABLE>

- ---------------
* filed herewith

(1) Previously filed with Registrant's Registration Statement on Form S-1,
filed with the Securities and Exchange Commission on April 23, 1999.

(2) Previously filed with Registrant's Amendment No. 1 to Registration
Statement on Form S-1 filed on May 21, 1999.

(3) Previously filed with Registrant's Amendment No. 2 to Registration
Statement on Form S-1 filed on June 14, 1999.

(4) Previously filed with Registrant's Amendment No. 3 to Registration
Statement on Form S-1 filed on July 16, 1999.

(5) Previously filed with Registrant's Amendment No. 4 to Registration
Statement on Form S-1 filed on August 4, 1999.

(6) Previously filed with Registrant's Amendment No. 6 to Registration
Statement on Form S-1 filed on November 10, 1999.

(7) Previously filed with Registrant's Amendment No. 7 to Registration
Statement on Form S-1 filed on November 24, 1999.

(8) Previously filed with Registrant's Amendment No. 9 to Registration
Statement on Form S-1 filed on December 29, 1999.

(9) Previously filed with Registrant's Amendment No. 10 to Registration
Statement on Form S-1 filed on January 19, 2000.

(10) Previously filed with Registrant's Amendment No. 11 to Registration
Statement on Form S-1 filed on January 24, 2000.

(11) Previously filed with Registrant's Registration Statement on Form S-8 filed
on March 2, 2000.

46
<PAGE> 47

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Burlington,
Massachusetts, on the 23rd day of March, 2000.

HEALTHGATE DATA CORP.

By: /s/ WILLIAM S. REECE
------------------------------------
William S. Reece
Chairman of the Board of Directors
and
Chief Executive Officer

POWER OF ATTORNEY AND SIGNATURES

Each person whose signature appears below constitutes and appoints William
S. Reece, as attorney-in-fact, with the power of substitution, for him or her in
any and all capacities, to sign any amendment to this Annual Report on Form 10-K
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully
as to all intents and purposes that he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact, or his
substitute, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM S. REECE Chairman of the Board of Directors, March 23, 2000
- --------------------------------------------------- Chief Executive Officer and President
William S. Reece (Principal executive officer)

/s/ MARY B. MILLER Chief Financial Officer and Treasurer March 23, 2000
- --------------------------------------------------- (Principal financial and accounting
Mary B. Miller officer)

/s/ TINA M. H. BLAIR, M.D. Director March 23, 2000
- ---------------------------------------------------
Tina M. H. Blair, M.D.

/s/ JONATHAN J. G. CONIBEAR Director March 23, 2000
- ---------------------------------------------------
Jonathan J. G. Conibear

/s/ EDSON D. DE CASTRO Director March 23, 2000
- ---------------------------------------------------
Edson D. de Castro

/s/ DAVID FRIEND Director March 23, 2000
- ---------------------------------------------------
David Friend

/s/ CHRIS H. HORGEN Director March 23, 2000
- ---------------------------------------------------
Chris H. Horgen
</TABLE>

47
<PAGE> 48

HEALTHGATE DATA CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 49
Consolidated Balance Sheet as of December 31, 1998 and
1999...................................................... 50
Consolidated Statement of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... 51
Consolidated Statement of Changes in Common Stock and Other
Stockholders' Equity (Deficit) for the years ended
December 31, 1997, 1998 and 1999.......................... 52
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... 53
Notes to Consolidated Financial Statements.................. 55
</TABLE>

48
<PAGE> 49

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of HealthGate Data Corp.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in common stock and other
stockholders' equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of HealthGate Data Corp. and its subsidiaries
at December 31, 1998 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 21, 2000

49
<PAGE> 50

HEALTHGATE DATA CORP.

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- PRO FORMA
1998 1999 DECEMBER 31, 1999
------------ ------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 960,831 $ 578,560 $ 42,901,949
Accounts receivable, including receivables
from related parties of $160,000 and
$49,125 at December 31, 1998 and 1999,
respectively, and net of allowance for
doubtful accounts of $20,000 and $50,000
at December 31, 1998 and 1999,
respectively.............................. 362,189 705,578 705,578
Unbilled accounts receivable................. 12,386 35,825 35,825
Prepaid advertising.......................... -- 4,500,000 4,500,000
Prepaid expenses and other current assets.... 225,482 318,514 318,514
------------ ------------ ------------
Total current assets.................... 1,560,888 6,138,477 48,461,866
Fixed assets, net.............................. 806,793 1,302,368 1,302,368
Marketing and distribution rights, net......... -- 17,535,000 17,535,000
Deferred offering costs........................ -- 2,055,491 --
Other assets................................... 3,298 131,586 131,586
------------ ------------ ------------
Total assets............................ $ 2,370,979 $ 27,162,922 $ 67,430,820
============ ============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND COMMON STOCK AND OTHER
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease
obligation................................ $ 213,713 $ 442,668 $ 442,668
Accounts payable............................. 572,687 3,060,189 1,497,227
Accrued payroll.............................. 201,254 767,396 767,396
Customer deposits............................ -- 558,066 558,066
Other accrued expenses....................... 228,880 1,282,674 1,241,398
Deferred revenue............................. 344,820 1,667,565 1,667,565
------------ ------------ ------------
Total current liabilities............... 1,561,354 7,778,558 6,174,320
Long-term portion of capital lease
obligation................................... 226,401 439,743 439,743
Note payable to related party.................. 2,000,000 -- --
Long-term note payable......................... 1,429,087 1,517,295 --
------------ ------------ ------------
Total liabilities....................... 5,216,842 9,735,596 6,614,063
------------ ------------ ------------
Redeemable convertible preferred stock (Note
4)........................................... 6,889,431 15,626,726 --
------------ ------------ ------------
Common stock and other stockholders' equity (deficit):
Common stock, $.01 par value;
Authorized: 100,000,000 shares
Issued and outstanding: 4,548,503 and
5,219,251 shares at December 31, 1998
and 1999, respectively and 17,295,261
shares at December 31, 1999 pro forma
(unaudited)............................. 45,485 52,192 172,952
Additional paid-in capital................... 680,725 38,681,954 98,060,056
Accumulated deficit.......................... (10,461,504) (35,930,662) (36,413,367)
Deferred compensation........................ -- (1,002,884) (1,002,884)
------------ ------------ ------------
Total common stock and other
stockholders' equity (deficit)....... (9,735,294) 1,800,600 60,816,757
------------ ------------ ------------
Commitments and contingencies (Note 8)
Total liabilities, redeemable
convertible preferred stock and
common stock and other stockholders'
equity (deficit)..................... $ 2,370,979 $ 27,162,922 $ 67,430,820
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
50
<PAGE> 51

HEALTHGATE DATA CORP.

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenue, including revenue from related parties of
$240,400, $1,070,500 and $1,357,400 in 1997, 1998
and 1999, respectively........................... $ 1,284,636 $ 2,434,124 $ 3,241,568
----------- ----------- ------------
Costs and expenses:
Cost of revenue.................................. 911,765 1,181,012 2,326,688
Research and development (excluding stock based
compensation of $321,480 in 1999)............. 890,577 1,450,106 4,253,228
Sales and marketing (excluding stock based
compensation of $128,960 in 1999)............. 1,496,356 1,414,179 4,251,759
General and administrative (excluding stock based
compensation of $284,089 in 1999)............. 521,323 929,479 1,700,598
Marketing and distribution rights amortization... -- -- 6,265,000
Stock based compensation......................... -- -- 734,529
----------- ----------- ------------
Total costs and expenses...................... 3,820,021 4,974,776 19,531,802
----------- ----------- ------------
Loss from operations............................. (2,535,385) (2,540,652) (16,290,234)
----------- ----------- ------------

Interest expense, net.............................. (5,773) (327,100) (435,058)
Other expense...................................... -- (9,777) (6,571)
----------- ----------- ------------
Net loss...................................... (2,541,158) (2,877,529) (16,731,863)

Preferred stock dividends and accretion of
preferred stock to redemption value.............. (539,644) (594,829) (8,737,295)
----------- ----------- ------------
Net loss attributable to common
stockholders................................ $(3,080,802) $(3,472,358) $(25,469,158)
=========== =========== ============
Basic and diluted net loss per share attributable
to common stockholders........................... $ (.68) $ (.76) $ (5.46)
Shares used in computing basic and diluted net loss
per share attributable to common stockholders.... 4,543,447 4,547,559 4,662,080
Unaudited pro forma basic and diluted net loss
per share........................................ $ (1.47)
Shares used in computing unaudited pro forma basic
and diluted net loss per share................... 11,368,777
</TABLE>

The accompanying notes are an integral part of these financial statements.
51
<PAGE> 52

HEALTHGATE DATA CORP.

CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
TOTAL COMMON
COMMON STOCK ADDITIONAL STOCK AND OTHER
--------------------- PAID-IN ACCUMULATED DEFERRED STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT COMPENSATION EQUITY (DEFICIT)
--------- --------- ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996..... 4,543,447 $45,434 $ 123,205 $ (3,908,344) $ -- $ (3,739,705)
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value.......... (539,644) (539,644)
Net loss....................... (2,541,158) (2,541,158)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1997..... 4,543,447 45,434 123,205 (6,989,146) -- (6,820,507)
Exercise of common stock
options...................... 5,056 51 3,520 3,571
Issuance of common stock
warrants..................... 554,000 554,000
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value.......... (594,829) (594,829)
Net loss....................... (2,877,529) (2,877,529)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1998..... 4,548,503 45,485 680,725 (10,461,504) -- (9,735,294)
Issuance of common stock....... 500,000 5,000 4,495,000 4,500,000
Issuance of common stock
warrants..................... 24,000,000 24,000,000
Cancellation of common stock
options...................... (611,214) 611,214 --
Exercise of common stock
options...................... 170,748 1,707 130,242 131,949
Deferred compensation relating
to grants of common stock
options...................... 2,307,246 (2,307,246) --
Stock based compensation....... 41,381 693,148 734,529
Series E preferred stock
beneficial conversion feature
(Note 4)..................... 7,638,574 7,638,574
Accrual of cumulative dividends
on redeemable convertible
preferred stock and accretion
to redemption value.......... (8,737,295) (8,737,295)
Net loss....................... (16,731,863) (16,731,863)
--------- ------- ----------- ------------ ----------- ------------
Balance, December 31, 1999..... 5,219,251 $52,192 $38,681,954 $(35,930,662) $(1,002,884) $ 1,800,600
========= ======= =========== ============ =========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
52
<PAGE> 53

HEALTHGATE DATA CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(2,541,158) $(2,877,529) $(16,731,863)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 356,791 416,897 6,933,969
Stock based compensation...................... -- -- 734,529
Other......................................... -- 9,777 (10,128)
Changes in assets and liabilities:
Accounts receivable......................... (228,010) (70,361) (343,389)
Unbilled accounts receivable................ -- (12,386) (23,439)
Prepaid expenses and other current assets... (47,349) (123,516) (93,032)
Deferred offering costs..................... -- -- (2,055,491)
Other assets................................ (1,357) 29,717 (128,288)
Accounts payable............................ 186,801 (37,808) 2,487,502
Accrued payroll............................. 35,091 151,147 566,142
Customer deposits........................... -- -- 558,066
Other accrued expenses...................... 36,722 147,531 1,053,794
Deferred revenue............................ 445,426 (117,209) 1,322,745
----------- ----------- ------------
Net cash used in operating activities.... (1,757,043) (2,483,740) (5,728,883)
----------- ----------- ------------
Cash flows from investing activities:
Purchases of fixed assets........................ (124,801) (277,538) (279,752)
----------- ----------- ------------
Cash flows from financing activities:
Payments of capital lease obligations............ (237,190) (239,785) (342,651)
Proceeds from issuance of preferred and common
stock, net of issuance costs.................. 992,353 3,571 5,969,015
Proceeds from notes payable and warrants......... -- 3,929,278 --
----------- ----------- ------------
Net cash provided by financing activities..... 755,163 3,693,064 5,626,364
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents...................................... (1,126,681) 931,786 (382,271)
Cash and cash equivalents, beginning of year....... 1,155,726 29,045 960,831
----------- ----------- ------------
Cash and cash equivalents, end of year............. $ 29,045 $ 960,831 $ 578,560
=========== =========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
53
<PAGE> 54

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

HealthGate paid cash for interest of approximately $28,000, $242,000 and
$472,000 for the years ended December 31, 1997, 1998, and 1999, respectively.

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES

HealthGate entered into capital leases for certain computer equipment
totaling approximately $71,000, $577,000, and $785,000 during the years ended
December 31, 1997, 1998 and 1999, respectively.

In connection with the issuance of the Series E redeemable convertible
preferred stock in April 1999, HealthGate issued a placement agent a warrant to
purchase up to 21,654 shares of HealthGate common stock at an exercise price of
$2.89 per share. A value of $200,000 was ascribed to the warrant. Also in April
1999, a $2,000,000 convertible note payable to a related party was converted
into 174,729 shares of HealthGate's Series E redeemable convertible preferred
stock (Note 3).

In June 1999, HealthGate issued a warrant to a related party in connection
with a development and distribution agreement. The fair value of the warrant of
$10,300,000 was recorded as marketing and distribution rights, and will be
amortized on a straight-line basis over the one year contractual term of the
related development and distribution agreement (Note 5). In January 2000, the
exercise price of this warrant was adjusted from $9.49 to $3.46 per share. As a
result, the fair value of the warrant increased by $1,243,000 and which was
recorded as marketing and distribution rights, and which will be amortized on a
straight-line basis over the remaining term of the contractual agreement.

In October 1999, HealthGate issued common stock to Snap! LLC in connection
with a strategic alliance agreement. The fair value of the shares of $4,500,000
was recorded as prepaid advertising. Of this value, $2,250,000 will be amortized
as a sales and marketing expense on a straight-line basis over the first year of
the related agreement and $2,250,000 will be recognized based on the delivery of
advertising impressions in the first year of the agreement (Note 8).

In November 1999, HealthGate issued a warrant to CIS Holdings, a related
party to Columbia Information Systems, in connection with a marketing and
reseller agreement. The fair value of the warrant $13,500,000 was recorded as
marketing and distribution rights, and will be amortized on a straight-line
basis over the three year contractual term of the related agreement (Note 5).

The accompanying notes are an integral part of these financial statements.
54
<PAGE> 55

HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

HealthGate Data Corp. ("HealthGate") is an Internet provider of technology
solutions to hospitals, institutions, businesses, publishers and individuals
featuring reliable, objective, comprehensive and up-to-date healthcare
information content. HealthGate's business to business (B2B) solutions help
physicians and other healthcare professionals, patients and health-conscious
consumers make better informed healthcare decisions. HealthGate was incorporated
in the State of Delaware on February 8, 1994.

Certain amounts in prior years' consolidated financial statements have been
reclassified to conform to the current year presentation.

HealthGate is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological developments, reliance
on continued development and acceptance of the Internet, intense competition and
a limited operating history.

Significant accounting polices followed in the preparation of the financial
statements are as follows:

Principles of Consolidation

The consolidated financial statements include the accounts of HealthGate
and its wholly-owned subsidiaries, HealthGate Europe Limited and HealthGate
Acquisition Corp. All material intercompany balances and transactions have been
eliminated.

Translation of Foreign Currencies

The functional currency of HealthGate's foreign subsidiary, HealthGate
Europe Limited, is the local currency. Adjustments resulting from the
translation of the financial statements of HealthGate's subsidiary into U.S.
dollars, and foreign currency transaction gains and losses included in the
results of operations, have not been significant.

Cash, Cash Equivalents and Marketable Securities

HealthGate considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. HealthGate
invests its excess cash in money market funds backed by U.S. Government
securities, U.S. Treasury securities and commercial paper which are subject to
minimal credit and market risk. HealthGate's cash equivalents are classified as
available for sale and recorded at amortized cost, which approximates fair
value.

Revenue Recognition

HealthGate derives revenue primarily from user subscriptions and
transaction based fees, Web site development and hosting arrangements, content
syndication arrangements and the sale of advertising and sponsorships under
short-term contracts. Revenue from user subscriptions is recognized ratably over
the subscription period, and revenue from usage fees is recognized when the
service is provided. Revenue from Web site development and hosting arrangements
and content syndication arrangements is recognized ratably over the terms of the
underlying agreements between HealthGate, the customer and, if applicable,
HealthGate's authorized reseller, which generally range from one to three years.
For any arrangement in which HealthGate guarantees advertising commissions to
the customer, HealthGate records fees paid by the customer as a customer
deposit, up to the amount of the applicable guarantee. Payments made to
customers under these guarantees are recorded as reductions of the related
customer deposit. The excess of the fee paid by the customer to HealthGate over
guaranteed advertising and sponsorship commissions, if any, is recognized as
revenue ratably over the term of the underlying agreement. For those
arrangements in which HealthGate guarantees advertising and sponsorship
commissions in excess of the fees paid by the customer, the excess is

55
<PAGE> 56
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recorded as expense upon signing the agreement. For arrangements in which
HealthGate sells through a reseller, HealthGate does not recognize any revenue
until an agreement has been finalized between HealthGate, its customer and its
authorized reseller and Web site has been delivered.

Advertising revenue is derived principally from short-term advertising
contracts, in which HealthGate typically guarantees a minimum number of
impressions to be delivered to users over a specified period of time for a fixed
fee. Advertising revenue is recognized in the period in which the advertisement
is displayed, at the lesser of the ratio of impressions delivered over total
guaranteed impressions or a straight line basis over the term of the contract,
provided that no significant HealthGate obligations remain. To the extent that
minimum guaranteed impressions are not met, HealthGate defers recognition of the
corresponding revenue until the guaranteed impressions are delivered.
Sponsorship revenue is recognized ratably over the terms of the applicable
agreements, which generally range from one to six months.

Advertising and sponsorship revenue also includes barter revenue, which
represents an exchange by HealthGate of advertising space on HealthGate's Web
sites for reciprocal advertising space on other Web sites. Revenue from
advertising barter transactions is recognized during the period in which the
advertisements are displayed by HealthGate. Barter transactions are recorded at
the fair value of the advertisements provided. Barter expenses are recognized
when HealthGate's advertisements are run on the reciprocal Web sites, which is
typically in the same period as when the advertisements are run on HealthGate's
Web sites. Barter expenses are included in sales and marketing expense. During
the years ended December 31, 1997, 1998 and 1999 revenue from barter
transactions was approximately $607,000, $436,000 and $74,000, respectively.

Fair Value of Financial Instruments

The carrying amounts of HealthGate's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses and
notes payable, approximate their fair values at December 31, 1998 and 1999.

Concentration of Credit Risk and Significant Customers

Financial instruments which potentially expose HealthGate to concentrations
of credit risk consist primarily of trade accounts receivable. To minimize risk,
ongoing credit evaluations of customers' financial condition are performed,
although collateral generally is not required. At December 31, 1999, one
customer accounted for 16% of gross accounts receivable. At December 31, 1998,
two customers accounted for 20% and 11% of gross accounts receivable, and a
related party accounted for 42% of gross accounts receivable. For the year ended
December 31, 1997, one customer accounted for 19% of total revenue, and a
related party accounted for 18% of total revenue. For the year ended December
31, 1998, one customer accounted for 18% of total revenue and a related party
accounted for 44% of total revenue. For the year ended December 31, 1999, two
related parties accounted for 42% of total revenue.

Research and Development and Software Development Costs

Costs incurred in the research and development of HealthGate's products are
expensed as incurred, except for certain software development costs. Costs
associated with the development of computer software are expensed prior to the
establishment of technological feasibility (as defined by Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed") and capitalized thereafter
if material to HealthGate's financial position or results of operations. Costs
eligible for capitalization have been insignificant to date and, accordingly, no
amounts have been capitalized.

56
<PAGE> 57
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Fixed Assets

Fixed assets are recorded at cost and depreciated over their estimated
useful lives, generally one to three years, using the straight-line method.
Fixed assets held under capital leases which involve a transfer of ownership are
amortized over the estimated useful life of the asset. Other fixed assets held
under capital leases are amortized over the shorter of the lease term or the
estimated useful life of the related asset. Repairs and maintenance costs are
expensed as incurred.

Accounting for Stock-Based Compensation

HealthGate accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair
market value of HealthGate's common stock at the date of grant. HealthGate has
adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," for disclosure purposes only (Note 5). All stock-based awards to
non-employees are accounted for at their fair value in accordance with SFAS No.
123 and related interpretations.

Advertising Costs

Advertising costs are charged to operations as incurred. Advertising costs
were approximately $790,000, $456,000 and $233,000 in the years ended December
31, 1997, 1998 and 1999, respectively, of which approximately $617,000, $418,000
and $74,000, respectively, related to barter transactions.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Unaudited Pro Forma Balance Sheet

The unaudited pro forma balance sheet at December 31, 1999 gives effect to
(a) HealthGate's initial public offering of common stock in January 2000, (b)
the private sale of 795,454 shares of common stock in January 2000, (c) the
application of proceeds from the initial public offering and concurrent private
sale to repay a long-term note payable and to pay Series E preferred stock
dividends, and (d) the conversion of all outstanding shares of redeemable
preferred stock into common stock in connection with the initial public
offering.

Actual and Unaudited Pro Forma Net Loss Per Share

Net loss per share is computed in accordance with SFAS No. 128, "Earnings
Per Share." Basic net loss per share is computed by dividing net loss
attributable to common stockholders by the weighted average number of shares of
common stock outstanding. Diluted net loss per share does not differ from basic
net loss per share since potential common shares from conversion of preferred
stock and exercise of stock options and warrants are anti-dilutive for all
periods presented. Unaudited pro forma basic and diluted net loss per share have
been calculated assuming the conversion of all outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.

57
<PAGE> 58
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The new standard
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. HealthGate does not expect SFAS No. 133 to have a material effect on
its financial position or results of operations.

2. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES -------------------------
IN YEARS 1998 1999
------------ ---------- -----------
<S> <C> <C> <C>
Computer equipment and software................ 3 $ 473,842 $ 657,963
Office equipment and fixtures.................. 3 127,349 134,108
Computer equipment under capital lease......... 1-3 1,126,659 1,818,607
---------- -----------
1,727,850 2,610,678
---------- -----------
Less-accumulated depreciation and
amortization................................. (921,057) (1,308,310)
---------- -----------
$ 806,793 $ 1,302,368
========== ===========
</TABLE>

Depreciation and amortization expense on fixed assets was $356,791,
$363,088 and $584,244 in 1997, 1998 and 1999, respectively, of which $248,217,
$186,475 and $297,784 in 1997, 1998 and 1999, respectively, related to
amortization of assets held under capital leases. Accumulated amortization on
assets under capital lease was $417,961, $604,436 and $806,474 at December 31,
1997, 1998 and 1999, respectively.

3. NOTES PAYABLE

On March 26, 1998, HealthGate issued a $2,000,000 subordinated note payable
(the "Note") with detachable warrants, for net cash proceeds of approximately
$1,929,000. The Note bore interest at an annual rate of 13.0%, payable monthly.
The principal amount was due on March 26, 2003, but could be prepaid without
penalty. The Note was secured by substantially all of HealthGate's tangible and
intangible assets, and limited HealthGate's ability to issue additional debt.

In connection with the Note, HealthGate issued warrants to purchase 341,076
shares of its common stock at an exercise price per share of $.00005. Further,
on December 31, 1998, HealthGate issued warrants to purchase an additional
114,816 shares at an exercise price of $.00005 per share, as HealthGate did not
achieve a minimum 1998 revenue target defined in the agreement. These warrants
were exercised in February 2000. The terms of the warrant agreement placed
certain restrictions on the number of options, warrants and other convertible
securities which HealthGate could issue. These restrictions expired on January
31, 2000, the closing date of the initial public offering of HealthGate's common
stock. HealthGate ascribed a value of $261,000 to the warrants issued in March
1998 and $293,000 to the warrants issued in December 1998, based on the fair
value at the time of issuance. The amount ascribed to the warrants was recorded
as additional paid-in capital and a discount from the face value of the Note.
The discount was being amortized to interest expense over the life of the note
using the effective interest method. As of December 31, 1999 the carrying value
of the note, net of unamortized discount, was $1,517,295. Discount amortized as
interest expense for 1998 and 1999 was approximately $54,000 and $88,000,
respectively. In February 2000, HealthGate repaid this note in full and recorded
the remaining unamortized discount of approximately $474,000 to current period
earnings.

58
<PAGE> 59
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On September 29, 1998, HealthGate issued a convertible note (the
"Convertible Note") in the principal amount of $2,000,000 to an existing
preferred stockholder. The Convertible Note bore interest at an annual rate of
12%, and was due on March 31, 1999. In April 1999, the Convertible Note was
converted into 174,729 shares of the HealthGate's Series E redeemable
convertible preferred stock (Note 4). Since the Convertible Note was converted
into preferred stock in April 1999, it was classified as long-term in
HealthGate's balance sheet at December 31, 1998.

4. REDEEMABLE CONVERTIBLE PREFERRED STOCK

A summary of redeemable convertible preferred stock activity for the years
ended December 31, 1997, 1998 and 1999 is as follows:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E
----------------- ------------------- ------------------- ------------------- --------------------
CARRYING CARRYING CARRYING CARRYING CARRYING
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
------ -------- ------ ---------- ------ ---------- ------ ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................ 1,000 $524,575 1,000 $1,727,876 1,000 $1,021,492 1,000 $1,488,662 -- $ --
Issuance of Series D,
net of issuance
costs of $8,147..... 667 992,353
Accrual of cumulative
dividends and
accretion to
redemption value.... 70,262 163,637 104,402 201,343
----- -------- ----- ---------- ----- ---------- ----- ---------- ------- ----------
Balance, December 31,
1997................ 1,000 594,837 1,000 1,891,513 1,000 1,125,894 1,667 2,682,358 -- --
Accrual of cumulative
dividends and
accretion to
redemption value.... -- 70,262 -- 163,637 -- 104,402 -- 256,528 -- --
----- -------- ----- ---------- ----- ---------- ----- ---------- ------- ----------
Balance, December 31,
1998................ 1,000 665,099 1,000 2,055,150 1,000 1,230,296 1,667 2,938,886 -- --
Issuance of Series E,
net of issuance
costs of $611,426
and of a beneficial
conversion feature
of $7,638,574....... 720,757 --
Accrual of cumulative
dividends and
accretion to
redemption value.... -- 70,269 -- 163,634 -- 104,400 -- 256,534 -- 8,142,458
----- -------- ----- ---------- ----- ---------- ----- ---------- ------- ----------
Balance at December
31, 1999............ 1,000 $735,368 1,000 $2,218,784 1,000 $1,334,696 1,667 $3,195,420 720,757 $8,142,458
===== ======== ===== ========== ===== ========== ===== ========== ======= ==========

TOTAL
CARRYING
VALUE
-----------
<S> <C>
Balance, December 31,
1996................ $ 4,762,605
Issuance of Series D,
net of issuance
costs of $8,147..... 992,353
Accrual of cumulative
dividends and
accretion to
redemption value.... 539,644
-----------
Balance, December 31,
1997................ 6,294,602
Accrual of cumulative
dividends and
accretion to
redemption value.... 594,829
-----------
Balance, December 31,
1998................ 6,889,431
Issuance of Series E,
net of issuance
costs of $611,426
and of a beneficial
conversion feature
of $7,638,574....... --
Accrual of cumulative
dividends and
accretion to
redemption value.... 8,737,295
-----------
Balance at December
31, 1999............ $15,626,726
===========
</TABLE>

Conversion

In January 2000, all the redeemable preferred stock was converted into
7,530,556 of common stock. The number of common shares to which a holder of the
preferred stock received upon conversion was based upon the conversion rates
defined by HealthGate's Amended and Restated Certificate of Incorporation,
(approximately 1,209.15 for 1, 1,584.02 for 1, 549.89 for 1 and 797.24 for 1 for
holders of Series A, B, C and D preferred stock, respectively, at December 31,
1999).

Liquidation, Voting and Dividends

The holders of Series A, B, C and D preferred stock, in the event of
liquidation, had been entitled to receive, on a pro-rata basis $500, $1,600,
$1,000 and $1,500 per share, respectively, plus accrued and unpaid dividends.
The holders of the preferred stock had certain voting rights on all matters
submitted to stockholders

59
<PAGE> 60
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for a vote. The holders of Series A, B, C and D preferred stock were entitled to
certain cumulative annual dividends.

Issuance of Series E Preferred Stock

In April 1999, HealthGate issued 546,028 shares of newly authorized Series
E redeemable convertible preferred stock to GE Capital Equity Investments, Inc.,
an affiliate of General Electric Company (Note 5), for gross proceeds of
$6,250,000. In connection with the issuance of the Series E preferred stock,
HealthGate paid approximately $300,000 of fees and out of pocket expenses to a
placement agent, paid other issue costs of approximately $111,000, and issued
the placement agent a warrant to purchase up to 21,654 shares of HealthGate
common stock at an exercise price of $2.89 per share. The Company ascribed a
value to the warrant of $200,000. The placement fee, other issue costs and
warrant value have been reflected as a reduction of the proceeds from the Series
E preferred stock issuance. An additional 174,729 shares of Series E preferred
stock were issued upon conversion of a convertible note (Note 3). The Series E
preferred stock ranked senior in liquidation to other classes of preferred
stock, and had certain veto rights. The Series E preferred stock accrued
cumulative annual dividends at 7% of its liquidation value (initially
$8,250,000). The dividends were compounded annually and were added to the Series
E preferred stock liquidation value. In January 2000 in connection with
HealthGate's initial public offering, the Series E preferred stock was converted
into 2,858,522 shares of common stock, and approximately $465,000 in cash was
paid for accrued cumulative dividends.

When issued, each share of Series E preferred stock was convertible into
3.966 shares of common stock, which represented a discount from the fair value
of common stock on the date of the Series E issuance. The value attributable to
this conversion right represented an incremental yield, or a beneficial
conversion feature, which was recognized as a return to the preferred
stockholders. This amount, equal to the net proceeds from the Series E offering
of approximately $7,639,000, which includes conversion of the convertible note,
has been recorded as accretion of preferred stock to redemption value in the
period ended December 31, 1999, and represents a non-cash charge in the
determination of net loss attributable to common stockholders.

5. COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock

Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of HealthGate's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to any preferential dividend rights of the preferred
stockholders.

A 50-for-1 split of HealthGate's common stock became effective on January
23, 1998 and a 3.966-for-1 split became effective on December 23, 1999. All
shares of common stock, options, and warrants and per share amounts included in
the accompanying financial statements have been adjusted to give retroactive
effect to these stock split for all periods presented.

Effective upon HealthGate's initial public offering on January 31, 2000,
the authorized capital stock of HealthGate increased to 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock.

Stock Option Plans

In June 1994, HealthGate adopted the HealthGate Data Corp. 1994 Stock
Option Plan (the "1994 Plan") which provides for the granting of both incentive
stock options and nonqualified options to employees, directors and consultants.
The 1994 Plan, as amended, allows for a maximum of 3,599,997 options to purchase
shares of common stock to be issued prior to December 2004. The exercise price
of any incentive stock option granted under the 1994 Plan shall not be less than
the fair market value of the stock on the date of grant, as determined in good
faith by the Board of Directors, or less than 110% of the fair value in the case
of optionees holding more than 10% of the total combined voting power of all
classes of HealthGate's stock. Options

60
<PAGE> 61
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

granted under the 1994 Plan are exercisable for a period of not longer than ten
years from the date of grant, or five years in the case of optionees holding
more than 10% of the combined voting power of all classes of HealthGate's stock.

HealthGate applies APB 25 and related interpretations in accounting for
employee and director options granted under the 1994 Plan. Since inception
(February 8, 1994) through December 31, 1998 no compensation expense was
recognized for options granted to employees under this plan. Compensation
expense of approximately $693,000 was recognized in 1999 for options granted to
employees under this plan. During 1999, HealthGate also recognized approximately
$41,000 for the value of options granted to consultants. During 1997 and 1998,
HealthGate granted options to purchase 29,745 and 9,915 shares of common stock,
respectively, to a member of its Board of Directors for consulting services
rendered. The options vested during 1997 and 1998 as the consulting services
were provided. The compensation expense related to these options was not
significant.

Had compensation cost attributable to the 1994 Plan and other options been
determined based on the fair value of the options at the grant date, consistent
with the provisions of SAS No. 123, HealthGate's net loss and net loss per share
would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss
As reported.............................. $(2,541,158) $(2,877,529) $(16,731,863)
Pro forma................................ (2,580,033) (2,904,547) (18,536,912)
Basic and diluted net loss per share
attributable to common stockholders
As reported.............................. $(.68) $(.76) $(5.46)
Pro forma................................ (.69) (.77) (5.85)
</TABLE>

Because the determination of the fair value of all options granted after
HealthGate became a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1999, and most options vest over several years, the above pro forma effects are
not necessarily indicative of the pro forma effects on future years.

Under SFAS No. 123, the fair value of each employee option grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants made during the
following periods:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---- ---- --------------------
PRE POST
APRIL 23 APRIL 23
<S> <C> <C> <C> <C>
Expected option term (years)....................... 4 4 4 4
Risk-free interest rate............................ 6.16% 5.29% 5.5% 5.5%
Expected volatility................................ 0.0% 0.0% 0.0% 100.0%
Dividend yield..................................... 0.0% 0.0% 0.0% 0.0%
</TABLE>

61
<PAGE> 62
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of HealthGate's options as of December 31, 1997,
1998 and 1999 and changes during the periods then ended are presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1998 1999
--------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period.......................... 921,500 $ .58 1,310,564 $ .45 1,714,105 $ .97
Granted......................... 611,755 .47 826,911 1.46 1,317,254 7.88
Exercised....................... -- -- (5,056) .70 (170,748) .77
Canceled........................ (222,691) 1.02 (418,314) .31 (310,411) 1.55
--------- ----- --------- ----- --------- -----
Outstanding at end of period...... 1,310,564 $ .45 1,714,105 $ .97 2,550,200 $4.48
========= ===== ========= ===== ========= =====
Options available for grant at end
of period....................... 496,147 87,550 1,049,797
========= ========= =========
Options granted at fair value:
Weighted average exercise
price........................ $ .47 $1.46 $9.12
===== ===== =====
Weighted average fair value..... $ .10 $ .05 $6.21
===== ===== =====
Options granted below fair value:
Weighted average exercise
price........................ $4.85
=====
Weighted average fair value..... $6.75
=====
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- -----------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
under $.49................... 575,663 2.01 $ .36 500,834 $ .34
$.50 - $1.17................. 361,816 2.83 .91 204,424 1.00
$1.88........................ 535,410 3.06 1.88 204,843 1.88
$9.00........................ 854,470 4.88 9.00 5,949 9.00
$9.49 - $11.35............... 222,841 4.05 9.88 19,830 11.35
--------- -------
2,550,200 935,880
========= =======
</TABLE>

Deferred Compensation

During the year ended December 31, 1999, HealthGate granted stock options
to purchase 382,806 shares of its common stock with exercise prices ranging from
$.88 to $9.49 per share. HealthGate recorded compensation expense and deferred
compensation relating to these options totaling approximately $693,000 and
$2,307,000, respectively, representing the differences between the estimated
fair market value of the common stock on the date of grant and the exercise
price. Compensation related to options which vest over three years was recorded
as a component of stockholders' equity and is being amortized over the vesting
periods of the related options. During the year ended December 31, 1999, stock
options to purchase 24,000 shares were cancelled as a result of employee
terminations, which resulted in the reversal of approximately $611,000 of
deferred compensation.

62
<PAGE> 63
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Issuance of Warrants

On June 11, 1999, HealthGate entered into a development and distribution
agreement with GE Medical Systems ("GEMS"), an operating division of General
Electric Company and an affiliate of a Series E preferred stock investor (Note
4). HealthGate believes that this agreement will benefit it through the
association of the GE Medical Systems name with HealthGate in general, and its
CHOICE product in particular, and through the efforts of GE Medical Systems to
distribute both its standard CHOICE product and the GE Medical Systems enhanced
versions of its CHOICE product. Therefore, in connection with this agreement,
HealthGate issued to General Electric Company a warrant to purchase up to
1,189,800 shares of HealthGate's common stock at an exercise price per share of
$9.49. The warrant is immediately exercisable, and has a term of 5 years. The
fair value of this warrant was determined to be $10,300,000 using the Black-
Scholes option pricing model, based on the following assumptions: 100%
volatility, a term of 5 years, and an interest rate of 5.6%. The value of the
warrant has been recorded as marketing and distribution rights, and is being
amortized on a straight-line basis over the one year contractual term of the
related development and distribution agreement. During the year ended December
31, 1999, amortization expense for this warrant totaled $5,515,000. On January
1, 2000, the exercise price of the warrant issued to General Electric Company
was adjusted from $9.49 to $3.46 per share. As a result of the exercise price
adjustment, the fair value of the warrant increased by approximately $1.2
million. This increase was calculated using the Black-Scholes option pricing
model, based on an assumed common stock fair value per share of $9.00, 100%
volatility, a term of 4.5 years and an interest rate of 5.94%. This incremental
value will be amortized over the remaining term of the agreement.

In November 1999, HealthGate entered a marketing and reseller agreement
with Columbia Information Systems. HealthGate believes that this agreement will
benefit it through the general association of the Columbia Information Systems
and Columbia/HCA names with HealthGate, through the right to make a first offer
to provide services for adding additional content to the Columbia Information
Systems health portal site and any Web sites owned or operated by Columbia/HCA
or their controlled affiliates, and, among other things, through the efforts of
Columbia Information Systems to distribute HealthGate products. In connection
with this agreement, HealthGate issued a warrant to CIS Holdings, Inc., a
related party, for the purchase of up to 1,941,035 shares of HealthGate's common
stock. CIS Holdings, Inc. is an indirect, wholly-owned subsidiary Columbia/HCA
Healthcare Corporation and an affiliate of Columbia Information Systems. The
warrant has a term of three years, an exercise price of $11.00, and became
exercisable on the consummation of HealthGate's initial public offering on
January 31, 2000. The fair value of this warrant was determined to be $13.5
million using the Black-Scholes option pricing model. The value of this warrant
has been recorded as marketing and distribution rights, and is being amortized
on a straight-line basis over the three year contractual term of the related
marketing and reseller agreement. During the year ended December 31, 1999,
amortization expense related to this warrant totaled $750,000.

63
<PAGE> 64
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 3,506,205 $ 7,530,911
Stock based compensation....................... -- 285,403
Marketing and distribution rights.............. -- 2,579,607
Other.......................................... 259,980 336,338
----------- ------------
Total deferred tax assets........................ 3,766,185 10,732,259
Deferred tax asset valuation allowance........... (3,766,185) (10,732,259)
----------- ------------
$ -- $ --
=========== ============
</TABLE>

Realization of total deferred tax assets is dependent upon the generation
of future taxable income. HealthGate has provided a valuation allowance for the
full amount of its deferred tax assets, since realization of these future
benefits is not sufficiently assured.

Income taxes computed using the federal statutory income tax rate differs
from HealthGate's effective tax primarily due to the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Income tax benefit at U.S. federal statutory
tax rate..................................... $ (889,405) $(1,007,135) $(5,856,152)
State taxes, net of federal tax impact......... (152,211) (170,165) (1,045,649)
Other.......................................... (32,083) (37,232) (64,273)
Change in valuation allowance.................. 1,073,699 1,214,532 6,966,074
---------- ----------- -----------
Provision for income taxes................... $ -- $ -- $ --
========== =========== ===========
</TABLE>

At December 31, 1999, HealthGate has net operating loss carryforwards and
research and development tax credit carryforwards of approximately $18,190,000
and $107,000, respectively, available for federal and foreign purposes to reduce
future taxable income and future tax liabilities. If not utilized, these
carryforwards will expire at various dates ranging from 2010 to 2019. Under the
provisions of the Internal Revenue Code, certain substantial changes in
HealthGate's ownership may have limited, or may limit in the future, the amount
of net operating loss and research and development tax credit carryforwards
which could be used annually to offset future taxable income and income tax
liability. The amount of any annual limitation is determined based upon
HealthGate's value prior to an ownership change.

Approximately $200,000 of the net operating loss carryforwards available
for federal income tax purposes relate to exercise of non-qualified stock option
and disqualifying dispositions of incentive stock options, the tax benefit from
which, if realized, will be credited to additional paid-in capital.

7. 401(k) PLANS

During 1996, HealthGate established a defined contribution savings plan
under Section 401(k) of the Internal Revenue Code. In 1999, HealthGate
established a new defined contribution savings plan under Section 401(k) of the
Internal Revenue Code and terminated the 1996 plan. Both plans cover
substantially all employees who meet minimum age and service requirements and
allow participants to defer a portion of their annual compensation on a pre-tax
basis. Company contributions to the plans may be made at the discretion of

64
<PAGE> 65
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Board of Directors. There were no contributions made under either plan by
HealthGate during the years ended December 31, 1997, 1998 or 1999.

8. COMMITMENTS AND CONTINGENCIES

HealthGate leases all facilities under operating lease agreements and
certain equipment under noncancelable capital lease agreements. HealthGate
entered into a new lease on February 4, 2000 for its Burlington, Massachusetts
headquarters. The new lease is scheduled to expire on June 30, 2005. Total rent
expense under noncancelable operating leases was approximately $84,100, $89,900
and $470,500 for the years ended December 31, 1997, 1998 and 1999, respectively.

The future minimum lease commitments under all noncancelable leases at
December 31, 1999, including the new facility lease dated February 4, 2000, are
as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- ----------
<S> <C> <C>
2000................................................ $1,011,968 $ 568,005
2001................................................ 904,322 311,977
2002................................................ 913,727 196,930
2003................................................ 910,527 --
2004................................................ 916,435 --
Thereafter.......................................... 462,202 --
---------- ----------
Total future payments............................... $5,119,181 1,076,912
==========
Less amount representing interest................... (194,501)
----------
Present value of minimum lease payments............. $ 882,411
==========
</TABLE>

HealthGate has entered into agreements to license content for its services
from various unrelated third parties. Future minimum license payments under
these agreements as of December 31, 1999 totaled approximately $1,878,000, which
includes annual payments of $500,000 for two years for a content development and
distribution agreement with the New England Journal of Medicine.

On July 27, 1999, HealthGate received a letter alleging that HealthGate's
Web site induces users to infringe a patent held by a company (the "Holder"). In
lieu of pursuing a patent infringement claim against HealthGate, the Holder
offered to provide HealthGate with a license for unlimited use of the patent for
a one-time payment of between $50,000 and $150,000. HealthGate is currently
investigating this matter. At this time, HealthGate is unable to predict its
outcome.

In October 1999, HealthGate entered into a three-year strategic alliance
agreement with Snap! LLC and Xoom.com, Inc. Under this agreement, Snap will
provide various services to promote HealthGate's name, its www.healthgate.com
Web site, its co-branded CHOICE Web sites and the products and services
HealthGate offers. In exchange for the services provided to HealthGate by Snap
during the first year of the agreement, HealthGate has agreed to pay Snap a
minimum fee of $10,000,000 in cash, plus a $250,000 production and content
integration fee and on November 3, 1999 issued 500,000 shares of HealthGate
common stock to Snap. The value of these shares was determined to be $4,500,000
on the date issued, which was recorded as prepaid advertising. HealthGate has
agreed to pay Snap minimum fees of $15,000,000 in cash in each of the second and
third years of the agreement for the services provided to HealthGate by Snap in
those years. HealthGate has also agreed to pay Snap up to an additional
$5,000,000 in the first year, $10,000,000 in the second year and $15,000,000 in
the third year of the agreement if Snap delivers more than certain minimum
click-throughs to the co-branded Snap/HealthGate Web site in the respective
years. Either Snap or HealthGate may terminate

65
<PAGE> 66
HEALTHGATE DATA CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

this agreement if the other party commits a material breach. Snap and Xoom.com
are both wholly-owned by NBC Internet, Inc., a subsidiary of General Electric.

