<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1999
REGISTRATION NO. 333-80557
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
AMERICASDOCTOR.COM, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7374 52-2059555
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------------
AMERICASDOCTOR.COM, INC.
10065 RED RUN BOULEVARD
SUITE 200
OWINGS MILLS, MD 21117
(443) 394-1300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
SCOTT M. RIFKIN, M.D.
CHIEF EXECUTIVE OFFICER
AMERICASDOCTOR.COM, INC.
10065 RED RUN BOULEVARD
SUITE 200
OWINGS MILLS, MD 21117
(443) 394-1300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL D. NATHAN, ESQ. WILLIAM J. GRANT, JR., ESQ.
SIMPSON THACHER & BARTLETT WILLKIE FARR & GALLAGHER
425 LEXINGTON AVENUE 787 SEVENTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
(212) 455-2000 (212) 728-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
<S> <C> <C>
Common Stock, par value $0.01 per share............................................ $ 83,375,000 $ 23,179
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information contained in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
PRELIMINARY PROSPECTUS DATED , 1999
- --------------------------------------------------------------------------------
7,250,000 SHARES
AMERICASDOCTOR.COM
COMMON STOCK
- ----------------------------------------------------------------------
AmericasDoctor.com is offering 7,250,000 shares of its common stock. This is
our initial public offering and no public market currently exists for our
shares. We expect to enter into a firm commitment underwriting.
We anticipate that the price to the public in the offering will be between
$8.00 and $10.00 per share.
In connection with this offering, we have applied to list our common stock
on the Nasdaq National Market under the symbol "AMDR."
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Price to the Public $ $
- -------------------------------------------------------------------------------------------
Underwriting Discounts and Commissions
- -------------------------------------------------------------------------------------------
Proceeds to AmericasDoctor.com
- -------------------------------------------------------------------------------------------
</TABLE>
AmericasDoctor.com will grant the underwriters the right to purchase
additional shares of our common stock to cover over-allotments.
WARBURG DILLON READ LLC
WILLIAM BLAIR & COMPANY
PRUDENTIAL VECTOR HEALTHCARE GROUP
A UNIT OF PRUDENTIAL SECURITIES
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary....................... 2
Risk Factors............................. 6
Use of Proceeds.......................... 21
Dividend Policy.......................... 21
Capitalization........................... 22
Dilution................................. 23
Selected Financial Data.................. 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 25
Business................................. 34
Government Regulation and Other Legal
Considerations......................... 52
Management............................... 59
Certain Transactions..................... 70
Principal Stockholders................... 78
Description of Capital Stock............. 80
Shares Eligible for Future Sale.......... 83
Underwriting............................. 86
Legal Matters............................ 88
Experts.................................. 88
Where You Can Find More Information About
AmericasDoctors.Com.................... 89
Index to Consolidated Financial
Statements............................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS, INCLUDING "RISK FACTORS,"
AND THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES CONTAINED ELSEWHERE IN THIS
PROSPECTUS BEFORE BUYING SHARES OF OUR COMMON STOCK.
AMERICASDOCTOR.COM
AmericasDoctor.com operates an interactive Internet healthcare information
site for consumers. We offer consumers free, real-time interaction with
healthcare professionals and easy access to relevant and reliable healthcare
information. Our site features our free 24-hour doctor chat service that enables
consumers to have live on-line, one-on-one chats with doctors and other
healthcare professionals, a variety of interactive healthcare content including
lectures and live educational programs, a growing library of information on
ailments, illnesses, nutrition, pharmacology and other topics, and health and
medical publications and news. We have designed our doctor chat service to
enable our users, through the assistance, expertise and insight of doctors and
other healthcare professionals, to successfully find relevant and reliable
healthcare information on-line in response to their health questions. We are
also expanding our site to include community Web pages focused on the needs of
people sharing specific health conditions and interests. In addition we offer
hospitals the opportunity to be exclusive sponsors of our Internet services
within markets defined by zip code. We also provide sponsors with opportunities
to feature their healthcare professionals on our site. Our goal is to establish
AmericasDoctor.com as a premier Internet site that consumers trust for accurate,
real-time answers to their health questions and rely on as a preferred
destination for healthcare content, on-line communities and services.
We initiated our service in September 1998, initially accessible only to
subscribers of America Online, Inc., commonly referred to as "AOL." In February
1999, we introduced our service on the Internet, at our domain address,
WWW.AMERICASDOCTOR.COM, and for the quarter ended June 30, 1999 we estimate that
we had approximately 1.4 million user sessions and approximately 13.3 million
page views. In general, a "user session" is a period of on-line activity by a
user separated by a period of at least 30 minutes of inactivity on our site by
that user.
We are developing our site to generate revenue opportunities from multiple
sources, including hospital sponsorships, the sale of health-related products
through our site, sales of advertising and commercial sponsorships and fees for
assisting in the recruitment of volunteers for clinical research studies. As of
September 1, 1999, we had 49 contracts with hospital sponsors, 40 of which
currently appear on our site and 9 of which are preparing for introduction. In
addition, in May 1999 we opened our on-line medical mall through which we intend
to offer health products to our customers.