9. GEOGRAPHIC AND SEGMENT INFORMATION

HealthGate operates in one segment, which is providing healthcare and
related information to institutions and individuals through the Internet.
HealthGate's revenue from external customers was derived from the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
United States.................................. $1,259,886 $1,665,718 $2,404,396
Europe......................................... 24,750 768,406 837,172
---------- ---------- ----------
Total.......................................... $1,284,636 $2,434,124 $3,241,568
========== ========== ==========
</TABLE>

Substantially all of HealthGate's long-lived assets were located in the
United States for all periods presented.

10. SUBSEQUENT EVENTS

In January 2000, HealthGate completed an initial public offering of its
common stock and a concurrent private placement, both at $11.00 per share.
HealthGate sold 3,750,000 shares of common stock in the initial public offering,
and 795,454 shares of common stock in the private placement, for aggregate net
proceeds of approximately $44 million (after deducting the underwriting
commissions and the offering expenses).

In conjunction with the initial public offering, all outstanding shares of
redeemable convertible preferred stock converted into 7,530,556 shares of common
stock.

<PAGE> 1
EXHIBIT 10.10
LEASE

THIS LEASE (this "Lease") is made as of February 10, 2000 by and between

"Landlord" RIGGS & CO., a division of RIGGS BANK N.A., as Trustee of the
Multi-Employer Property Trust, a trust organized under 12 C.F.R.
Section 9.18

and

"Tenant" HealthGate Data Corp., a Delaware corporation

SECTION A: TABLE OF CONTENTS

SECTION 1: DEFINITIONS..................................................... 1

SECTION 2: PREMISES AND TERM............................................... 4
2.1 Lease of Premises................................................. 4
2.2 Lease Term........................................................ 4
2.3 Plans and Specifications.......................................... 5
2.4 Commencement Date................................................. 6
2.5 Tenant's Contribution to Tenant Improvement Costs................. 7
2.6 Memorandum of Commencement Date................................... 7
2.7 Use and Conduct of Business....................................... 7
2.8 Compliance with Governmental Requirements and Rules and
Regulations....................................................... 7
SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE... 8
3.1 Payment of Rental................................................. 8
3.2 Base Rent......................................................... 8
3.3 Security Deposit.................................................. 8
3.4 Additional Rent................................................... 9
3.5 Utilities......................................................... 11
3.6 Holdover.......................................................... 12
3.7 Late Charge....................................................... 12
3.8 Default Rate...................................................... 12

SECTION 4: GENERAL PROVISIONS.............................................. 12
4.1 Maintenance and Repair by Landlord................................ 12
4.2 Maintenance and Repair by Tenant.................................. 12
4.3 Common Areas/Security; Building Services.......................... 12
4.4 Tenant Alterations................................................ 13
4.5 Tenant's Work Performance......................................... 13
4.6 Surrender of Possession........................................... 14
4.7 Removal of Property............................................... 14
4.8 Access............................................................ 14
4.9 Damage or Destruction............................................. 15
4.10 Condemnation ..................................................... 15
4.11 Parking .......................................................... 16
4.12 Indemnification .................................................. 16
4.13 Tenant Insurance ................................................. 16
4.14 Landlord's Insurance ............................................. 17
4.15 Waiver of Subrogation ............................................ 17
4.16 Assignment and Subletting by Tenant .............................. 17
4.17 Assignment by Landlord ........................................... 19
4.18 Estoppel Certificates and Financial Statements ................... 19
4.19 Modification for Lender .......................................... 20
4.20 Hazardous Substances ............................................. 20
4.21 Access Laws ...................................................... 21
4.22 Quiet Enjoyment .................................................. 21
4.23 Signs ............................................................ 21
4.24 Subordination .................................................... 21
4.25 Workers Compensation Immunity .................................... 22
4.26 Brokers .......................................................... 22
4.27 Exculpation and Limitation of Liability .......................... 22
4.28 Mechanic's Liens and Tenant's Personal Property Taxes ............ 22
4.29 Intentionally deleted ............................................ 23

SECTION 5: DEFAULT AND REMEDIES............................................ 23
5.1 Events of Default................................................. 23
5.2 Remedies.......................................................... 23
5.3 Right to Perform.................................................. 25
5.4 Landlord's Default................................................ 25

SECTION 6: MISCELLANEOUS PROVISIONS ....................................... 25
6.1 Notices........................................................... 25
6.2 Attorney's Fees and Expenses...................................... 25
6.3 No Accord and Satisfaction........................................ 25
6.4 Successors; Joint and Several Liability........................... 25
6.5 Choice of Law..................................................... 26
6.6 No Waiver of Remedies............................................. 26
6.7 Offer to Lease.................................................... 26
6.8 Force Majeure..................................................... 26
6.9 Landlord's Consent................................................ 26
6.10 Severability; Captions ........................................... 26
6.11 Interpretation ................................................... 26
6.12 Incorporation of Prior Agreement; Amendments ..................... 26
6.13 Authority ........................................................ 27
6.14 Time of Essence .................................................. 27
6.15 Survival of Obligations .......................................... 27
6.16 Consent to Service ............................................... 27
6.17 Landlord's Authorized Agents ..................................... 27
6.18 Waiver of Jury Trial ............................................. 27
6.19 Intentionally deleted ............................................ 27
6.20 Year 2000 Compliance ............................................. 27
<PAGE> 2
LISTING OF EXHIBITS

Exhibit A Drawing Showing Location of the Premises
Exhibit B Listing of Plans and Specifications for Tenant Improvements
Exhibit C Form of Memorandum of Commencement Date
Exhibit D Rules and Regulations
Exhibit E Fee Schedule
Exhibit F Cleaning Schedule

SECTION 1: DEFINITIONS

1.1 DEFINITIONS. Each underlined term in this section shall have the
meaning set forth next to that underlined term.

1.2 ACCESS LAWS: The Americans With Disabilities Act of 1990 (including the
Americans with Disabilities Act Accessibility Guidelines for Building and
Facilities) and all other Governmental Requirements relating to the foregoing.

1.3 ADDITIONAL RENT: Defined in paragraph captioned "Additional Rent".

1.4 BASE AMOUNT: Defined in paragraph captioned "Additional Rent".

1.5 BASE RENT: Base Rent shall be as follows:

<TABLE>
<CAPTION>
Premises Period Annual Base Rent Monthly Payment
- -------- ------ ---------------- ---------------

<S> <C> <C> <C>
Premises A & B Commencement at the rate of
Date to 6-30-00 $303,345.00 $ 25,278.75

Premises A, B & C 7-1-00 to 6-30-01 $860,652.00 $ 71,721.00
7-1-01 to 6-30-02 $876,590.00 $ 73,049.17
7-1-02 to 6-30-03 $892,528.00 $ 74,377.33
7-1-03 to 6-30-04 $908,466.00 $ 75,705.50
7-1-04 to 6-30-05 $924,404.00 $ 77,033.67
</TABLE>

1.6 BROKERS: Tenant was represented in this transaction by Spaulding &
Slye/Colliers International, a licensed real estate broker. Landlord was
represented in this transaction by Trammell Crow Company, a licensed real estate
broker

1.7 BUILDING: The building located on the Land at 25 Corporate Drive,
Burlington, Massachusetts, commonly known as 500 Burlington Centre and
containing approximately 124,854 rentable square feet.

1.8 BUSINESS DAY: Calendar days, except for Saturdays and Sundays and
holidays when banks are closed in the Commonwealth of Massachusetts.

1.9 CLAIMS: An individual and collective reference to any and all claims,
demands, damages, injuries, losses, liens, liabilities, penalties, fines,
lawsuits, actions, other proceedings and expenses (including reasonable
attorneys' fees and expenses incurred in connection with the proceeding whether
at trial or on appeal).

1.10 COMMENCEMENT DATE: Premises A & B: The earlier of (a) March 1, 2000 and
(b) the date on which the Premises shall have attained Substantial Completion
(including delivery of a certificate of occupancy in respect of the Premises;
see paragraph 1.34 for the definition of "Substantial Completion"). Premises C:
July 1, 2000.

1.11 ESTIMATED OPERATING COSTS ALLOCABLE TO THE PREMISES AND ESTIMATED
PROPERTY TAXES ALLOCABLE TO THE PREMISES: Each defined in paragraph captioned
"Additional Rent".

1.12 EVENTS OF DEFAULT: One or more of those events or states of facts
defined in the paragraph captioned "Events of Default".

1.13 GOVERNMENTAL AGENCY: The United States of America, the state in which
the Land is located, any county, city, district, municipality or other
governmental subdivision, court or agency or quasi-governmental agency having
jurisdiction over the Land and any board, agency or authority associated with
any such governmental entity, including the fire department having jurisdiction
over the Land.

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1.14 GOVERNMENTAL REQUIREMENTS: Any and all statutes, ordinances, codes,
laws, rules, regulations, orders and directives of any Governmental Agency as
now or later amended.

1.15 HAZARDOUS SUBSTANCE(S): Asbestos, PCBs, petroleum or petroleum-based
chemicals or substances, urea formaldehyde or any chemical, material, element,
compound, solution, mixture, substance or other matter of any kind whatsoever
which is now or later defined, classified, listed, designated or regulated as
hazardous, toxic or radioactive by any Governmental Agency.

1.16 LAND: The land upon which the Building is located in Burlington,
Middlesex County, Massachusetts.

1.17 LANDLORD: The trust named on the first page of this Lease, or its
successors and assigns as provided in paragraph captioned "Assignment by
Landlord".

1.18 LANDLORD'S AGENTS: Any and all partners, officers, agents, employees,
trustees, investment advisors and consultants of Landlord.

1.19 LEASE TERM: Premises A & B: Commencing on the Commencement Date in
respect of Premises A & B (the "Premises A & B Commencement Date"), and ending
June 30, 2005; Premises C: Commencing on July 1, 2000 and ending on June 30,
2005.

1.20 MANAGER: Trammell Crow Company, or its replacement as specified by
written notice from Landlord to Tenant.

1.21 MANAGER'S ADDRESS: 25 Corporate Drive, Burlington, Massachusetts 01803,
which address may be changed by written notice from Landlord to Tenant.

1.22 OPERATING COSTS: Defined in paragraph captioned "Additional Rent".

1.23 OPERATING COSTS ALLOCABLE TO THE PREMISES: Defined in paragraph
captioned "Additional Rent".

1.24 PARKING RATIO: 3.3 spaces per 1,000 square feet of rentable area in the
Premises.

1.25 PERMITTED USE: General business offices, and for no other use
whatsoever, and so long as such use is consistent with Governmental Requirements
and with first-class buildings of the same or similar use as the Building
located in the metropolitan area in which the Building is located.

1.26 PLANS AND SPECIFICATIONS: (a) Those certain plans and specifications
for the Tenant Improvements as listed in Exhibit B and any modifications to them
approved in writing by Landlord and Tenant; or (b) if Exhibit B does not include
a listing of such plans and specifications, then such plans and specifications
shall be prepared by Tenant (the "Preparing Party") and delivered to Landlord
(the "Receiving Party") and approved by Landlord and Tenant as set forth in the
paragraph captioned "Plans and Specifications".

1.27 PREPAID RENT: $25,278.75, being the first (1) month of initial Base
Rent due.

1.28 PREMISES: Three (3) areas being (i) Premises A containing approximately
7,735 rentable square feet on the third (3rd) floor, substantially as depicted
on the plan attached to this Lease as Exhibit A; (ii) Premises B containing
approximately 3,500 rentable square feet adjacent to Premises A, substantially
as depicted on Exhibit A; and Premises C containing approximately 20,641
rentable square feet adjacent to Premises A and Premises B, substantially as
depicted on Exhibit A. Collectively, Premises A, B and C shall be referred to as
the "Premises."

1.29 PRIME RATE: Defined in paragraph captioned "Default Rate".

1.30 PROPERTY TAXES: (a) Any form of ad valorem real or personal property
tax or assessment imposed by any Governmental Agency on the Land, Building,
related improvements or any personal property owned by Landlord associated with
such Land, Building or improvements; (b) any other form of tax or assessment,
license fee, license tax, tax or excise on rent or any other levy, charge,
expense or imposition made or required by any Governmental Agency on any
interest of Landlord in such Land, Building, related improvements or personal
property; (c) any fee for services charged by any Governmental Agency for any
services such as fire protection, street, sidewalk and road maintenance, refuse
collection, school systems or other services provided or formerly provided to
property owners and residents within the general area of the Land; (d) any
governmental impositions allocable to or measured by the area of any or all of
such Land, Building, related improvements or personal property or the amount of
any base rent, additional rent or other sums payable under any lease for any or
all of such Land, Building, related

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<PAGE> 4
improvements or personal property, including any tax on gross receipts or any
excise tax or other charges levied by any Governmental Agency with respect to
the possession, leasing, operation, maintenance, alteration, repair, use or
occupancy of any or all of such Land, Building, related improvements, personal
property or the rent earned by any part of or interest in such Land, Building,
related improvements or personal property; (e) any impositions by any
Governmental Agency on any transaction evidenced by a lease of any or all of
such Land, Building, related improvements or personal property or charge with
respect to any document to which Landlord is a party creating or transferring an
interest or an estate in any or all of such Land, Building, related improvements
or personal property; (f) any increase in any of the foregoing based upon
construction of improvements or change of ownership of any or all of such Land,
Building, related improvements or personal property; and (g) tax consultant fees
and expenses and costs of appeals of any property taxes. Property Taxes shall
not include taxes on Landlord's net income or any inheritance, estate or gift
taxes. Property Taxes shall be reduced by the amount of any abatement, net of
Landlord's costs of obtaining such abatement, granted by any Governmental Agency
on the Land, Building, related improvements or any personal property owned by
Landlord associated with such Land, Building, or improvements and on account of
any Year in which Tenant shall have paid Property Taxes Allocable to the
Premises, as hereinafter defined.

1.31 PROPERTY TAXES ALLOCABLE TO THE PREMISES: Defined in paragraph
captioned "Additional Rent".

1.32 PUNCH LIST WORK: Minor items of repair, correction, adjustment or
completion as such phrase is commonly understood in the construction industry in
the metropolitan area in which the Land is located.

1.33 SECURITY DEPOSIT: An amount equal to the sum of (i) Landlord's lease
transaction costs, including all brokerage fees and attorney's fees paid by
Landlord in connection with the negotiation and execution of the Lease and (ii)
the amount of the Tenant Improvement Allowance, as defined herein, allocable to
the preparation of Premises B for Tenant's occupancy. From and after the
execution of this Lease through October 1, 2000, the amount of the Security
Deposit shall be subject to increase from time to time to the extent that
Landlord may, on or before October 1, 2000, approve Plans and Specifications for
the preparation of Premises A and/or Premises C, or portions thereof, as the
case may be, and for which preparation an amount of the Tenant Improvement
Allowance shall be available in accordance with the terms of the Lease to pay
toward the construction of Tenant Improvements in such Premises. The Security
Deposit shall be increased by the amount equal to the amount of such further
Tenant Improvement Allowance, and such increase to the Security Deposit shall be
deposited with Landlord in the manner specified in paragraph 3.3 hereof promptly
upon Landlord's approval of such Plans and Specifications. The availability of
such additional amount of the Tenant Improvement Allowance shall be expressly
conditioned upon Landlord's prior receipt of the increase in the Security
Deposit, as aforesaid. As of the date which is twelve (12) months after payment
of the final amount drawn for the Tenant Improvement Allowance and as of each
subsequent anniversary of such date falling during the Term, the amount of the
Security Deposit shall be reduced by twenty percent (20%) of the amount then
held by Landlord provided that (i) Tenant shall not then be in default under
this Lease and (ii) Tenant shall maintain, in Landlord's reasonable judgment,
good financial standing as shown on Tenant's then most recent audited financial
statement. If during the Term Tenant shall register and then actually offer
stock for sale in an initial public offering, Landlord may, in its sole
discretion, but without obligation hereby, consider a further reduction of the
Security Deposit, based on Tenant's audited financial statement issued in
connection with such offering.

1.34 SUBSTANTIAL COMPLETION: The date that the Tenant Improvements have been
completed substantially in accordance with the Plans and Specifications, subject
to Punch List Work, and the building department for the Town of Burlington,
Massachusetts shall have issued a certificate of occupancy for the Premises.

1.35 TENANT: The person or entity named on the first page of this Lease.

1.36 TENANT ALTERATIONS: Defined in paragraph captioned "Tenant
Alterations".

1.37 TENANT IMPROVEMENT ALLOWANCE: The maximum amount to be expended by
Landlord, if any, for the cost of Tenant Improvements (including architectural,
engineering, permitting and space planning fees, plus the Construction
Management Fee [see paragraph 2.5] equal to three percent [3%] of the total cost
of preparing the Premises for Tenant's occupancy) which maximum shall not exceed
Three Hundred Eighteen Thousand Seven Hundred Sixty and 00/100 Dollars
($318,760.00), or Ten and 00/100 Dollars ($10.00) per rentable square foot,
provided, however, and notwithstanding anything to the contrary contained in the
foregoing, the actual amount of the Tenant Improvement Allowance to be paid by
Landlord in respect of the preparation of the Premises for Tenant's

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occupancy shall be determined as of October 1, 2000, based upon the Plans and
Specifications to the extent of Landlord's approval thereof by October 1, 2000.
If as of October 1, 2000, the cost of the Tenant Improvements, as then shown on
the Plans and Specifications and to the extent then approved by Landlord, shall
be less than the aforesaid amount, then notwithstanding anything to the contrary
contained herein, such cost shall be deemed to be the final Tenant Improvement
Allowance and Tenant shall be deemed to have forfeited any right to any Tenant
Improvement Allowance in excess of such final amount. There shall be no credit
or payment due Tenant on account of any unexpended portion of the Tenant
Improvement Allowance.

1.38 TENANT IMPROVEMENTS: Those alterations or improvements to the Premises
as appear and are depicted in the Plans and Specifications.

1.39 TENANT'S AGENTS: Any and all officers, partners, contractors,
subcontractors, consultants, licensees, agents, concessionaires, subtenants,
servants, employees, customers, guests, invitees or visitors of Tenant.

1.40 TENANT'S PRO RATA SHARE initially shall be nine and zero one hundredths
percent (9.00%) based upon Premises A and B. Commencing as of July 1, 2000,
Tenant's Pro Rata Share shall be twenty-five and fifty-three one hundredths
percent (25.53%) based upon Premises A, B and C in the aggregate.

1.41 YEAR: A calendar year commencing January 1 and ending December 31.

SECTION 2: PREMISES AND TERM

2.1 LEASE OF PREMISES. Landlord demises and leases the Premises to Tenant,
and Tenant hires and takes the Premises from Landlord, upon the terms and
conditions set forth in this Lease.

2.2 LEASE TERM. The Lease Term shall be for the period stated in the
definition of that term, unless earlier terminated as provided in this Lease.

2.2.1 OPTION TO EXTEND. While the Lease is in full force and effect,
provided the Tenant is not in default of any of the terms, covenants and
conditions thereof, beyond any applicable notice and cure periods, and that
HealthGate Data Corp. is itself occupying not less than seventy percent (70%) of
the Premises then demised to Tenant both as of the time of option exercise and
as of the commencement of the herein additional term, Tenant shall have the
right or option to extend the original term of this Lease for two (2) additional
periods of five (5) years each. Such extensions of the original term shall be on
the same terms, covenants and conditions as provided for in the original term
except that Tenant shall have no further options to extend the term, and except
that the base rental during the extended terms shall be the then fair market
rental value, as determined by Landlord, taking into account provisions for
subsequent increases and other adjustments for new leases then currently being
negotiated or executed in comparable space located in the office park in which
the Building is located, or if no new leases are then being negotiated or
executed in such office park, the fair market rental value shall be determined
by Landlord taking into account new leases then being negotiated or executed for
comparable space located elsewhere in first-class office buildings located in
the Burlington, Massachusetts area, provided, however, that in no event shall
the Base Rent payable on account of the then additional term be less than the
annual Base Rent payable for the Premises as of the date immediately preceding
the commencement of such additional term. Notice of Tenant's intention to
exercise this option must be given to Landlord, in writing, not less than twelve
(12) months prior to the expiration of the then current Term of the Lease.
Within 30 days of Landlord's receipt of notice of Tenant's intention to exercise
the option to extend, Landlord, in writing, shall notify Tenant of the then fair
market rental value of the Premises for such extended term. Landlord shall have
no obligation to prepare, refurbish or construct the Premises or any part
thereof prior to the commencement of the herein additional term or otherwise
provide any amount of improvement allowance in respect of the Premises.

2.2.2 RIGHT OF FIRST OPPORTUNITY TO LEASE VACANT SPACE. While the Lease
is in full force and effect, provided the Tenant is not in default of any of the
terms, covenants and conditions thereof, and, provided further, that HealthGate
Data Corp. is itself occupying not less than seventy percent (70%) of the
Premises then demised to Tenant both at the time Tenant shall exercise the right
herein to lease additional space and as of the commencement of the Term in
respect of such additional space, Tenant shall have the one-time right to lease
additional space ("RFO Premises") as hereinafter set forth. When the RFO
Premises become available (i.e., when Landlord determines that the then current
tenant of such RFO Premises will vacate such RFO Premises), Landlord shall first
offer such RFO Premises to Tenant on an "As Is" basis. The Base Rent payable for
the RFO Premises shall be the fair market rental value of such RFO Premises as
determined by Landlord as of the commencement of the term in respect of such RFO
Premises, provided,

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however, that in no event shall the Base Rent per square foot of the RFO
Premises be less than the then current Base Rent per square foot payable in
respect of the Premises then demised to Tenant. Tenant shall have seven (7)
business days from notification of Landlord within which to accept Landlord's
offer and to enter into a written agreement to lease the RFO Premises from
Landlord within twenty (20) business days after the date of Tenant's acceptance.
Tenant shall thereafter lease such RFO Premises for a term which will commence
not earlier than the later of (i) the date which shall be thirty (30) days after
the date on which Tenant shall accept Landlord's offer to lease the RFO Premises
and (ii) the day next following the date on which any tenant(s) occupying all or
any part of the RFO Premises shall vacate all of the RFO Premises, and will
expire simultaneously with the Term of this Lease. Notwithstanding anything to
the contrary contained in the foregoing, Tenant shall have no right to lease the
RFO Premises unless, at the time of Tenant's acceptance of Landlord's offer and
Tenant's execution and delivery of the aforesaid written agreement to lease the
RFO Premises, there shall be a minimum of three (3) years remaining in the Term,
provided, however, that if at the time Tenant shall accept Landlord's offer
there shall be less than three (3) years remaining in the initial Term, then
Tenant may accept Landlord's offer only on the express condition that Tenant
simultaneously exercise its option provided in paragraph 2.2.1 to extend the
Term (subject always to the conditions for the valid exercise of such option as
stated therein). If Tenant has not accepted Landlord's offer in writing within
said seven (7) business day time period or shall not enter into said written
agreement within said twenty (20) business day period, this right of first
opportunity shall expire as to such RFO Premises and Tenant shall have no
further right to lease such RFO Premises, Landlord shall have no further duty to
offer the RFO Premises or any other space to Tenant when it becomes available,
and Landlord shall be free to offer such space to any third party for lease on
such terms and conditions as Landlord shall determine in its own discretion and
without obligation to reoffer the space to tenant. The RFO Premises shall be
defined as the space currently leased to Santa Cruise Operation, Inc.,
containing approximately 3,543 rentable square feet and situated on the third
(3rd) floor of the Building, substantially as shown on Exhibit A.

2.2.3 TENANT'S RIGHT OF TERMINATION AT END OF THIRD YEAR. While the
Lease is in full force and effect, provided the Tenant is not in default of any
of the terms, covenants and conditions thereof, both as of the time of Tenant's
exercise of the right to terminate this Lease and as of the effective
termination date, Tenant shall have the right to terminate this Lease effective
as of June 30, 2003. Tenant shall exercise the foregoing right by giving
Landlord written notice (the "Termination Notice") of its exercise of its
termination right not later than September 30, 2002. If Tenant exercises its
right of termination, on or before June 30, 2003 Tenant shall vacate and
surrender to Landlord all Premises then demised to Tenant in the condition in
which the Premises are required to be delivered to Landlord upon the expiration
or sooner termination of the Term pursuant to, without limitation, paragraph 4.6
of the Lease. Simultaneously with Tenant's delivery of Tenant's Notice, Tenant
shall pay to Landlord an amount equal to the sum of (i) six (6) months worth of
Base Rent, Additional Rent and other charges at the rate then in effect under
the Lease, plus (ii) the then (i.e., as of the date of the Termination Notice)
unamortized amount of the Tenant Improvement Allowance, calculated on a straight
line basis over the original Term of the Lease, plus (iii) the then unamortized
amount of Landlord's leasing commissions payable on account of this Lease
calculated on a straight line basis over the original Term of this Lease.
Landlord shall calculate the said unamortized amounts (utilizing an interest
factor of eleven percent [11%] per annum) and notify Tenant thereof prior to the
payment due date. If Tenant shall fail to give its Termination Notice in a
timely manner or pay any amount when and as due in accordance with the
foregoing, then this Lease shall not be deemed terminated as of the effective
termination date, and the Lease shall continue in full force and effect for the
remainder of the Term, and Landlord shall have all rights and remedies available
to it as specified under this Lease, such timely notice and payment being of the
essence hereof. Nothing contained in this paragraph 2.2.3 shall be deemed to
relieve Tenant of the covenants, agreements and obligations on its part to be
kept and performed under this Lease from and after the giving of its Termination
Notice through the effective termination date (including, without limitation,
Tenant's obligation to pay Base Rent and other charges under this Lease).

2.3 PLANS AND SPECIFICATIONS. If clause (b) of the definition of Plans and
Specifications is applicable, then the Preparing Party shall deliver the plans
and specifications for the Tenant Improvements to the Receiving Party. Upon
receipt of the proposed plans and specifications, the Receiving Party shall
either (a) approve and return them to the Preparing Party within ten (10)
Business Days after such receipt in which case such proposed plans and
specifications shall be the Plans and Specifications, or (b) if the Receiving
Party disapproves the plans and specifications, it shall

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provide the Preparing Party with notice of disapproval together with its
specific objections within such ten (10) Business Day period. If the Receiving
Party disapproves any portion of the proposed plans and specifications in
accordance with the previous sentence, then Landlord and Tenant shall use good
faith efforts to reach mutually acceptable Plans and Specifications. If Landlord
and Tenant are unable to reach mutually acceptable Plans and Specifications
within twenty (20) Business Days of the Preparing Party's receipt of the
Receiving Party's notice of disapproval, then either party may terminate this
Lease, without any liability to the other party, upon five (5) Business Days'
written notice provided, however, that Landlord shall return to Tenant all
Prepaid Rent and any Security Deposit made hereunder by Tenant, less the amount
of Landlord's actual costs incurred in preparing and/or reviewing, as the case
may be, such Plans and Specifications.

2.4 COMMENCEMENT DATE. Landlord shall prepare the Premises for Tenant's
occupancy in accordance with the Plans and Specifications. Landlord's
preparation of the Premises ("Landlord's Work") shall be performed by Landlord's
contractors and the Tenant Improvement Allowance shall be applied against the
cost thereof as provided in paragraph 2.5 hereof. Landlord shall notify Tenant
in writing of Substantial Completion. If Tenant believes that Substantial
Completion has not occurred, Tenant shall notify Landlord in writing of its
objections within ten (10) Business Days after its receipt of the Landlord's
notice described in the preceding sentence. Landlord shall have a reasonable
time after its receipt of Tenant's notice in which to take such action as may be
necessary to achieve Substantial Completion, and shall notify Tenant in writing
when such has been completed. As of the date of this Lease, Tenant is in
possession of Premises C. Taking of possession by Tenant of the whole or any
part of Premises A and/or Premises B prior to March 1, 2000 or Substantial
Completion in respect of Premises A and B shall establish the Commencement Date
as specified in the definition of that term for both Premises A and B and the
establishment of such fact upon the taking of possession shall occur even if
Tenant disputes whether Substantial Completion has occurred or attempts to
condition or qualify the taking of possession. Such taking of possession shall
further establish that the Premises are in good and satisfactory condition when
possession was so taken and the Commencement Date has occurred. Tenant
acknowledges that no representations as to the condition of the Premises have
been made by Landlord, unless such are expressly set forth in this Lease. In the
event of any dispute as to whether Substantial Completion has occurred, the
certificate of Landlord's architect or general contractor shall be conclusive.
If on the date of Substantial Completion, Punch List Work remains to be
completed, Landlord and Tenant shall agree on such Punch List Work prior to
occupancy by Tenant and Landlord will promptly complete it after the date of
Substantial Completion. In no event shall Tenant's refusal or failure to agree
on the nature and extent of Punch List Work or the existence of items of Punch
List Work delay or postpone the occurrence of the date of Substantial Completion
or the Commencement Date. Tenant shall make no changes to the Plans and
Specifications or the work reflected in the Plans and Specifications without the
written consent of Landlord. Notwithstanding anything to the contrary herein
contained, Landlord shall perform Landlord's Work in respect of Premises C while
Tenant is in occupancy of Premises C and may perform Landlord's Work in respect
of Premises A and/or B subsequent to March 1, 2000 and possibly while Tenant is
in occupancy of Premises A and/or B, or parts thereof. There shall be no
allowance to Tenant for diminution of rental value and no liability on the part
of Landlord by reason of inconvenience, annoyance or injury to Tenant arising
from the performance of Landlord's Work.

2.4.1 ACCESS FOR TELECOMMUNICATIONS INSTALLATION. During the period
which is two (2) weeks prior to the date of Substantial Completion of Premises
A, B and C respectively, and as to the occurrence of which Landlord shall notify
Tenant of its reasonable estimate, Tenant and its contractors shall be permitted
reasonable access to the Premises in order to install Tenant's
telecommunications equipment, and for furniture set up. Access to the Premises
by Tenant or such contractors as provided above shall not require Tenant to
commence paying Base Rent or Additional Rent prior to the Commencement Date,
provided, however, upon entry into the Building by Tenant or Tenant's Agent's,
including, without limitation, Tenant's contractors, all of the other terms,
provisions and conditions of the Lease shall be deemed to be in full force and
effect, including without limitation, paragraphs 4.4, 4.5, 4.12, 4.13 and 4.28.
Tenant's contractors who are employed for the foregoing purposes shall conform
in all respects to the requirements set forth in paragraph 4.5. To the extent
that Landlord shall have the right to do so, Landlord shall permit Tenant and
Tenant's contractors access to and use of such telecommunications copper and
fiber optic cable which Landlord shall have connected or shall have caused or
permitted to have been connected to the Building as shall be reasonably
necessary in order for Tenant to establish telecommunications services to the
Premises. All such installation work to be performed in the Building or in the
Premises, as the case may be, shall be subject to Landlord's review and prior
written approval in accordance with the terms of the Lease, including, without
limitation, paragraph 4.4. All such

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telecommunications work shall be performed by or at the expense of Tenant.
Landlord makes no representation as to the availability or sufficiency of
existing cabling serving the Building, or as to its suitability for Tenant's
purposes.

2.5 TENANT'S CONTRIBUTION TO TENANT IMPROVEMENT COSTS. Tenant shall be
responsible for all costs to prepare the Premises for Tenant's occupancy,
including all hard and soft costs, such as and without limitation, labor and
materials, architectural, engineering, permitting and space planning fees
(collectively, the "Tenant Improvement Costs"). Tenant further agrees to pay
Landlord a construction management fee (the "Construction Management Fee") equal
to three percent (3%) of the Tenant Improvement Costs. The Tenant Improvement
Allowance shall be applied against the Tenant Improvement Costs and the
Construction Management Fee. Tenant shall not be entitled to receive any credit
or payment on account of any unexpended portion of the Tenant Improvement
Allowance. If the cost of the Tenant Improvements and the Construction
Management Fee exceed the Tenant Improvement Allowance, Tenant shall pay to
Landlord on demand and prior to Landlord's commencement of the work to prepare
the Premises for Tenant's occupancy, any amount which is Tenant's responsibility
to pay. If Tenant fails to pay to Landlord the cost of any such excess Tenant
Improvements and Construction Management Fee as and when due, Landlord may elect
to suspend work on the Tenant Improvements pending such timely payment, and the
Commencement Date shall be deemed to have occurred on the date that the Tenant
Improvements would have achieved Substantial Completion absent such suspension
of work. All Tenant Improvements, regardless of which party constructed them,
shall become the property of Landlord and shall remain upon and be surrendered
with the Premises upon the expiration or earlier termination of this Lease;
provided that, at Landlord's election and upon notice to Tenant given at the
time of Landlord's approval of the Plans and Specifications, Tenant shall be
required to remove all or any portion of the Tenant Improvements upon the
expiration or earlier termination of this Lease.

2.6 MEMORANDUM OF COMMENCEMENT DATE. At Landlord's election and request,
Tenant shall execute a Memorandum of Commencement Date in the form attached as
Exhibit C. In no event shall Tenant record this Lease or the Memorandum of
Commencement Date.

2.7 USE AND CONDUCT OF BUSINESS. The Premises are to be used only for the
Permitted Uses, and for no other business or purpose without the prior consent
of Landlord. Landlord makes no representation or warranty as to the suitability
of the Premises for Tenant's intended use. Tenant shall, at its own cost and
expense, obtain and maintain any and all licenses, permits, and approvals
necessary or appropriate for its use, occupation and operation of the Premises.
Tenant's inability to obtain or maintain any such license, permit or approval
necessary or appropriate for its use, occupation or operation of the Premises
shall not relieve it of its obligations under this Lease, including the
obligation to pay Base Rent and Additional Rent. No act shall be done in or
about the Premises that is unlawful or that will increase the existing rate of
insurance on any or all of the Land or Building. Tenant shall not commit or
allow to be committed or exist: (a) any waste upon the Premises, (b) any public
or private nuisance, or (c) any act or condition which disturbs the quiet
enjoyment of any other tenant in the Building, violates any of Landlord's
contracts affecting any or all of the Land or Building, creates or contributes
to any work stoppage, strike, picketing, labor disruption or dispute, interferes
in any way with the business of Landlord or any other tenant in the Building or
with the rights or privileges of any contractors, subcontractors, licensees,
agents, concessionaires, subtenants, servants, employees, customers, guests,
invitees or visitors or any other persons lawfully in and upon the Land or
Building, or causes any impairment or reduction of the good will or reputation
of the Land or Building. Tenant shall not, without the prior consent of
Landlord, use any apparatus, machinery or device in or about the Premises which
will cause any substantial noise or vibration or any increase in the normal
consumption level of electric power. If any of Tenant's machines and equipment
should disturb the quiet enjoyment of any other tenant in the Building, then
Tenant shall provide, at its sole cost and expense, adequate insulation or take
other such action, including removing such machines and equipment, as may be
necessary to eliminate the disturbance.

2.8 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS AND RULES AND REGULATIONS.
Tenant shall comply with all Governmental Requirements relating to its use,
occupancy and operation of the Premises and shall observe such reasonable rules
and regulations as may be adopted and published by Landlord from time to time
for the safety, care and cleanliness of the Premises and the Building, and for
the preservation of good order in the Building, including the Rules and
Regulations attached to this Lease as Exhibit D.

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SECTION 3: BASE RENT, ADDITIONAL RENT AND OTHER SUMS PAYABLE UNDER LEASE

3.1 PAYMENT OF RENTAL. Tenant agrees to pay Base Rent, Additional Rent and
any other sum due under this Lease to Landlord without demand, deduction,
credit, adjustment or offset of any kind or nature, in lawful money of the
United States when due under this Lease, at the offices of Manager at Manager's
Address, or to such other party or at such other place as Landlord may from time
to time designate in writing.

3.2 BASE RENT. Tenant agrees to pay Base Rent to Landlord without demand,
in advance on or before the first day of each calendar month of the Lease Term.
Base Rent for any partial month at the beginning or end of the Lease Term shall
be prorated. On execution of this Lease, Tenant has paid to Landlord the amount
specified in the definition of Prepaid Rent for the month specified in the
definition of that term. Base Rent for any partial month at the beginning of the
Lease Term shall be paid by Tenant on the Commencement Date.

3.3 SECURITY DEPOSIT. As security for the full and faithful payment of all
sums due under this Lease and the full and faithful performance of every
covenant and condition of this Lease to be performed by Tenant, Tenant agrees to
pay to Landlord upon execution of this Lease the sum specified in the definition
of the term Security Deposit. If Tenant shall breach or default with respect to
any payment obligation or other covenant or condition of this Lease, Landlord
may apply all or any part of the Security Deposit to the payment of any sum in
default or any damage suffered by Landlord as a result of such breach or
default, and in such event, Tenant shall, upon demand by Landlord, deposit with
Landlord the amount so applied so that Landlord shall have the full Security
Deposit on hand at all times during the Lease Term. Landlord's use or
application of all or any portion of the Security Deposit shall not impair any
other rights or remedies provided under this Lease or under applicable law and
shall not be construed as a payment of liquidated damages. If Tenant shall have
fully complied with all of the covenants and conditions of this Lease, the
Security Deposit shall be repaid to Tenant, without interest, within ten (10)
Business Days after the expiration of this Lease. Tenant may not mortgage,
assign, transfer or encumber the Security Deposit and any such act on the part
of Tenant shall be without force or effect. In the event any bankruptcy,
insolvency, reorganization or other creditor-debtor proceedings shall be
instituted by or against Tenant, the Security Deposit shall be deemed to be
applied first to the payment of Base Rent, Additional Rent and all other sums
payable under this Lease to Landlord for all periods prior to the institution of
such proceedings and the balance, if any, may be retained by Landlord and
applied against Landlord's damages.

3.3.1 LETTER OF CREDIT IN LIEU OF CASH SECURITY DEPOSIT. In lieu of a
cash Security Deposit, Tenant may deliver to Landlord an irrevocable and
unconditional standby letter of credit made payable to Landlord, its successors
and assigns, in the sum of the applicable amount of the Security Deposit (the
"Letter of Credit"), in such form as is reasonably acceptable to Landlord, which
shall secure the performance by Tenant of all obligations on the part of Tenant
hereunder. The issuer of the Letter of Credit shall be a banking institution
with at least a rating of A and otherwise reasonably acceptable to Landlord.
Although Landlord shall only have the right to draw under the Letter of Credit
as set forth herein, under the terms of the Letter of Credit, the sole condition
to Landlord's draw upon the Letter of Credit shall be presentment to the issuer
thereof, prior to or on the expiration date, of a demand for payment. The Letter
of Credit shall be self-renewing from year to year during the Term of this Lease
(in the applicable amount of the Security Deposit as may be in effect from time
to time) so as to expire no earlier than thirty (30) days following the Lease
expiration date and shall contain such other customary terms as Landlord
requires in its reasonable discretion. It is agreed: (i) that the Letter of
Credit may be drawn upon to cure any Event of Default that may exist, without
prejudice to any other remedy or remedies which Landlord may have on account
thereof; and upon Landlord's demand, Tenant shall reimburse the issuer for the
amount so drawn so that the Letter of Credit will be restored to its original
amount; (ii) that the Letter of Credit may be drawn upon if the Letter of Credit
has not been extended or renewed without amendment at least forty five (45) days
prior to any then current expiration date thereof; (iii) that if the rating of
the issuer of the Letter of Credit at any time drops below A, within sixty (60)
days of Landlords demand, Tenant shall replace the Letter of Credit with another
Letter of Credit in a form reasonably acceptable to Landlord and with an issuer
with a rating of at least an A and otherwise reasonably acceptable to Landlord;
Landlord may draw on the existing Letter of Credit if, after Landlord requests
that Tenant replace the Letter of Credit as aforesaid, Landlord is not provided
with a substitute Letter of Credit in a form, and from an issuer, satisfactory
to Landlord as provided above at least fifteen (15) days prior to the
then-current expiration date of the Letter of Credit; (iv) that should the
Premises be conveyed by Landlord, the Letter of Credit or any portion thereof
shall be assigned to Landlord from any and all liability with respect to the

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Letter of Credit and its application or return, and Tenant agrees to look to
such guarantee for such application or return; and (v) that the Letter of Credit
shall be returned to Tenant no later than thirty (30) days after the expiration
of the Term or any renewal or extension thereof, provided Tenant has vacated the
Premises and surrendered possession thereof to Landlord at the expiration of the
Term or any extension thereof as provided herein and has paid Landlord all sums
due and owing under this Lease.

3.4 ADDITIONAL RENT. Definitions of certain terms used in this paragraph
are set forth in subparagraph 3.4.5. Tenant agrees to pay to Landlord additional
rent as computed in this paragraph (individually and collectively the
"Additional Rent"):

3.4.1 RENTAL ADJUSTMENT FOR ESTIMATED OPERATING COSTS AND PROPERTY
TAXES. Landlord shall furnish Tenant a written statement of Estimated Operating
Costs Allocable to the Premises and estimated Property Taxes Allocable to the
Premises for each Year and the amount payable monthly by Tenant for such Costs
shall be computed as follows: one-twelfth (1/12) of the amount, if any, by which
the Estimated Operating Costs Allocable to the Premises and the Estimated
Property Taxes Allocable to the Premises exceeds the Base Amount shall be
Additional Rent and shall be paid monthly by Tenant for each month during such
Year after the Commencement Date. If the Commencement Date occurs on a date
other than the first day of the Year, the statements provided by Landlord to
Tenant and the computation of the monthly payment amounts shall be determined
based on a proration of the excess amount over a 360-day year. If such written
statement (except the first statement, which shall be prorated pursuant to the
previous sentence) is furnished after the commencement of the Year, Tenant shall
also make a retroactive lump-sum payment equal to the amount of the monthly
payment amount multiplied by the number of months during the Year after the
Commencement Date for which no payment was paid.

3.4.2 ACTUAL COSTS. After the close of each Year, Landlord shall
deliver to Tenant a written statement setting forth the Operating Costs
Allocable to the Premises and Property Taxes Allocable to the Premises during
the preceding Year. If such costs for any Year exceed the Estimated Operating
Costs Allocable to the Premises or the Estimated Property Taxes Allocable to the
Premises paid by Tenant to Landlord pursuant to subparagraph 3.4.1 for such
Year, Tenant shall pay the amount of such excess to Landlord with in twenty (20)
Business Days after receipt of such statement by Tenant. If such statement shows
the Operating Costs Allocable to the Premises or the Property Taxes Allocable to
the Premises to be less than the Estimated Operating Costs Allocable to the
Premises or the Property Taxes Allocable to the Premises, as the case may be,
paid by Tenant to Landlord pursuant to subparagraph 3.4.1, then the amount of
such overpayment shall be paid by Landlord to Tenant within twenty (20) Business
Days following the date of such statement or, at Landlord's option, shall be
credited towards the installment(s) of Additional Rent next coming due from
Tenant.

3.4.3 DETERMINATION. The determination of Operating Costs Allocable to
the Premises and Property Taxes Allocable to the Premises shall be made by
Landlord. Any sums payable under this Lease pursuant to this paragraph shall be
Additional Rent and, in the event of nonpayment of such sums, Landlord shall
have the same rights and remedies with respect to such nonpayment as it has with
respect to nonpayment of the Base Rent due under this Lease.

3.4.3.1 OPERATING COST AUDIT. Landlord shall maintain records
concerning estimated and actual Operating Costs Allocable to the Premises for no
less than twelve (12) months following the period covered by the statement or
statements furnished Tenant, after which time Landlord may dispose of such
records. Provided that Tenant is not then in default of its obligation to pay
Base Rent, Additional Rent or other payments required to be made by it under
this Lease and provided that Tenant is not otherwise in default under this
Lease, Tenant may, at Tenant's sole cost and expense, cause a Qualified Person
(defined below) to inspect Landlord's records. Such inspection, if any, shall be
conducted no more than once each Year, during Landlord's normal business hours
within seventy five (75) Business Days after receipt of Landlord's written
statement of Operating Costs Allocable to the Premises for the previous year,
upon first furnishing Landlord at least fifteen (15) Business Days prior written
notice. Any errors disclosed by the review shall be promptly corrected by
Landlord; provided, however, that if Landlord disagrees with any such claimed
errors, Landlord shall have the right to cause another review to be made by an
auditor of Landlord's choice. In the event the results of the review of records
(taking into account, if applicable, the results of any additional review caused
by Landlord) reveal that Tenant has overpaid obligations for a preceding period,
the amount of such overpayment shall be credited against Tenant's subsequent
installment of Base Rent,

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Additional Rent or other payments due to Landlord under the Lease. In the event
that such results show that Tenant has underpaid its obligations for a preceding
period, the amount of such underpayment shall be paid by Tenant to Landlord with
the next succeeding installment obligation of estimated Operating Costs
Allocable to the Premises. If the actual Operating Costs Allocable to the
Premises for any given Year were improperly computed and if the actual Operating
Costs Allocable to the Premises are overstated by more than 5%, Landlord shall
reimburse Tenant for the cost of its audit. A "Qualified Person" means an
accountant or other person experienced in accounting for income and expenses of
office projects, who is engaged solely by Tenant on terms which do not entail
any compensation based or measured in any way upon any savings in Additional
Rent or reduction in Operating Costs Allocable to the Premises achieved through
the inspection process described in this subparagraph. Notwithstanding anything
to the contrary contained in the foregoing, if the amount of any overpayment or
underpayment by Tenant shall be determined by undisputed audit after the
expiration or prior termination of the Lease Term, the amount of overpayment
shall be refunded by Landlord to Tenant, provided there shall then be no
outstanding amount due from Tenant to Landlord, or the amount of any
underpayment shall be paid by Tenant upon receipt of a bill therefor from
Landlord, as applicable. The provisions of the preceding sentence shall survive
expiration or prior termination of the Lease Term.

3.4.4 END OF TERM. If this Lease shall terminate on a day other than
the last day of a Year, (a) Landlord shall estimate the Operating Costs
Allocable to the Premises and the Property Taxes Allocable to the Premises for
such Year predicated on the most recent reliable information available to
Landlord; (b) the amounts determined under clause (a) of this sentence shall be
prorated by multiplying each such amount by a fraction, the numerator of which
is the number of days within the Lease Term in such Year and the denominator of
which is 360; (c) the Base Amount Allocable to the Premises on account of
Operating Expense, net of Property Taxes and the Base Amount Allocable to the
Premises on account of Property Taxes shall be prorated in the manner described
in clause (b); (d) the clause (c) amounts (i.e., the prorated Base Amount
Allocable to the Premises on account of Operating Expense, net of Property Taxes
and the Base Amount Allocable to the Premises on account of Property Taxes,
respectively) shall be deducted from the clause (b) amounts (i.e., the prorated
Operating Costs Allocable to the Premises and the prorated Property Taxes
Allocable to the Premises, respectively); (e) if the respective clause (d)
amounts exceed the Estimated Operating Costs Allocable to the Premises and the
Estimated Amount of Property Taxes Allocable to the Premises, respectively, paid
by Tenant for the last Year in the Lease Term, then Tenant shall pay the excess
to Landlord within twenty (20) Business Days after Landlord's delivery to Tenant
of a statement for such excess; and (f) if the Estimated Operating Costs
Allocable to the Premises and the Estimated Amount of Property Taxes Allocable
to the Premises, respectively, paid by Tenant for the last Year in the Lease
Term exceed the respective clause (d) amounts, then Landlord shall refund to
Tenant the excess within the twenty (20) Business Day period described in clause
(e). Landlord's and Tenant's obligations under this paragraph shall survive the
expiration or other termination of this Lease.

3.4.5 DEFINITIONS. Each underlined term in this subparagraph shall have
the meaning set forth next to that underlined term:

BASE AMOUNT: The Base Amount on account of Operating Costs, net of
Property Taxes, shall be the amount actually paid by Landlord in
respect of calendar year 2000 on account of Operating Costs, net of
Property Taxes The Base Amount on account of Property Taxes shall be
the amount of Property Taxes in respect of fiscal tax year 1999 (July
1, 1998 through June 30, 1999) on account of Property Taxes.

ESTIMATED OPERATING COSTS ALLOCABLE TO THE PREMISES: Landlord's
estimate of Operating Costs allocable to the Premises for a Year to be
given by Landlord to Tenant pursuant to subparagraph 3.4.1.

ESTIMATED PROPERTY TAXES ALLOCABLE TO THE PREMISES: Landlord's
estimated Property Taxes Allocable to the Premises for a Year to be
given by Landlord to Tenant pursuant to subparagraph 3.4.1.

OPERATING COSTS: All expenses paid or incurred by Landlord for
maintaining, operating, owning and repairing any or all of the Land,
Building, related improvements, and the personal property used in
conjunction with such Land, Building and related improvements,
including all expenses paid or incurred by Landlord for: (a) utilities,
including electricity, water, gas, sewers, refuse collection, telephone
charges, cable television or other electronic or microwave signal
reception, steam, heat, cooling or any other service which is now or in
the future considered a utility and which are not payable directly by
tenants in the Building; (b) supplies; (c) cleaning and janitorial
services (including window washing), landscaping and landscaping
maintenance (including irrigating, trimming,

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moving, fertilizing, seeding and replacing plants), snow removal and
other services; (d) security services, if any; (e) insurance; (f)
management fees; (g) services of independent contractors; (h)
compensation (including employment taxes and fringe benefits) of all
persons who perform duties in connection with any service, repair,
maintenance, replacement or improvement or other work included in this
subparagraph; (i) license, permit and inspection fees; (j) assessments
and special assessments due to deed restrictions, declarations or
owners associations or other means of allocating costs of a larger
tract of which the Land is a part; (k) rental of any machinery or
equipment; (l) audit fees and accounting services related to the
Building, and charges for the computation of the rents and charges
payable by tenants in the Building (but only to the extent the cost of
such fees and services are in addition to the cost of the management
fee); (m) the cost of improvements, repairs or replacements; (n)
maintenance and service contracts; (o) legal fees and other expenses of
legal or other dispute resolution proceedings; (p) maintenance and
repair of the roof and roof membranes, (q) costs incurred by Landlord
for compliance with Access Laws, as set forth in the paragraph
captioned "Access Laws"; (r) elevator service and repair, if any; and
(s) any other expense or charge which in accordance with generally
accepted accounting and management principles would be considered an
expense of maintaining, operating, owning or repairing the Building.
Without limiting the foregoing, Operating Costs shall include
replacement of roofs and roof membranes; exterior painting; parking
area resurfacing, resealing and restriping parking areas and driveways;
upgrading of the HVAC systems in the Building, and other capital
improvements which are intended to reduce Operating Costs; provided
that, such capital improvements, whether installed before or after the
Commencement Date, shall be amortized with market interest over their
estimated useful lives as determined by Landlord and only the
amortization installments and interest attributable to the Lease Term
shall be an Operating Cost under this Lease.

Operating Costs shall not include any of the following: ground
rent; interest and amortization of funds borrowed by Landlord for items
other than capital improvements; leasing commissions and advertising
and space planning expenses incurred in procuring tenants; and
salaries, wages, or other compensation paid to officers or executives
of Landlord in their capacities as officers and executives. If less
than ninety-five percent (95%) of the net rentable area of the Building
is occupied by tenants at all times during any Year, then Operating
Costs for such Year may include all additional costs and expenses that
Landlord reasonably determines would have been incurred had ninety-five
percent (95%) of the Building been occupied at all times during such
Year by tenants.

OPERATING COSTS ALLOCABLE TO THE PREMISES: The product of Tenant's Pro
Rata Share times Operating Costs.

PROPERTY TAXES ALLOCABLE TO THE PREMISES: The product of Tenant's Pro
Rata Share times Property Taxes.

3.5 UTILITIES. Tenant shall contract directly and pay for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges and other utilities used
on or from the Premises together with any taxes, penalties, surcharges or
similar charges relating to such utilities. If any such service is not
separately metered to the Premises, the cost therefor shall be billed by
Landlord to Tenant as a part of Tenant's share of Operating Costs, provided that
the cost of electric current for lights and convenience outlets shall be billed
by Landlord to Tenant separately from, and in addition to, Operating Costs.
Landlord estimates that the present cost of electric current for lights and
convenience outlets only shall be $1.00 per square foot. Landlord makes no
warranty or representation that such cost will not increase during the Term due
to increases in electric rates or electricity consumption, as the case may be.
HVAC service shall be provided to the Premises Monday through Friday (excluding
holidays) from 8:00 a.m. to 6:00 p.m. and Saturdays (excluding holidays) from
8:00 a.m. to 12:00 noon. If Tenant shall require after-hours HVAC, Tenant may
request such service by notifying Landlord's Manager not later than 11:00 a.m.
of the day prior to the day on which such after-hours service shall be needed,
and not later than 2:00 p.m. on the Thursday preceding any weekend for which
such after-hours service shall be needed reasonably estimating the number of
hours required for such after-hours service. Tenant shall pay for such
additional HVAC service at Landlord's hourly rate in effect from time to time,
the fee schedule initially in effect being attached as Exhibit E, and shall pay
all charges therefor when and as billed by Landlord. Such charges shall be
deemed Additional Rent under the Lease.

3.6 HOLDOVER. If Tenant shall, without the prior consent of Landlord, hold
over after the expiration or termination of the Lease Term, Tenant shall be
deemed to be occupying the Premises under a month-to-month tenancy, which
tenancy may be terminated as provided by the laws of the state in which the
Premises are located. During such tenancy, Tenant agrees to pay to Landlord 150%
the rate of Base Rent in effect on the expiration or

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termination of the Lease Term, plus all Additional Rent and other sums payable
under this Lease, and to be bound by all of the other covenants and conditions
specified in this Lease, so far as applicable. The preceding provisions shall
not be construed as consent for Tenant to hold over.

3.7 LATE CHARGE. If Tenant fails to make any payment of Base Rent,
Additional Rent or other amount when due under this Lease, Tenant shall also pay
a late charge equal to five percent (5%) of the amount of any such payment.
Landlord and Tenant agree that this charge compensates Landlord for the
administrative costs caused by the delinquency. The parties agree that
Landlord's damage would be difficult to compute and the amount stated in this
paragraph represents a reasonable estimate of such damage. Assessment or payment
of the late charge contemplated in this paragraph shall not excuse or cure any
Event of Default or breach by Tenant under this Lease or impair any other right
or remedy provided under this Lease or under law.

3.8 DEFAULT RATE. Any Base Rent, Additional Rent or other sum payable under
this Lease which is not paid when due shall bear interest at a rate equal to the
lesser of: (a) the published prime rate of Riggs Bank N.A., or such other
national banking institution designated by Landlord if such bank ceases to
publish a prime rate (the "Prime Rate"), then in effect, plus four (4)
percentage points, or (b) the maximum rate of interest per annum permitted by
applicable law (the "Default Rate"), but the payment of such interest shall not
excuse or cure any Event of Default or breach by Tenant under this Lease or
impair any other right or remedy provided under this Lease or under law.

SECTION 4: GENERAL PROVISIONS

4.1 MAINTENANCE AND REPAIR BY LANDLORD. Subject to the paragraphs captioned
"Damage or Destruction" and "Condemnation", Landlord shall maintain the
Building's systems, including, but not limited to all plumbing, electrical,
HVAC, and other utilities and the public and common areas of the Building in
reasonably good order and condition, except for damage occasioned by the act or
omission of Tenant or Tenant's Agents which shall be paid for entirely by Tenant
upon demand by Landlord, and ordinary wear and tear. In the event any or all of
the Building becomes in need of maintenance or repair which Landlord is required
to make under this Lease, Tenant shall immediately give written notice to
Landlord, and Landlord shall not be obligated in any way to commence such
maintenance or repairs until a reasonable time elapses after Landlord's receipt
of such notice.

4.2 MAINTENANCE AND REPAIR BY TENANT. Except as is expressly set forth as
Landlord's responsibility pursuant to the paragraph captioned "Maintenance and
Repair by Landlord," Tenant shall at Tenant's sole cost and expense keep and
maintain the Premises in good condition and repair, including interior painting,
cleaning of the interior side of all exterior glass, plumbing and utility
fixtures and installations if repair of the aforesaid plumbing and utility
fixtures and installations is necessitated by the act or negligence of Tenant or
Tenant's Agents (except for any plumbing fixtures such as dishwashers, disposals
and the like installed in the Premises for Tenant's exclusive use, which in all
events shall be the responsibility of Tenant to keep and maintain in good order
and repair at its own cost and expense), carpets and floor coverings, all
interior wall surfaces and coverings including tile and paneling, replacement of
all broken windows (including without limitation any exterior windows) if repair
of windows is necessitated by the act or negligence of Tenant or Tenant's
Agents, exterior and interior doors, roof penetrations and membranes in
connection with any Tenant installations on the roof including satellite dishes,
light bulb replacement and interior preventative maintenance. If Tenant fails to
maintain or repair the Premises in accordance with this paragraph, then Landlord
may, but shall not be required to, enter the Premises upon two (2) Business Days
prior written notice to Tenant (or immediately without any notice in the case of
an emergency) to perform such maintenance or repair at Tenant's sole cost and
expense. Tenant shall pay to Landlord the cost of such maintenance or repair
within ten (10) Business Days of written demand from Landlord.

4.3 COMMON AREAS/SECURITY. The common areas of the Building shall be
subject to Landlord's sole management and control. Without limiting the
generality of the immediately preceding sentence, Landlord reserves the
exclusive right as it deems necessary or desirable to install, construct,
remove, maintain and operate lighting systems, facilities, improvements,
equipment and signs on, in or to all parts of the common areas; change the
number, size, height, layout, or locations of walks, driveways and truckways or
parking areas now or later forming a part of the Land or Building; make
alterations or additions to the Building or common area; close temporarily all
or any portion of the common areas to make repairs, changes or to avoid public
dedication; grant easements to which the Land will be subject, replat,
subdivide, or make other changes to the Land; place, relocate and operate
utility lines through, over or under the Land and Building; and use or permit
the use of all or any portion of the roofs of

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the Building. Landlord has no duty or obligation to provide any security
services in, on or around the Premises, Land or Building, and Tenant recognizes
that security services, if any, provided by Landlord will be for the sole
benefit of Landlord and the protection of Landlord's property and under no
circumstances shall Landlord be responsible for, and Tenant waives any rights
with respect to, Landlord providing security or other protection for Tenant or
Tenant's Agents or property in, on or about the Premises, Land or Building.
Landlord reserves the right to relocate parking areas and driveways and to build
additional improvements in the common areas. Notwithstanding anything to the
contrary contained herein, Landlord shall, during the Lease Term, maintain the
presence of night security in the Building during the hours as provided as of
the date hereof. For purposes of this provision, during the Lease Term,
"presence" may mean either the physical presence of a security guard in the
Building or the installation of electronic surveillance devices within the
Building in such configuration(s) as Landlord may reasonably determine,
connected to a remote manned location established to monitor such electronic
surveillance devices, but without precluding in any event the performance of
normal and periodic rounds and visual inspections of the Building and the Park
by such security guard. Landlord may modify or change the manner in which it
shall maintain such security presence in the Building at any time and from time
to time during the Lease Term, provided that such presence as described above is
maintained.

4.4 TENANT ALTERATIONS. Tenant shall not make any alterations, additions or
improvements in or to the Premises, or make changes to locks on doors, or add,
disturb or in any way change any floor covering, wall covering, fixtures,
plumbing or wiring (individually and collectively "Tenant Alterations"), without
first obtaining the consent of Landlord. Landlord's consent may be reasonably
withheld if in Landlord's reasonable discretion any of the proposed Tenant
Alterations, in whole or in part, shall have an adverse impact on the Building's
structural elements, common areas or operating systems, or compromise the
security of the Building or do not appear to be in keeping with Class A office
buildings located in the Burlington, Massachusetts market area. Tenant shall
deliver to Landlord full and complete plans and specifications for any proposed
Tenant Alterations and, if consent by Landlord is given, all such work shall be
performed at Tenant's expense by Landlord or by Tenant at Landlord's election
and by contracts previously approved by Landlord. Without limiting the
generality of the foregoing, Landlord may require Tenant (if Landlord has
elected to require Tenant to perform the Tenant Alterations), at Tenant's sole
cost and expense, to obtain and provide Landlord with proof of insurance
coverage and a payment and performance bond, in forms, amounts and by companies
acceptable to Landlord. All Tenant Alterations to the Premises, regardless of
which party constructed them, shall become the property of Landlord and shall
remain upon and be surrendered with the Premises upon the expiration or earlier
termination of this Lease, unless Landlord's consent to such Tenant Alterations
is conditioned upon Tenant removing the Tenant Alterations upon the expiration
or earlier termination of this Lease. If Tenant fails to remove any such Tenant
Alterations as required by Landlord's consent, Landlord may do so and Tenant
shall pay the entire cost thereof to Landlord within ten (10) Business Days
after Tenant's receipt of Landlord's written demand therefor, which obligation
shall survive expiration or earlier termination of the Lease. Tenant shall
reimburse Landlord, upon receipt of demand therefor, for all out-of-pocket costs
and expenses incurred by Landlord related to its review of Tenant's plans and
specifications (regardless of whether Landlord approves Tenant's request) and
Tenant's construction. Nothing contained in this paragraph or the paragraph
captioned "Tenant's Work Performance" shall be deemed a waiver of the provisions
of the paragraph captioned "Mechanic's Liens".

4.5 TENANT'S WORK PERFORMANCE. If Landlord elects to require Tenant to
perform the Tenant Alterations, then the Tenant Alterations shall be performed
by contractors employed by Tenant under one or more construction contracts, in
form and content approved in advance in writing by Landlord (which approval
shall be subject to Landlord's discretion and may include a requirement that the
prime contractor and the respective subcontractors: (a) be parties to, and bound
by, a collective bargaining agreement with a labor organization affiliated with
the Building and Construction Trades Council of the AFL-CIO and (b) employ only
members of such labor organizations to perform work within their respective
jurisdictions). Tenant's contractors, workers and suppliers shall work in
harmony with and not interfere with workers or contractors of Landlord or other
tenants of Landlord. If Tenant's contractors, workers or suppliers do, in the
opinion of Landlord, cause such disharmony or interference, Landlord's consent
to the continuation of such work may be withdrawn upon written notice to Tenant.
All Tenant Alterations shall be (1) completed in accordance with the plans and
specifications approved by Landlord; (2) completed in accordance with all
Governmental Requirements; (3) carried out promptly in a good and workmanlike
manner; (4) of all new materials; and (5) free of defect in materials and
workmanship. Tenant shall pay for all damage to the Premises, Building and Land
caused by Tenant or Tenant's Agents. Tenant shall indemnify, defend and hold
harmless Landlord

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and Landlord's Agents from any Claims arising as a result of any defect in
design, material or workmanship of any Tenant Alterations.

4.6 SURRENDER OF POSSESSION. Tenant shall, at the expiration or earlier
termination of this Lease, surrender and deliver the Premises to Landlord in as
good condition as when received by Tenant from Landlord or as later improved,
reasonable use and wear excepted.

4.7 REMOVAL OF PROPERTY. Upon expiration or earlier termination of this
Lease, Tenant may remove its trade fixtures, office supplies and office
furniture and equipment if (a) such items are readily moveable and are not
attached to the Premises; (b) such removal is completed prior to the expiration
or earlier termination of this Lease; (c) Tenant is not in default of any
covenant or condition of this Lease at the time of such removal; and (d) Tenant
immediately repairs all damage caused by or resulting from such removal. All
other property in the Premises and any Tenant Alterations (including,
wall-to-wall carpeting, paneling, wall covering or lighting fixtures and
apparatus) or any other article affixed to the floor, walls, ceiling or any
other part of the Premises or Building, shall become the property of Landlord
and shall remain upon and be surrendered with the Premises, except as may be
otherwise provided in the paragraph captioned "Tenant Alterations" or the
paragraph captioned "Tenant's Contribution to Tenant Improvement Costs". Tenant
waives all rights to any payment or compensation for such property. If, at the
expiration or earlier termination of this Lease or at such time as Landlord
exercises its right of re-entry, Tenant has failed to remove any property from
the Premises, Building or Land which it is entitled or required to remove as
provided in this Lease, Landlord may, at its option, remove and store such
property without liability for loss of or damage to such property, such storage
to be for the account and at the expense of Tenant. If Tenant fails to pay the
cost of storing any such property, Landlord may, at its option, after it has
been stored for a period of twenty (20) Business Days or more, sell or permit to
be sold, any or all such property at public or private sale (and Landlord may
become a purchaser at such sale), in such manner and at such times and places as
Landlord in its sole discretion may deem proper, without notice to Tenant, and
Landlord shall apply the proceeds of such sale: first, to the cost and expense
of such sale, including reasonable attorney's fees actually incurred; second, to
the payment of the costs or charges for storing any such property; third, to the
payment of any other sums of money which may then be or later become due
Landlord from Tenant under this Lease; and, fourth, the balance, if any, to
Tenant.

4.8 ACCESS. Tenant shall permit Landlord and Landlord's Agents to enter
into the Premises at any time on at least two (2) Business Days' notice (except
in case of emergency, in which case no notice shall be required), for the
purpose of inspecting the same or for the purpose of repairing, altering or
improving the Premises or the Building. Nothing contained in this paragraph
shall be deemed to impose any obligation upon Landlord not expressly stated
elsewhere in this Lease. When reasonably necessary, Landlord may temporarily
close Building or Land entrances, Building doors or other facilities, without
liability to Tenant by reason of such closure and without such action by
Landlord being construed as an eviction of Tenant or as relieving Tenant from
the duty of observing or performing any of the provisions of this Lease.
Landlord shall have the right to enter the Premises for the purpose of showing
the Premises to prospective tenants within the period of one-hundred twenty
(120) Business Days prior to the expiration or sooner termination of this Lease
and to erect on the Premises a suitable sign indicating the Premises are
available. Tenant shall give written notice to Landlord at least ten (10)
Business Days prior to vacating the Premises and shall arrange to meet with
Landlord for a joint inspection of the Premises prior to vacating. In the event
of Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall be
conclusively deemed correct for purposes of determining Tenant's responsibility
for repairs and restoration. Landlord shall not be liable for the consequences
of admitting by passkey, or refusing to admit to the Premises, Tenant or any of
Tenant's Agents, or other persons claiming the right of admittance.
Notwithstanding anything contained herein to the contrary, in Landlord's
exercise of its foregoing rights, neither Landlord nor Landlord's Agents shall
unreasonably interfere with Tenant's use and enjoyment of the Premises.

4.9 DAMAGE OR DESTRUCTION.

4.9.1 If the Premises are damaged by fire, earthquake or other
casualty, Tenant shall give immediate written notice thereof to Landlord. If
Landlord estimates that the damage can be repaired within one hundred-twenty
(120) Business Days after Landlord is notified by Tenant of such damage and if
there are sufficient insurance proceeds available to repair such damage, then
Landlord shall proceed with reasonable diligence to restore the Premises to
substantially the condition which existed prior to the damage and this Lease
shall not terminate. If, in

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<PAGE> 16
Landlord's estimation, the damage cannot be repaired within such 120 Business
Day period or if there are insufficient insurance proceeds available to repair
such damage, Landlord may elect in its absolute discretion to either: (a)
terminate this Lease or (b) restore the Premises to substantially the condition
which existed prior to the damage and this Lease will continue. If Landlord
restores the Premises under this paragraph, then (1) the Lease Term shall be
extended for the time required to complete such restoration, (2) Tenant shall
pay to Landlord, upon demand, Tenant's Pro Rata Share of any applicable
deductible amount specified under Landlord's insurance and (3) Landlord shall
not be required to repair or restore Tenant Improvements, Tenant Alterations, or
any or all furniture, fixtures, equipment, inventory, improvements or other
property which was in or about the Premises at the time of the damage and was
not owned by Landlord. Base Rent, Additional Rent and any other sum due under
this Lease during any reconstruction period shall not be abated. Tenant agrees
to look to the provider of Tenant's insurance for coverage for the loss of
Tenant's use of the Premises and any other related losses or damages incurred by
Tenant during any reconstruction period.

4.9.2 If the Building is damaged by fire, earthquake or other casualty
and more than fifty percent (50%) of the Building is rendered untenantable,
without regard to whether the Premises are affected by such damage, Landlord may
in its absolute discretion and without limiting any other options available to
Landlord under this Lease or otherwise, elect to terminate this Lease by notice
in writing to Tenant within forty (40) Business Days after the occurrence of
such damage. Such notice shall be effective twenty (20) Business Days after
receipt by Tenant unless a later date is set forth in Landlord's notice.

4.9.3 Notwithstanding anything contained in this Lease to the contrary,
if there is damage to the Premises, or Building and the holder of any
indebtedness secured by a mortgage or deed of trust covering any such property
requires that the insurance proceeds be applied to such indebtedness, then
Landlord shall have the right to terminate this Lease by delivering written
notice of termination to Tenant within thirty (30) Business Days after such
requirement is made by such holder, whereupon this Lease shall end on the date
of such notice as if the date of such notice were the date originally fixed in
this Lease for the expiration of the Term.

4.10 CONDEMNATION. If all of the Premises, or such portions of the Building
as may be required for the Tenant's reasonable use of the Premises, are taken by
eminent domain or by conveyance in lieu thereof, this Lease shall automatically
terminate as of the date the physical taking occurs, and all Base Rent,
Additional Rent and other sums payable under this Lease shall be paid to that
date. In case of taking of a part of the Premises or a portion of the Building
not required for the Tenant's reasonable use of the Premises, then this Lease
shall continue in full force and effect and the Base Rent shall be equitably
reduced based on the proportion by which the floor area of the Premises is
reduced, such reduction in Base Rent to be effective as of the date the physical
taking occurs. Additional Rent and all other sums payable under this Lease shall
not be abated but Tenant's Pro Rata Share may be redetermined as equitable under
the circumstances. Landlord reserves all rights to damages or awards for any
taking by eminent domain relating to the Premises, Building, Land and the
unexpired term of this Lease. Tenant assigns to Landlord any right Tenant may
have to such damages or award and Tenant shall make no claim against Landlord
for damages for termination of its leasehold interest or interference with
Tenant's business. Tenant shall have the right, however, to claim and recover
from the condemning authority compensation for any loss to which Tenant may be
entitled for Tenant's moving expenses or other relocation costs; provided that,
such expenses or costs may be claimed only if they are awarded separately in the
eminent domain proceedings and not as a part of the damages recoverable by
Landlord.

4.11 PARKING. Tenant shall have the nonexclusive privilege to use parking
spaces on the Land in common with other tenants of Landlord, but only in areas
reasonably designated by Landlord and only on a first-come-first-served basis.
Tenant's parking privileges shall be subject to the rules and regulations
relating to parking adopted by Landlord from time to time. Landlord shall have
the right to grant designated, reserved parking stalls to other tenants in the
Building. Landlord makes no representations or warranties concerning the
availability of parking for Tenant's use at any time during the Term. Landlord
shall have no obligation whatsoever to monitor or police the use of the parking
or other common areas.

4.12 INDEMNIFICATION. Tenant shall indemnify, defend and hold harmless
Landlord and Landlord's Agents from and against any and all Claims, arising in
whole or in part out of (a) the possession, use or occupancy of the Premises or
the business conducted in the Premises, (b) any act, omission or negligence of
Tenant or Tenant's Agents, (c) any breach or default under this Lease by Tenant,
or (d) the installation, interconnection and use of Tenant's

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<PAGE> 17
telecommunications equipment as specified in paragraph 2.4 hereof. Neither
Landlord nor Landlord's Agents shall, to the extent permitted by law, have any
liability to Tenant, or to Tenant's Agents, for any Claims arising out of any
cause whatsoever, including repair to any portion of the Premises; interruption
in the use of the Premises or any equipment therein; any accident or damage
resulting from any use or operation by Landlord, Tenant or any person or entity
of heating, cooling, electrical, sewerage or plumbing equipment or apparatus;
termination of this Lease by reason of damage to the Premises or Building; fire,
robbery, theft, vandalism, mysterious disappearance or any other casualty;
actions of any other tenant of the Building or of any other person or entity;
inability to furnish any service required of Landlord as specified in this
Lease; or leakage in any part of the Premises or the Building from rain, ice or
snow, or from drains, pipes or plumbing fixtures in the Premises or the
Building; except for Claims arising solely out of the gross negligence or
willful misconduct of Landlord, Landlord's Agents or contractors in failing to
repair or maintain the Building as required by this Lease after notice by Tenant
as required by the paragraph captioned "Maintenance and Repair by Landlord";
provided that, in no event shall Landlord be responsible for any interruption to
Tenant's business or for any indirect or consequential losses suffered by Tenant
or Tenant's Agents. The obligations of this paragraph shall be subject to the
paragraph captioned "Waiver of Subrogation".

4.13 TENANT INSURANCE.

4.13.1 Tenant shall, throughout the Lease Term, at its own expense, keep
and maintain in full force and effect:

(a) A policy of commercial general liability insurance, including a
contractual liability endorsement covering Tenant's obligations under the
paragraph captioned "Indemnification", on or before the time Tenant and/or its
contractors enter the Premises and insuring against claims of bodily injury and
death or property damage or loss with a combined single limit at the
Commencement Date of this Lease of not less than Two Million Dollars
($2,000,000.00), which limit shall be reasonably increased during the Lease Term
at Landlord's request to reflect both increases in liability exposure arising
from inflation as well as from changing use of the Premises or changing legal
liability standards, which policy shall be payable on an "occurrence" rather
than a "claims made" basis, and which policy names Landlord and Manager and, at
Landlord's request Landlord's mortgage lender(s) or investment advisors, as
additional insureds;

(b) A policy of extended property insurance (which is commonly called
"all risk") covering Tenant Improvements, Tenant Alterations, and any and all
furniture, fixtures, equipment, inventory, improvements and other property in or
about the Premises which is not owned by Landlord, for one hundred percent
(100%) of the then current replacement value of such property; and

(c) Business interruption insurance in an amount sufficient to cover
costs, damages, lost income, expenses, Base Rent, Additional Rent and all other
sums payable under this Lease, should any or all of the Premises not be usable
for a period of up to six (6) months.

4.13.2 All insurance policies required under this paragraph shall be
with companies reasonably approved by Landlord and each policy shall provide
that it is not subject to cancellation or reduction in coverage except after
thirty (30) days' written notice to Landlord. Tenant shall deliver to Landlord
and, at Landlord's request Landlord's mortgage lender(s), prior to the
Commencement Date and from time to time thereafter, certificates evidencing the
existence and amounts of all such policies.

4.13.3 If Tenant fails to acquire or maintain any insurance or provide
any certificate required by this paragraph, Landlord may, but shall not be
required to, obtain such insurance or certificates and the costs associated with
obtaining such insurance or certificates shall be payable by Tenant to Landlord
on demand.

4.14 LANDLORD'S INSURANCE. Landlord shall, throughout the Lease Term, keep
and maintain in full force and effect:

(a) A policy of commercial general liability insurance, insuring
against claims of bodily injury and death or property damage or loss with a
combined single limit at the Commencement Date of not less than Five Million
Dollars ($5,000,000.00), which policy shall be payable on an "occurrence" rather
than a "claims made" basis; and

(b) A policy of extended property insurance (what is commonly called
"all risk") covering the Building and Landlord's personal property, if any,
located on the Land in the amount of one hundred percent (100%) of the then
current replacement value of such property.

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<PAGE> 18
Landlord may, but shall not be required to, maintain property insurance
coverage for earthquakes and floods in such amounts as Landlord deems
appropriate. Such policies may be "blanket" policies which cover other
properties owned by Landlord. To the extent that any payment on an insurance
claim under any Landlord's policy is reduced by a deductible, such deductible
shall be an Operating Cost.

4.15 WAIVER OF SUBROGATION. Notwithstanding anything in this Lease to the
contrary, Landlord and Tenant hereby each waive and release the other from any
and all Claims or any loss or damage that may occur to the Land, Building,
Premises, or personal property located therein, by reason of fire or other
casualty regardless of cause or origin, including the negligence or misconduct
of Landlord, Tenant, Landlord's Agents or Tenant's Agents, but only to the
extent of the insurance proceeds paid to such releasor under its policies of
insurance or, if it fails to maintain the required policies, the insurance
proceeds that would have been paid to such releasor if it had maintained such
policies. Each party to this Lease shall promptly give to its insurance company
written notice of the mutual waivers contained in this subparagraph, and shall
cause its insurance policies to be properly endorsed, if necessary, to prevent
the invalidation of any insurance coverages by reason of the mutual waivers
contained in this subparagraph.

4.16 ASSIGNMENT AND SUBLETTING BY TENANT.

4.16.1 Tenant shall not have the right to assign, transfer, mortgage or
encumber this Lease in whole or in part, nor sublet the whole or any part of the
Premises, nor allow the occupancy of all or any part of the Premises by another,
without first obtaining Landlord's written consent, which consent Landlord shall
not unreasonably withhold or delay, subject at all times to Landlord's rights
under paragraph 4.16.3 of this Lease. Notwithstanding any permitted assignment
or subletting, Tenant shall at all times remain directly, primarily and fully
responsible and liable for the payment of all sums payable under this Lease and
for compliance with all of its other obligations as tenant under this Lease.
Upon the occurrence of an Event of Default, if the Premises or any part of the
Premises are then subject to an assignment or subletting, Landlord, in addition
to any other remedies provided in this Lease or by law, may at its option
collect directly from such assignee or subtenant all rents becoming due to
Tenant under such assignment or sublease and apply such rents against any sums
due to Landlord from Tenant under this Lease, and no such collection shall be
construed to constitute a novation or release of Tenant from the further
performance of Tenant's obligations under this Lease. Tenant makes an absolute
assignment to Landlord of such assignments and subleases and any rent, security
deposits and other sums payable under such assignments and subleases as
collateral to secure the performance of the obligations of Tenant under this
Lease. No consent once given by Landlord to any assignment or subletting shall
be deemed to relieve Tenant or any assignee or subtenant from the obligations of
seeking Landlord's prior written consent to any subsequent transfer.

4.16.2 In the event Tenant desires to assign this Lease or to sublet
all or any portion of the Premises, Tenant shall give written notice of such
desire to Landlord setting forth the name of the proposed subtenant or assignee,
the proposed term, the nature of the proposed subtenant's or assignee's business
to be conducted on the Premises, the rental rate, and any other particulars of
the proposed subletting or assignment that Landlord may reasonably request.
Without limiting the preceding sentence, Tenant shall also provide Landlord
with: (a) such financial information as Landlord may reasonably request
concerning the proposed subtenant or assignee, including recent financial
statements certified as accurate and complete by a certified public accountant
and by the president, managing partner or other appropriate officer of the
proposed subtenant or assignee; (b) proof satisfactory to Landlord that the
proposed subtenant or assignee will immediately occupy and thereafter use the
entire Premises (or any sublet portion of the Premises) for the remainder of the
Lease Term (or for the entire term of the sublease, if shorter) in compliance
with the terms of this Lease; and (c) a copy of the proposed sublease or
assignment or letter of intent. At the same time that Tenant provides Landlord
with notice of its desire to assign or sublease, Tenant shall pay to Landlord
the sum of $750 as Landlord's fee for processing such proposed assignment and
sublease, including attorneys' fees incurred by Landlord with respect to such
processing. Receipt of such fee shall not obligate Landlord to approve the
proposed assignment or sublease.

4.16.3 In determining whether to grant or withhold consent to a
proposed assignment or sublease, Landlord may consider, and weigh, any
commercial factor it deems relevant. Without limiting what may be construed as a
factor considered by Landlord in good faith, Tenant agrees that any one or more
of the following will be proper grounds for Landlord's disapproval of a proposed
assignment or sublease:

(a) The proposed assignee or subtenant does not, in Landlord's good
faith judgment, have financial worth or creditworthiness equal to or greater
than that of Tenant as of the execution date of this Lease or sufficient
financial

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<PAGE> 19
worth to insure full and timely performance under this Lease;

(b) Landlord has received insufficient evidence of the financial worth
or creditworthiness of the proposed assignee or subtenant to make the
determination set forth in clause (a);

(c) The proposed assignee or subtenant has a reputation for disputes in
contractual relations, for failure to observe and perform its contractual
obligations in a timely and complete manner or for negative business relations
in the business community as a tenant of property or otherwise;

(d) Landlord has received from any prior lessor of the proposed
assignee or subtenant a negative report concerning such prior lessor's
experience with the proposed assignee or subtenant;

(e) Landlord has had prior negative leasing experience with the
proposed assignee or subtenant;

(f) The use of the Premises by the proposed assignee or subtenant will
not be a Permitted Use;

(g) In Landlord's judgment, the proposed assignee or subtenant is
engaged in a business, or the Premises or any part of the Premises will be used
in a manner, that is not in keeping with the then standards of the Building, or
that is not compatible with the businesses of other tenants in the Building, or
that is inappropriate for the Building, or that will violate any negative
covenant as to use contained in any other lease of space in the Building;

(h) The use of the Premises by the proposed assignee or subtenant will
violate any Governmental Requirement or create a violation of Access Laws;

(i) Tenant is in default of any obligation of Tenant under this Lease,
or Tenant has defaulted under this Lease on three (3) or more occasions during
the twenty-four (24) months preceding the date that Tenant shall request such
consent;

(j) Landlord does not approve of any of the tenant improvements
required for the proposed assignee or subtenant; or

(k) Landlord has had contact with the proposed assignee or subtenant,
in the six (6) months preceding Tenant's request, regarding the leasing of space
by such proposed assignee or subtenant in the Building or any other buildings
owned by Landlord in the metropolitan area in which the Land is located.

(l) the proposed assignee or subtenant is then a tenant of Landlord in
the Building or a tenant of Landlord or an affiliate of Landlord in another
property.

4.16.4 Within ten (10) Business Days after Landlord's receipt of all
required information to be supplied by Tenant pursuant to this paragraph,
Landlord shall notify Tenant of Landlord's approval, disapproval or conditional
approval of any proposed assignment or subletting. Landlord shall have no
obligation to respond unless and until all required information has been
submitted. In the event Landlord approves of any proposed assignment or
subletting, Tenant and the proposed assignee or sublessee shall execute and
deliver to Landlord an assignment (or subletting) and assumption agreement in
form and content satisfactory to Landlord.

4.16.5 Any transfer, assignment or hypothecation, whether singly or
through an orchestrated series of transactions, of any of the stock or interest
in, or the assets of, Tenant which is either: (a) greater than fifty percent
(50%) of such stock, interest or assets or (b) intended as a subterfuge denying
Landlord the benefits of this paragraph, shall be deemed to be an assignment
within the meaning and provisions of this paragraph and shall be subject to the
provisions of this paragraph. Notwithstanding anything to the contrary in the
immediately preceding sentence, Tenant shall have the right, upon prior written
notice to Landlord, but without obtaining Landlord's prior consent to assign
this Lease to an entity to which Tenant shall transfer all or substantially all
of its stock or assets, provided that said transferee shall execute and deliver
to Landlord an assignment and assumption agreement in form and content
satisfactory to Landlord. Notwithstanding anything herein to the contrary, any
sale of the stock of Tenant pursuant to an initial public offering, one (1) or
more subsequent public offerings, or other form of public financing shall not be
deemed to be an assignment within the meaning and provisions of this paragraph
and shall not be subject to the provisions of this paragraph.

4.16.6 If Landlord consents to any assignment or sublease and Tenant
receives rent or any other consideration, either initially or over the term of
the assignment or sublease, in excess of the Base Rent and Additional Rent (or,
in the case of a sublease of a portion of the Premises, in excess of the Base
Rent paid by Tenant on a

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<PAGE> 20
square footage basis under this Lease), Tenant shall pay to Landlord fifty
percent (50%) of such excess.

4.16.7 Notwithstanding anything to the contrary contained in the
foregoing, the provisions of paragraph 4.16.5 shall not apply to any
transactions by Tenant with an entity into or with which Tenant is merged or
consolidated or with an entity to which substantially all of Tenant's assets are
transferred or with any entity which controls or is controlled by Tenant or is
under common control with Tenant or with which Tenant, directly or indirectly,
has a 50 percent or greater ownership interest, or which directly or indirectly,
has a fifty percent (50%) or greater interest in Tenant, provided that in any of
such events (x) Landlord is provided with evidence satisfactory to it that the
successor to Tenant has a net worth computed in accordance with generally
accepted accounting principles at least equal to the net worth of Tenant
immediately prior to such merger, consolidation or transfer, and (y) in the case
of any assignment of this Lease, the assignee agrees directly with Landlord, by
written instrument in form reasonably satisfactory to Landlord, to be bound by
all the obligations of Tenant hereunder including, without limitation, the
covenant against further assignment and subletting except in accordance with the
express provisions of this Lease.

4.16.8 If Tenant shall propose to assign this Lease or to sublet all or
any portion of the Premises, Landlord shall have the right to recapture the
Premises or the applicable portion thereof (a "Recapture") by giving written
notice of such Recapture to Tenant within fifteen (15) Business Days after
receipt of Tenant's written request for Landlord's consent to such proposed
assignment or subletting. Tenant shall have no right to retract its request for
Landlord's consent to assign or sublease once such request has been made. Such
Recapture shall terminate this Lease as to the applicable space effective on the
prospective effective date of assignment or subletting, which shall be the last
day of a calendar month and shall not be earlier than forty-five (45) Business
Days after receipt of Tenant's request hereunder. If less than the entire
Premises are recaptured, Landlord and Tenant agree that this Lease shall remain
in full force and effect with respect to that remaining area not recaptured by
Landlord. Tenant agrees to surrender that portion of the Premises recaptured by
Landlord in accordance with the terms and conditions of this Lease.
Notwithstanding the first sentence of this subparagraph, Landlord shall have no
right to Recapture the Premises or applicable portion thereof if Tenant's
proposed assignment or sublet is to an affiliate, a controlled or controlling
entity, as aforesaid, or successor entity.

4.17 ASSIGNMENT BY LANDLORD. Landlord shall have the right to transfer and
assign, in whole or in part, its rights and obligations under this Lease and in
any and all of the Land or Building. If Landlord sells or transfers any or all
of the Building, including the Premises, Landlord and Landlord's Agents shall,
upon consummation of such sale or transfer, be released automatically from any
liability relating to obligations or covenants under this Lease to be performed
or observed after the date of such transfer, and in such event, Tenant agrees to
look solely to Landlord's successor-in-interest with respect to such liability;
provided that, as to the Security Deposit and Prepaid Rent, Landlord shall not
be released from liability therefor unless Landlord has delivered (by direct
transfer or credit against the purchase price) the Security Deposit or Prepaid
Rent to its successor-in-interest.

4.18 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS. Tenant shall, from time
to time, upon the written request of Landlord, execute, acknowledge and deliver
to Landlord or its designee a written statement stating: (a) the date this Lease
was executed and the date it expires; (b) the date Tenant entered into occupancy
of the Premises; (c) the amount of monthly Base Rent and Additional Rent and the
date to which such Base Rent and Additional Rent have been paid; and (d)
certifying, if accurate, that (1) this Lease is in full force and effect and has
not been assigned, modified, supplemented or amended in any way (or specifying
the date of the agreement so affecting this Lease); (2) Landlord is not in
breach of this Lease (or, if so, a description of each such breach) and that no
event, omission or condition has occurred which would result, with the giving of
notice or the passage of time, in a breach of this Lease by Landlord; (3) this
Lease represents the entire agreement between the parties with respect to the
Premises; (4) all required contributions by Landlord to Tenant on account of
Tenant Improvements have been received; (5) on the date of execution, there
exist no defenses or offsets which the Tenant has against the enforcement of
this Lease by the Landlord; (6) no Base Rent, Additional Rent or other sums
payable under this Lease have been paid in advance except for Base Rent and
Additional Rent for the then current month; (7) no security has been deposited
with Landlord (or, if so, the amount of such security); (8) it is intended that
any Tenant's statements may be relied upon by a prospective purchaser or
mortgagee of Landlord's interest or an assignee of any such mortgagee; and (9)
such other information as may be reasonably requested by Landlord. If Tenant
fails to respond within ten (10) Business Days of its receipt of

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a written request by Landlord as provided in this paragraph, such shall be a
breach of this Lease and Tenant shall be deemed to have admitted the accuracy of
any information supplied by Landlord to a prospective purchaser, mortgagee or
assignee. In addition, Tenant shall, from time to time, upon the written request
of Landlord, deliver to or cause to be delivered to Landlord or its designee
current financial statements as regularly prepared by or at the direction of
Tenant (including a statement of operations and balance sheet) certified as
accurate by a certified public accountant and prepared in conformance with
generally accepted accounting principles for (i) Tenant, (ii) any entity which
owns a controlling (i.e., greater than fifty percent [50%]) interest in Tenant,
(iii) any entity the controlling interest of which is owned by Tenant, (iv) any
successor entity to Tenant by merger or operation of law, and (v) any guarantor
of this Lease.

4.19 MODIFICATION FOR LENDER. If, in connection with obtaining construction,
interim or permanent financing for the Building or Land, Landlord's lender, if
any, shall request reasonable modifications to this Lease as a condition to such
financing, Tenant will not unreasonably withhold or delay its consent to such
modifications; provided that, such modifications do not increase the obligations
of Tenant under this Lease or materially adversely affect Tenant's rights under
this Lease.

4.20 HAZARDOUS SUBSTANCES.

4.20.1 Tenant agrees that neither Tenant, any of Tenant's Agents nor
any other person under the control of Tenant for whom Tenant is legally
responsible will store, place, generate, manufacture, refine, handle, or locate
on, in, under or around the Land or Building any Hazardous Substance, except for
storage, handling and use of reasonable quantities and types of cleaning fluids
and office supplies in the Premises in the ordinary course and the prudent
conduct of Tenant's business in the Premises, provided that, (a) the storage,
handling and use of such permitted Hazardous Substances must at all times
conform to all Governmental Requirements and to applicable fire, safety and
insurance requirements; (b) the types and quantities of permitted Hazardous
Substances which are stored in the Premises must be reasonable and appropriate
to the nature and size of Tenant's operation in the Premises and reasonable and
appropriate for a first-class building of the same or similar use and in the
same market area as the Building; (c) no Hazardous Substance shall be spilled or
disposed of on, in, under or around the Land or Building or otherwise discharged
from the Premises or any area adjacent to the Land or Building; and (d) in no
event will Tenant be permitted to store, handle or use on, in, under or around
the Premises any Hazardous Substance which will increase the rate of property
coverage insurance on the Land or Building, unless: (1) such Hazardous Substance
and the expected rate increase have been specifically disclosed in writing to
Landlord; (2) Tenant has agreed in writing to pay any rate increase related to
each such Hazardous Substance; and (3) Landlord has approved in writing each
such Hazardous Substance, which approval shall be subject to Landlord's
discretion.

4.20.2 Tenant shall indemnify, defend and hold harmless Landlord and
Landlord's Agents from and against any and all Claims arising out of any breach
of any provision of this paragraph, which expenses shall also include laboratory
testing fees, personal injury claims, clean-up costs and environmental
consultants' fees. Tenant agrees that Landlord may be irreparably harmed by
Tenant's breach of this paragraph and that a specific performance action may
appropriately be brought by Landlord; provided that, Landlord's election to
bring or not bring any such specific performance action shall in no way limit,
waive, impair or hinder Landlord's other remedies against Tenant.

4.20.3 As of the execution date of this Lease, Tenant represents and
warrants to Landlord that, except as otherwise disclosed by Tenant to Landlord,
Tenant has no intent to bring any Hazardous Substances on, in or under the
Premises except for the type and quantities authorized in the first paragraph of
the paragraph captioned "Hazardous Substances."

4.21 ACCESS LAWS.

4.21.1 Tenant agrees to notify Landlord immediately if Tenant receives
notification or otherwise becomes aware of: (a) any condition or situation on,
in, under or around the Land or Building which may constitute a violation of any
Access Laws or (b) any threatened or actual lien, action or notice that the Land
or Building is not in compliance with any Access Laws. If Tenant is responsible
for such condition, situation, lien, action or notice under this paragraph,
Tenant's notice to Landlord shall include a statement as to the actions Tenant
proposes to take in response to such condition, situation, lien, action or
notice.

4.21.2 Tenant shall not alter or permit any assignee or subtenant or
any other person to alter the Premises in any manner which would violate any
Access Laws or increase Landlord's responsibilities for compliance with Access

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Laws, without the prior approval of the Landlord. In connection with any such
approval, Landlord may require a certificate of compliance with Access Laws from
an architect, engineer or other person acceptable to Landlord. Tenant agrees to
pay the reasonable fees incurred by such architect, engineer or other third
party in connection with the issuance of such certificate of compliance.
Landlord's consent to any proposed Tenant Alteration shall (a) not relieve
Tenant of its obligations or indemnities contained in this paragraph or this
Lease or (b) be construed as a warranty that such proposed alternation complies
with any Access Law.

4.21.3 Tenant shall be solely responsible for all costs and expenses
relating to or incurred in connection with: (a) failure of the Premises to
comply with the Access Laws; and (b) bringing the Building and the common areas
of the Building into compliance with Access Laws, if and to the extent such
noncompliance arises out of or relates to: (1) Tenant's use of the Premises,
including the hiring of employees; (2) any Tenant Alterations to the Premises;
or (3) any Tenant Improvements constructed in the Premises at the request of
Tenant, regardless of whether such improvements are constructed prior to or
after the Commencement Date.

4.21.4 Landlord shall deliver the Premises to Tenant in compliance with
the Access Laws. From and after the Commencement Date, Landlord shall be
responsible for all costs and expenses relating to or incurred in connection
with bringing the common areas of the Building into compliance with Access Laws,
unless such costs and expenses are Tenant's responsibility as provided in the
preceding subparagraph. Any cost or expense paid or incurred by Landlord to
bring the Premises or common areas of the Building into compliance with Access
Laws which is not Tenant's responsibility under the preceding subparagraphs
shall be amortized over the useful economic life of the improvements (not to
exceed ten (10) years) using an amortization rate of twelve percent (12%) per
annum, and shall be an Operating Cost for purposes of this Lease.

4.21.5 Tenant agrees to indemnify, defend and hold harmless Landlord
and Landlord's Agents from and against any and all Claims arising out of or
relating to any failure of Tenant or Tenant's Agents to comply with Tenant's
obligations under this paragraph.

4.21.6 The provisions of this paragraph shall supersede any other
provisions in this Lease regarding Access Laws, to the extent inconsistent with
the provisions of any other paragraphs.

4.22 QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying Base Rent,
Additional Rent and all other sums payable under this Lease and performing all
covenants and conditions required of Tenant under this Lease and otherwise
subject to all of the terms and conditions of this Lease, shall and may
peacefully have, hold and enjoy the Premises without hindrance or molestation by
Landlord. The foregoing covenant is in lieu of any other covenant express or
implied.

4.23 SIGNS. Tenant shall be permitted to have its entity name listed on the
main directory sign for the Building situated in the main lobby of the Building.
Tenant shall be permitted to install next to Tenant's entryway into the
Premises, as part of the preparation of the Premises for Tenant's occupancy
(with the cost thereof included in the Tenant Improvement Costs), one (1)
entryway sign bearing Tenant's name. Said sign shall be of a size, design and
coloration, and in a location consistent with Landlord's standard tenant
entryway signage for the Building.

4.24 SUBORDINATION. Tenant subordinates this Lease and all rights of Tenant
under this Lease to any mortgage, deed of trust, ground lease or vendor's lien,
or similar instrument which may from time to time be placed upon the Premises
(and all renewals, modifications, replacements and extensions of such
encumbrances), and each such mortgage, deed of trust, ground lease or lien or
other instrument shall be superior to and prior to this Lease; provided that,
Landlord provides Tenant with a commercially reasonable nondisturbance agreement
on the standard form of the applicable lender or ground lessor. Notwithstanding
the foregoing, the holder or beneficiary of such mortgage, deed of trust, ground
lease, vendor's lien or similar instrument shall have the right to subordinate
or cause to be subordinated any such mortgage, deed of trust, ground lease,
vendor's lien or similar instrument to this Lease. Tenant further covenants and
agrees that if the lender or ground lessor acquires the Premises as a purchaser
at any foreclosure sale or otherwise, Tenant shall recognize and attorn to such
party as landlord under this Lease, and shall make all payments required
hereunder to such new landlord without deduction or set-off and, upon the
request of such purchaser or other successor, execute, deliver and acknowledge
documents confirming such attornment. Tenant waives the provisions of any law or
regulation, now or hereafter in effect, which may give or purport to give Tenant
any right to terminate or otherwise adversely affect this Lease or the
obligations of Tenant hereunder in the event that any such foreclosure or
termination or other proceeding is prosecuted or completed.

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4.25 WORKERS COMPENSATION IMMUNITY. If and to the extent that Tenant is
obligated to indemnify, defend or hold harmless Landlord or Landlord's Agents
from any Claims arising from its use of the Premises or any act or failure to
act by Tenant or Tenant's Agents or otherwise, Tenant expressly waives, to and
in favor of Landlord and Landlord's Agents, its statutory workers compensation
act employers immunity relative to any injury to an employee or employees of
Tenant.

4.26 BROKERS. Landlord and Tenant acknowledge that no real estate broker or
agent or other party entitled to any brokerage fee, commission or other
compensation in connection with this Lease, other than Trammell Crow Company and
Spaulding & Slye (herein collectively called the "Broker") has dealt with either
Landlord or Tenant. Landlord shall pay and discharge the Broker's commission
pursuant to a separate commission agreement. Tenant shall indemnify and hold
harmless Landlord from all Claims arising out of any brokerage claims due to any
dealings by Tenant with any party other than the Broker in connection with this
Lease. Landlord shall indemnify and hold harmless Tenant from all Claims arising
out of any brokerage claims due to any dealings by Landlord in connection with
this Lease. The foregoing mutual indemnity shall survive the expiration or
earlier termination of this Lease.

4.27 EXCULPATION AND LIMITATION OF LIABILITY. Landlord has executed this
Lease by its trustee signing solely in a representative capacity.
Notwithstanding anything contained in this Lease to the contrary, Tenant
confirms that the covenants of Landlord are made and intended, not as personal
covenants of the trustee, or for the purpose of binding the trustee personally,
but solely in the exercise of the representative powers conferred upon the
trustee by its principal. Liability with respect to the entry and performance of
this Lease by or on behalf of Landlord, however it may arise, shall be asserted
and enforced only against the Landlord's estate and interest in the Building and
Landlord shall have no personal liability in the event of any claim against
Landlord arising out of or in connection with this Lease, the relationship of
Landlord and Tenant or Tenant's use of the Premises. Further, in no event
whatsoever shall any Landlord's Agent have any liability or responsibility
whatsoever arising out of or in connection with this Lease, the relationship of
Landlord and Tenant or Tenant's use of the Premises. Any and all personal
liability, if any, beyond that which may be asserted under this paragraph, is
expressly waived and released by Tenant and by all persons claiming by, through
or under Tenant. In no event shall Landlord or Landlord's Agents ever be liable
for indirect or consequential damages.

4.28 MECHANIC'S LIENS AND TENANT'S PERSONAL PROPERTY TAXES.

4.28.1 Tenant shall have no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind, the interest of Landlord or Tenant in the Premises or to charge
the rentals payable under this Lease for any Claims in favor of any person
dealing with Tenant, including those who may furnish materials or perform labor
for any construction or repairs. Tenant shall pay or cause to be paid all sums
legally due and payable by it on account of any labor performed or materials
furnished in connection with any work performed on the Premises on which any
lien is or can be validly and legally asserted against its leasehold interest in
the Premises and Tenant shall indemnify, defend and hold harmless Landlord from
any and all Claims arising out of any such asserted Claims. Tenant agrees to
give Landlord immediate written notice of any such Claim. If Tenant fails to
discharge any lien, Landlord may do so at Tenant's expense and Tenant shall
reimburse Landlord for any expense or cost incurred by Landlord in so doing
within fifteen (15) days after rendition of bill therefor.

4.28.2 Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the Premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and Landlord elects to pay them or if the
assessed value of Landlord's property is increased by inclusion of such personal
property, furniture or fixtures and Landlord elects to pay the taxes based on
such increase, Tenant shall reimburse Landlord for the sums so paid by Landlord,
upon demand by Landlord.

4.29 INTENTIONALLY DELETED.

SECTION 5: DEFAULT AND REMEDIES

5.1 EVENTS OF DEFAULT.

5.1.1 The occurrence of any one or more of the following events shall
constitute a material default and breach of this Lease by Tenant ("EVENT OF
DEFAULT"):

(a) vacation or abandonment of all or any portion of the Premises;

(b) failure by Tenant to make any payment of Base Rent, Additional Rent
or any other sum payable by

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<PAGE> 24
Tenant under this Lease within three (3) Business Days after Tenant receives
notice from Landlord of Tenant's failure to pay any such sums, provided,
however, that Tenant shall be entitled to receive only two (2) such notices in
any twelve (12) month period and upon the third (3rd) such occurrence of
nonpayment within such period no notice shall be due Tenant prior to any Event
of Default for nonpayment of any sum due;

(c) failure by Tenant to observe or perform any covenant or condition
of this Lease, other than the making of payments, where such failure shall
continue for a period of twenty (20) days after written notice from Landlord
provided, however, if such default cannot be cured within such twenty (20) day
period and Tenant commences to cure such default within such period and
diligently prosecutes such cure to completion, then Tenant shall have an
additional reasonable period, not to exceed sixty (60) days, to cure such
default; or

(d) (1) the making by Tenant of any general assignment or general
arrangement for the benefit of creditors; (2) the filing by or against Tenant of
a petition in bankruptcy, including reorganization or arrangement, unless, in
the case of a petition filed against Tenant, unless the same is dismissed within
twenty (20) Business Days; (3) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located in the Premises or of
Tenant's interest in this Lease; (4) any execution, levy, attachment or other
process of law against any property of Tenant or Tenant's interest in this
Lease, unless the same is dismissed within twenty (20) Business Days; (5)
adjudication that Tenant is bankrupt; (6) the making by Tenant of a transfer in
fraud of creditors; or (7) the failure of Tenant to generally pay its debts as
they become due; or

(e) any information furnished by or on behalf of Tenant to Landlord in
connection with the entry of this Lease is determined to have been materially
false, misleading or incomplete when made.

5.1.2 Tenant shall notify Landlord promptly of any Event of Default or
any facts, conditions or events which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

5.1.3 If a petition in bankruptcy is filed by or against Tenant, and if
this Lease is treated as an "unexpired lease" under applicable bankruptcy law in
such proceeding, then Tenant agrees that Tenant shall not attempt nor cause any
trustee to attempt to extend the applicable time period within which this Lease
must be assumed or rejected.

5.2 REMEDIES. If any Event of Default occurs, Landlord may at any time
after such occurrence, with or without notice or demand except as stated in this
paragraph, and without limiting Landlord in the exercise of any right or remedy
at law which Landlord may have by reason of such Event of Default, exercise the
rights and remedies, either singularly or in combination, as are specified or
described in the subparagraphs of this paragraph.

5.2.1 Landlord may terminate this Lease and all rights of Tenant under
this Lease either immediately or at some later date by giving Tenant written
notice that this Lease is terminated. If Landlord so terminates this Lease, then
Landlord may recover from Tenant the sum of:

(a) the unpaid Base Rent, Additional Rent and all other sums payable
under this Lease which have been earned at the time of termination;

(b) interest at the Default Rate on the unpaid Base Rent, Additional
Rent and all other sums payable under this Lease which have been earned at the
time of termination; plus

(c) the amount by which the unpaid Base Rent, Additional Rent and all
other sums payable under this Lease which would have been earned after
termination until the time of award exceeds the amount of such rental loss, if
any, as Tenant affirmatively proves could have been reasonably avoided and
interest on such excess at the Default Rate; plus

(d) the amount by which the aggregate of the unpaid Base Rent,
Additional Rent and all other sums payable under this Lease for the balance of
the Lease Term after the time of award exceeds the amount of such rental loss,
if any, as Tenant affirmatively proves could be reasonably avoided, with such
difference being discounted to present value at the Prime Rate at the time of
award; plus

(e) any other amount necessary to compensate Landlord for the detriment
proximately caused by Tenant's failure to perform Tenant's obligations under
this Lease or which, in the ordinary course of things, would be likely to result
from such failure, including, leasing commissions, tenant improvement costs,
renovation costs and advertising costs; plus

(f) all such other amounts in addition to or in lieu of the foregoing
as may be permitted from time to time

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<PAGE> 25
by applicable law.

5.2.2 Landlord shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises. Landlord may cause property so removed from the Premises to be
stored in a public warehouse or elsewhere at the expense and for the account of
Tenant.

5.2.3 Landlord shall also have the right, without terminating this
Lease, to accelerate and recover from Tenant the sum of all unpaid Base Rent,
Additional Rent and all other sums payable under the then remaining term of the
Lease, discounting such amount to present value at the Prime Rate.

5.2.4 If Tenant vacates, abandons or surrenders the Premises without
Landlord's consent, or if Landlord re-enters the Premises as provided in
subparagraph 5.2.2 or takes possession of the Premises pursuant to legal
proceedings or through any notice procedure provided by law, then, if Landlord
does not elect to terminate this Lease, Landlord may, from time to time, without
terminating this Lease, either (a) recover all Base Rent, Additional Rent and
all other sums payable under this Lease as they become due or (b) relet the
Premises or any part of the Premises on behalf of Tenant for such term or terms,
at such rent or rents and pursuant to such other provisions as Landlord, in its
sole discretion, may deem advisable, all with the right, at Tenant's cost, to
make reasonable alterations and repairs to the Premises and recover any
deficiency from Tenant as set forth in subparagraph 5.2.5.

5.2.5 None of the following remedial actions, singly or in combination,
shall be construed as an election by Landlord to terminate this Lease unless
Landlord has in fact given Tenant written notice that this Lease is terminated:
an act by Landlord to maintain or preserve the Premises; any efforts by Landlord
to relet the Premises; any repairs or alterations made by Landlord to the
Premises; re-entry, repossession or reletting of the Premises by Landlord
pursuant to this paragraph; or the appointment of a receiver, upon the
initiative of Landlord, to protect Landlord's interest under this Lease. If
Landlord takes any of the foregoing remedial action without terminating this
Lease, Landlord may nevertheless at any time after taking any such remedial
action terminate this Lease by written notice to Tenant.

5.2.6 If Landlord relets the Premises, Landlord shall apply the revenue
from such reletting as follows: first, to the payment of any indebtedness of
Tenant to Landlord other than Base Rent, Additional Rent or any other sums
payable by Tenant under this Lease; second, to the payment of any cost of
reletting (including finders' fees and leasing commissions); third, to the
payment of the cost of any alterations, improvements, maintenance and repairs to
the Premises in connection with the reletting; and fourth, to the payment of
Base Rent, Additional Rent and other sums due and payable and unpaid under this
Lease. Landlord shall hold and apply the residue, if any, to payment of future
Base Rent, Additional Rent and other sums payable under this Lease as the same
become due, and shall deliver the eventual balance, if any, to Tenant. Should
revenue from letting during any month, after application pursuant to the
foregoing provisions, be less than the sum of the Base Rent, Additional Rent and
other sums payable under this Lease and Landlord's expenditures for the Premises
during such month, Tenant shall be obligated to pay such deficiency to Landlord
as and when such deficiency arises.

5.2.7 Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies provided in this Lease or by law (all such
remedies being cumulative), nor shall pursuit of any remedy provided in this
Lease constitute a forfeiture or waiver of any Base Rent, Additional Rent or
other sum payable under this Lease or of any damages accruing to Landlord by
reason of the violation of any of the covenants or conditions contained in this
Lease.

5.3 RIGHT TO PERFORM. If Tenant shall fail to pay any sum of money, other
than Base Rent or Additional Rent, required to be paid by it under this Lease or
shall fail to perform any other act on its part to be performed under this
Lease, and such failure shall continue for ten (10) Business Days after notice
of such failure by Landlord, or such shorter time if reasonable under the
circumstances, Landlord may, but shall not be obligated to, and without waiving
or releasing Tenant from any obligations of Tenant, make such payment or perform
such other act on Tenant's part to be made or performed as provided in this
Lease. Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment of sums
due under this paragraph as in the case of default by Tenant in the payment of
Base Rent.

5.4 LANDLORD'S DEFAULT. In the event that Landlord defaults under or
breaches this Lease, Tenant shall notify Landlord of such default or breach in
writing, and Tenant shall not exercise any right or remedy which Tenant may have
under this Lease or at law if Landlord commences to cure such default or breach
within twenty (20) Business Days after receipt of Tenant's notice and thereafter
diligently prosecutes the cure to completion.

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SECTION 6: MISCELLANEOUS PROVISIONS

6.1 NOTICES. Any notice, request or written communication required or
permitted to be delivered under this Lease shall be: (a) in writing; (b)
transmitted by personal delivery, express or courier service, United States
Postal Service in the manner described below, or electronic means of
transmitting written material; and (c) deemed to be delivered on the earlier of
the date received or four (4) Business Days after having been deposited in the
United States Postal Service, postage prepaid. Such writings shall be addressed
to Landlord or Tenant, as the case may be, at the respective designated
addresses set forth opposite their signatures, or at such other address(es) as
they may, after the execution date of this Lease, specify by written notice
delivered in accordance with this paragraph, with copies to the persons at the
addresses, if any, designated opposite each party's signature. Those notices
which contain a notice of breach or default or a demand for performance may be
sent by any of the methods described in clause (b) above, but if transmitted by
personal delivery or electronic means, shall also be sent concurrently by
certified or registered mail, return receipt requested.

6.2 ATTORNEY'S FEES AND EXPENSES. In the event either party requires the
services of an attorney in connection with enforcing the terms of this Lease, or
in the event suit is brought for the recovery of Base Rent, Additional Rent or
any other sums payable under this Lease or for the breach of any covenant or
condition of this Lease, or for the restitution of the Premises to Landlord or
the eviction of Tenant during the Lease Term or after the expiration or earlier
termination of this Lease, the non-breaching party shall be entitled to a
reasonable sum for attorney's and paralegal's fees, expenses and court costs,
including those relating to any appeal.

6.3 NO ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord
of an amount less than the Base Rent or Additional Rent or any other sum due and
payable under this Lease shall be deemed to be other than a payment on account
of the Base Rent, Additional Rent or other such sum, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, nor preclude Landlord's right to recover the
balance of any amount payable or Landlord's right to pursue any other remedy
provided in this Lease or at law.

6.4 SUCCESSORS; JOINT AND SEVERAL LIABILITY. Except as provided in the
paragraph captioned "Exculpation and Limitation of Liability" and subject to the
paragraph captioned "Assignment by Landlord", all of the covenants and
conditions contained in this Lease shall apply to and be binding upon Landlord
and Tenant and their respective heirs, executors, administrators, successors and
assigns. In the event that more than one person, partnership, company,
corporation or other entity is included in the term "Tenant," then each such
person, partnership, company, corporation or other entity shall be jointly and
severally liable for all obligations of Tenant under this Lease.

6.5 CHOICE OF LAW. This Lease shall be construed and governed by the laws
of the state in which the Land is located. Tenant consents to Landlord's choice
of venue for any legal proceeding brought by Landlord or Tenant to enforce the
terms of this Lease.

6.6 NO WAIVER OF REMEDIES. The waiver by Landlord of any covenant or
condition contained in this Lease shall not be deemed to be a waiver of any
subsequent breach of such covenant or condition nor shall any custom or practice
which may develop between the parties in the administration of this Lease be
construed to waive or lessen the rights of Landlord to insist on the strict
performance by Tenant of all of the covenants and conditions of this Lease. No
act or thing done by Landlord or Landlord's Agents during the Lease Term shall
be deemed an acceptance or a surrender of the Premises, and no agreement to
accept a surrender of the Premises shall be valid unless made in writing and
signed by Landlord. The mention in this Lease of any particular remedy shall not
preclude Landlord from any other remedy it might have, either under this Lease
or at law, nor shall the waiver of or redress for any violation of any covenant
or condition in this Lease or in any of the rules or regulations attached to
this Lease or later adopted by Landlord, prevent a subsequent act, which would
have originally constituted a violation, from having all the force and effect of
an original violation. The receipt by Landlord of Base Rent, Additional Rent or
any other sum payable under this Lease with knowledge of a breach of any
covenant or condition in this Lease shall not be deemed a waiver of such breach.
The failure of Landlord to enforce any of the rules and regulations attached to
this Lease or later adopted, against Tenant or any other tenant in the Building,
shall not be deemed a waiver. Any waiver by Landlord must be in writing and
signed by Landlord to be effective.

6.7 OFFER TO LEASE. The submission of this Lease to Tenant or its broker or
other agent does not constitute an

-25-
<PAGE> 27
offer to Tenant to lease the Premises. This Lease shall have no force or effect
until: (a) it is executed and delivered by Tenant to Landlord; and (b) it is
executed and delivered by Landlord to Tenant.

6.8 FORCE MAJEURE. In the event that Landlord or Tenant shall be delayed,
hindered in or prevented from the performance of any act or obligation required
under this Lease by reason of acts of God, strikes, lockouts, labor troubles or
disputes, inability to procure or shortage of materials or labor, failure of
power or utilities, delay in transportation, fire, vandalism, accident, flood,
severe weather, other casualty, Governmental Requirements (including mandated
changes in the Plans and Specifications or the Tenant Improvements resulting
from changes in pertinent Governmental Requirements or interpretations thereof),
riot, insurrection, civil commotion, sabotage, explosion, war, natural or local
emergency, acts or omissions of others, including Landlord or Tenant, as the
case may be, or other reasons of a similar or dissimilar nature not solely the
fault of, or under the exclusive control of, Landlord or Tenant, as the case may
be, then performance of such act or obligation shall be excused for the period
of the delay and the period for the performance of any such act or obligation
shall be extended for the period equivalent to the period of such delay.
Notwithstanding the foregoing, nothing herein shall excuse Tenant from the
payment of any amount of Base Rent, Additional Rent or other charges as and when
due under the Lease.

6.9 LANDLORD'S CONSENT. Unless otherwise provided in this Lease, whenever
Landlord's consent, approval or other action is required under the terms of this
Lease, such consent, approval or action shall be subject to Landlord's judgment
or discretion exercised in good faith and shall be delivered in writing.

6.10 SEVERABILITY; CAPTIONS. If any clause or provision of this Lease is
determined to be illegal, invalid, or unenforceable under present or future
laws, the remainder of this Lease shall not be affected by such determination,
and in lieu of each clause or provision that is determined to be illegal,
invalid or unenforceable, there be added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and be legal, valid and enforceable. Headings or
captions in this Lease are added as a matter of convenience only and in no way
define, limit or otherwise affect the construction or interpretation of this
Lease.

6.11 INTERPRETATION. Whenever a provision of this Lease uses the term (a)
"include" or "including", that term shall not be limiting but shall be construed
as illustrative, (b) "covenant", that term shall include any covenant,
agreement, term or provision, (c) "at law", that term shall mean at law or in
equity, or both, and (d) "day", that uncapitalized word shall mean a calendar
day. This Lease shall be given a fair and reasonable interpretation of the words
contained in it without any weight being given to whether a provision was
drafted by one party or its counsel.

6.12 INCORPORATION OF PRIOR AGREEMENT; AMENDMENTS. This Lease contains all
of the agreements of the parties to this Lease with respect to any matter
covered or mentioned in this Lease, and no prior agreement or understanding
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties to this Lease or their respective successors in interest.

6.13 AUTHORITY. If Tenant is a partnership, company, corporation or other
entity, each individual executing this Lease on behalf of Tenant represents and
warrants to Landlord that he or she is duly authorized to so execute and deliver
this Lease and that all partnership, company, corporation or other entity
actions and consents required for execution of this Lease have been given,
granted or obtained. If Tenant is a partnership, company, corporation or other
business organization, it shall, within ten (10) Business Days after demand by
Landlord, deliver to Landlord satisfactory evidence of the due authorization of
this Lease and the authority of the person executing this Lease on its behalf.

6.14 TIME OF ESSENCE. Time is of the essence with respect to the performance
of every covenant and condition of this Lease.

6.15 SURVIVAL OF OBLIGATIONS. Notwithstanding anything contained in this
Lease to the contrary or the expiration or earlier termination of this Lease,
any and all obligations of either party accruing prior to the expiration or
termination of this Lease shall survive the expiration or earlier termination of
this Lease, and either party shall promptly perform all such obligations whether
or not this Lease has expired or terminated. Such obligations shall include any
and all indemnity obligations set forth in this Lease.

6.16 CONSENT TO SERVICE. Tenant irrevocably consents to the service of
process of any action or proceeding at the address of the Premises. Nothing in
this paragraph shall affect the right to serve process in any other manner

-26-
<PAGE> 28
permitted by law. Service shall be made to the attention of Tenant's chief
executive officer.

6.17 LANDLORD'S AUTHORIZED AGENTS. Notwithstanding anything contained in the
Lease to the contrary, including without limitation, the definition of
Landlord's Agents, only officers of Riggs Bank N.A., are authorized to amend,
renew or terminate this Lease, or to compromise any of Landlord's claims under
this Lease or to bind Landlord in any manner. Without limiting the effect of the
previous sentence, no property manager or broker shall be considered an
authorized agent of Landlord to amend, renew or terminate this Lease or to
compromise any of Landlord's claims under this Lease or to bind Landlord in any
manner.

6.18 WAIVER OF JURY TRIAL. Landlord and Tenant agree to waive trial by jury
in any action, proceeding or counterclaim brought by either against the other on
any matter arising out of or relating in any way to this Lease.

6.19.1 INTENTIONALLY DELETED.

6.20 YEAR 2000 COMPLIANCE.

6.20.1 CORRECTIONS AND CONTINGENCY PLAN. With regard to the "Landlord
Systems and Equipment" (defined below), Landlord will make good faith efforts to
locate and correct any "Year 2000 Problems" (defined below) where it is
reasonably feasible to do so. With regard to "Tenant Systems and Equipment"
(defined below), Tenant will make good faith efforts to locate and correct any
"Year 2000 Problems where it is reasonably feasible to do so.

6.20.2 DAMAGES AND RENT ABATEMENT. As long as Landlord has complied in
good faith with the obligations stated in subsection 6.20.1, Landlord shall have
no liability to Tenant for any damage to Tenant's business or property occurring
in connection with the millennium change. If the millennium change causes a
failure in Landlord's Equipment or Systems, Landlord shall use commercially
reasonable efforts to correct the failure in Landlord's Equipment or Systems as
promptly as reasonably possible and the Base Rent due hereunder shall be abated
during the period that the Premises are untenantable due to that failure. If the
millennium change causes a failure in Tenant's Equipment or Systems, which is
not the direct result of a failure in Landlord's Equipment or Systems, there
shall be no abatement.

6.20.3 DEFINITIONS. "Landlord's Systems and Equipment" shall mean the
building-wide systems and equipment which Landlord is responsible for
maintaining and repairing pursuant to Section 4.1. "Tenant's Equipment and
Systems" shall mean the systems and equipment which Tenant is responsible for
maintaining and repairing pursuant to Section 4.3, including, without
limitation, Tenant's telecommunications equipment (phones, faxes, etc.). "Year
2000 Problem" means a failure of equipment or systems to operate properly due to
computer programming errors associated with the change in the millennium, often
associated with programming which provides only a two (2) digit date field.

[Remainder of this page intentionally left blank; signature page follows]

-27-
<PAGE> 29
IN WITNESS WHEREOF, this Lease has been executed the day and year first above
set forth.

Designated Address for Landlord: LANDLORD:

c/o Riggs Trust Group RIGGS & CO., a division of RIGGS BANK
Attn:________________________ N.A., as Trustee of the Multi-Employer
808 17th Street, N.W. Property Trust, a trust organized under
Washington, DC 20006 12 C.F.R. Section 9.18.
Facsimile: 202-835-6887

By: /s/ Leanne Tobias
with copy to Manager at: -------------------------------------
Name: Leanne Tobias
Its: Managing Director

25 Corporate Drive
Burlington, MA 01803

__________________________________

Designated Address for Tenant: TENANT:

__________________________________
__________________________________ HEALTHGATE DATA CORP., a Delaware
__________________________________ corporation
__________________________________
__________________________________
By: /s/ Mary B. Miller
Facsimile:________________________ --------------------------------------
Name: Mary B. Miller
Its: Chief Financial Officer

With a copy to:
Stephen M. Kane, Esq.
Rich, May Bilodeau & Flaherty, P.C.
176 Federal Street
Boston, MA 02110

-28-
<PAGE> 30
LANDLORD ACKNOWLEDGEMENT

)
DISTRICT OF COLUMBIA ) ss.
)

On this 10th day of February, 2000, before me personally appeared
Leanne Tobias, to me known to be a Managing Director of Riggs & Co., a division
of Riggs Bank N.A., the Trustee of the Multi-Employer Property Trust, the
national banking association that executed the within and foregoing instrument,
and acknowledged said instrument to be the free and voluntary act and deed of
said national banking association as trustee, for the uses and purposes therein
mentioned, and on oath stated that she was authorized to execute said
instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.

Name: /s/ Denise Hart-Gamble
----------------------------------------------
NOTARY PUBLIC in and for the District of Columbia,
residing at Riggs Bank N.A.
My appointment expires: March 31, 2003

-29-
<PAGE> 31
TENANT ACKNOWLEDGEMENT (CORPORATION)

_____________________________)
) ss.
_____________________________)

On this 4th day of February, 2000, before me, a Notary Public in and
for the Commonwealth of Massachusetts personally appeared Mary B. Miller, the
Chief Financial Officer of HealthGate Data Corp., the Delaware corporation that
executed the within and foregoing instrument, and acknowledged said instrument
to be the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned, and on oath stated that s/he/they was/were
authorized to execute said instrument.

WITNESS my hand and official seal hereto affixed the day and year first
as above written.

___________________________________________________
Name: /s/ Patricia S. Quinn
----------------------------------------------
NOTARY PUBLIC in and for the___________ of ________
residing at________________________________________

My appointment expires: March 25, 2005

[NOTARIAL SEAL]

<PAGE> 1
Exhibit 10.19

INDEMNIFICATION AGREEMENT

THIS AGREEMENT dated as of __________, _______, by and between
HealthGate Data Corp., a Delaware corporation (the "Corporation"), and
_____________ ("Indemnitee").

WITNESSETH

WHEREAS, it is essential to the Corporation to retain and attract as
Directors and Officers the most capable persons available, and

WHEREAS, it is the policy of the Corporation to indemnify its Directors
and Officers so as to provide them with the maximum possible protection
permitted by law, and

WHEREAS, Indemnitee may not be willing to continue to serve as a
Director or Officer, as the case may be, without full and adequate protection,
and the Corporation desires Indemnitee to serve in such capacity.

NOW, THEREFORE, in consideration of the premises and Indemnitee's
continued service as a Director or Officer, as the case may be, of the
Corporation after the date hereof, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged by each
of the parties hereto, it is hereby agreed as follows:

1. Definitions. As used in this Agreement:

(a) The term "Proceeding" shall mean any threatened, pending
or completed action, suit or proceeding, whether brought in the name of
the Corporation or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which Indemnitee may be or
may have been involved as a party or otherwise, by reason of the fact
that Indemnitee is or was a Director or Officer of the Corporation, or
by reason of any action taken by Indemnitee or of any inaction on
Indemnitee's part while serving as such a Director or Officer, or by
reason of the fact that Indemnitee is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
affiliated with the Corporation, whether or not Indemnitee is still
serving as a Director or Officer of the Corporation and/or such other
enterprise at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this Agreement.

(b) The term "Expenses" includes, without limitation thereto,
(i) all expenses of investigations, judicial or administrative
proceedings or appeals, (ii) all damages, judgments, fines and amounts
paid in settlement by or on behalf of Indemnitee, (iii) all attorneys'
fees and disbursements incurred by Indemnitee in connection with any
Proceeding, this Agreement, or any other matter involving
<PAGE> 2
the Corporation, and (iv) all attorneys' fees, disbursements and
expenses of establishing a right to indemnification under this
Agreement.

2. Indemnity. Subject only to the limitations set forth in Section 3 of
this Agreement, the Corporation shall pay on behalf of Indemnitee all
Expenses actually and reasonably incurred by Indemnitee in connection
with and/or as a consequence of any Proceeding.

3. Advance Payment of Costs. All Expenses incurred by Indemnitee in
connection with and/or as a consequence of a Proceeding shall be
promptly paid by the Corporation, as incurred and in the advance of the
final determination of such Proceeding, and in any event within thirty
(30) days of receipt by the Corporation of an invoice with respect
thereto. Indemnitee hereby agrees to repay to the Corporation any
amounts advanced to Indemnitee hereunder in the event as a consequence
of any final determination of a Proceeding, the Corporation shall be
prohibited by applicable law from indemnifying Indemnitee for such
amounts. For purposes hereof, the phrase a "final determination of a
Proceeding" shall mean a decision by a court having the legal authority
to make such a decision, which decision has become final and from which
no appeal or other review proceeding is possible.

4. Enforcement. The right to indemnification as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent
jurisdiction.

5. Indemnification Hereunder Not Exclusive. The indemnification provided
by this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may be entitled under the Certificate of
Incorporation, the By-Laws, any agreement, any vote of shareholders or
disinterested Directors, the General Corporation Law of the State of
Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such
office. The indemnification under this Agreement shall continue as to
Indemnitee even though Indemnitee may have ceased to be a Director or
Officer and shall inure to the benefit of the heirs and personal
representatives of Indemnitee. This Agreement shall remain in full
force and effect until the later of the final determination of any and
all Proceedings now existing or hereinafter arising and the fulfillment
by the Corporation of all of its obligations hereunder.

6. Savings Clause. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify Indemnitee as to Expenses
with respect to any Proceeding to the maximum extent permitted by law.
If any provision of this Agreement shall be invalidated on any ground
by any court of competent jurisdiction, then all other provisions of
this Agreement shall remain operative and in full force and effect
<PAGE> 3
7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.

8. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.

9. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns.

IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
duly executed and signed as of the day and year first above written.

HealthGate Data Corp.
(The "Corporation")

By:________________________________

___________________________________
[Name]

<PAGE> 1
Exhibit 11.1

HEALTHGATE DATA CORP.
LOSS PER SHARE

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
Computation of loss per share: 1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss $(2,541,158) $(2,877,529) $(16,731,863)

Net loss attributable to common stockholders $(3,080,802) $(3,472,358) $(25,469,160)

Shares used in computing basic and diluted net loss per
share attributable to common stockholders 4,543,447 4,547,559 4,662,080

Basic and diluted net loss per share $ (0.68) $ (0.76) $ (5.46)
=========== =========== ============

Shares used in computing proforma basic and diluted
net loss per share 8,974,288 9,219,587 11,368,777

Proforma Basic and diluted net loss per share $ (0.28) $ (0.31) $ (1.47)
=========== =========== ============
</TABLE>

This schedule contains summary financial information extracted from Form 10-K
and is qualified in its entirety to such financial statements.

<PAGE> 1
HEALTHGATE DATA CORP. Exhibit 21.1
LIST OF SUBSIDIARIES

HealthGate Europe Limited, a United Kingdom private limited company

HealthGate Acquisition Corp., a Delaware corporation

<PAGE> 1
Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-31524) of HealthGate Data Corp. and its
subsidiaries of our report dated February 21, 2000 relating to the financial
statements, which appears in this Annual Report on Form 10-K. We also consent to
the incorporation by reference of our report dated February 21, 2000 relating to
the financial statement schedule, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

Boston, Massachusetts
March 23, 2000

<PAGE> 1
Exhibit 99.1

HEALTHGATE DATA CORP.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGES BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION YEAR EXPENSES DEDUCTIONS YEAR
<S> <C> <C> <C> <C>
1999

Allowance for doubtful accounts $ 20,000 $ 30,000 $ 50,000

Deferred tax asset valuation allowance 3,766,185 6,966,074 10,732,259

1998

Allowance for doubtful accounts 3,500 20,000 (3,500)(1) 20,000

Deferred tax asset valuation allowance 2,551,653 1,214,532 3,766,185

1997

Allowance for doubtful accounts 0 3,500 3,500

Deferred tax asset valuation allowance 1,477,954 1,073,699 2,551,653
</TABLE>

- ----------------------------------------------------

(1) Write off of uncollectible accounts

<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of HealthGate Data Corp.

Our audits of the consolidated financial statements referred to in our report
dated February 21, 2000 appearing in this Annual Report on Form 10-K also
included an audit of the financial statement schedule listed in Item 14(a)(2)
of this Form 10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 21, 2000

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 960,831 578,560
<SECURITIES> 0 0
<RECEIVABLES> 394,575 791,403
<ALLOWANCES> (20,000) (50,000)
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,560,888 6,138,477
<PP&E> 1,727,850 2,610,678
<DEPRECIATION> (921,057) (1,308,310)
<TOTAL-ASSETS> 2,370,979 27,162,922
<CURRENT-LIABILITIES> 1,561,354 7,778,558
<BONDS> 0 0
0 0
6,889,431 15,626,726
<COMMON> 45,485 52,192
<OTHER-SE> (9,780,779) (1,748,408)
<TOTAL-LIABILITY-AND-EQUITY> 2,370,979 27,162,922
<SALES> 0 0
<TOTAL-REVENUES> 2,434,124 3,241,568
<CGS> 0 0
<TOTAL-COSTS> 1,181,012 2,326,688
<OTHER-EXPENSES> 3,773,764 17,175,114
<LOSS-PROVISION> 20,000 30,000
<INTEREST-EXPENSE> 327,100 435,058
<INCOME-PRETAX> (2,877,529) (16,731,863)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,877,529) (16,731,863)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (594,829) (8,737,297)
<CHANGES> 0 0
<NET-INCOME> 3,472,358 (25,469,160)
<EPS-BASIC> (0.76) (5.46)
<EPS-DILUTED> (0.76) (5.46)

</TABLE>