We have established several key strategic relationships, and we intend to
pursue additional strategic relationships in the future. In particular, we are
one of four companies placed in a prominent on-line position, generally referred
to as an "anchor tenant," on AOL's subscriber Health Channel main screen which
provides AOL's subscribers easy access to our content, communities and services.
In addition to our relationships with AOL and our hospital sponsors, we have
entered into agreements with Smith & Nephew PLC, a distributor and manufacturer
of home health products and devices, to develop our on-line sales presence, and
CenterWatch, Inc., a publishing company focusing on the clinical trials
industry, to help develop our ability to recruit volunteers for clinical
research studies. We also have entered into an agreement with Lycos Corporation,
a leading gateway to the Internet, generally referred to as an Internet
"portal," to provide us with over 400 keywords and phrases as well as
advertising that enables consumers to easily locate our Web site and communities
and to assist us in building our brand image and driving more traffic to our
site.
2
<PAGE>
The Internet has emerged as one of the fastest growing media in history and
has rapidly become a significant global medium enabling an increasing number of
users to quickly retrieve information, share their experiences in on-line
communities and purchase a variety of products and services on-line, generally
referred to as "e-commerce." Changes in the healthcare industry, including the
development of managed care and the emergence of new medical and pharmaceutical
treatments, are placing increasing pressure on consumers to educate themselves
on healthcare issues. According to Cyber Dialogue, an Internet research
organization, the number of adults searching for on-line healthcare information
is projected to grow from approximately 17 million in 1998 to approximately 30
million by the year 2000.
As consumers become more involved in managing their personal health, and
that of their relatives or other people close to them, they are searching for
clear answers to their health questions and more reliable information about
medical conditions, treatments and outcomes. Many traditional and on-line
sources of healthcare information are unclear, voluminous and difficult for many
consumers to evaluate. We believe many consumers continue to lack the tools
necessary to navigate successfully through the abundance of healthcare
information services and products available to them.
Our solution enables consumers to obtain accurate real-time answers to their
healthcare questions and quickly find clearly presented, objective and
up-to-date healthcare information by utilizing the expertise and insight of
doctors through our free 24-hour doctor chat service. We are designing our site
to offer an engaging and interactive destination where consumers also will find
interactive expert lectures, healthcare articles, current healthcare news,
on-line communities focused on specific health conditions, opportunities to
purchase health-related products on-line and access to sponsor hospitals.
We believe our healthcare content, communities and services, featuring our
free 24-hour doctor chat service, will enable us to attract a loyal consumer
audience that will be highly attractive to hospital sponsors and other
healthcare providers, pharmaceutical companies and other healthcare product
suppliers, advertisers and research organizations. Key elements of our business
strategy include:
- establish AmericasDoctor.com as a leading and trusted brand for on-line
healthcare information, and products and services;
- differentiate our healthcare content, communities and services by
featuring our free 24-hour doctor chat service and interactive expert
lectures and designing additional easy-to-use interactive features;
- pursue and expand relationships with local hospital sponsors;
- expand our strategic distribution relationships with companies that have
the ability, among other things, to promote the AmericasDoctor.com brand
and drive additional consumers to our site;
- pursue and expand our strategic relationships with traditional healthcare
companies to strengthen key areas of our business including our e-commerce
and clinical trial recruitment services; and
- integrate and expand our health condition-specific on-line communities to
become premier healthcare destinations combining relevant and reliable
information and community activities with the full range of our healthcare
content, products and services.
We were incorporated in Delaware in August 1997 and commenced operations in
September 1998.
------------------------
Our corporate headquarters currently are located at 10065 Red Run Boulevard,
Suite 200, Owings Mills, Maryland 21117. Our telephone number is (443) 394-1300.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by AmericasDoctor.com.............. 7,250,000 shares
Common stock to be outstanding after this offering...... 24,930,020 shares
Use of proceeds......................................... AmericasDoctor.com intends to use
the proceeds from this offering to
fund operating losses and for
general corporate purposes,
including a significantly expanded
marketing campaign, working
capital and expenditures
associated with possible
acquisitions or strategic
investments. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.................. AMDR
</TABLE>
Immediately following completion of this offering, AmericasDoctor.com will
have 6,000,440 shares of common stock issuable upon the exercise of outstanding
options granted under our 1999 Long-Term Incentive Plan and 451,720 shares of
common stock issuable upon exercise of outstanding warrants. See "Underwriting,"
"Management--Stock Plans" and note 11 to the consolidated financial statements
and the other notes to the consolidated financial statements.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
Unless otherwise indicated in this prospectus, the information contained in
this prospectus:
- reflects a 20 for 1 split of our common stock to be effected in the form
of a stock distribution in connection with the consummation of this
offering;
- reflects the conversion of all outstanding shares of our preferred stock
into common stock immediately prior to the split of our common stock in
connection with the consummation of this offering and reflects a pro forma
20 for 1 split of our preferred stock into 4,933,200 shares of common
stock for purposes of comparability, although the preferred stock will not
actually split; and
- assumes that the representatives of the underwriters do not exercise their
over-allotment option and that no other person exercises any other
outstanding options or warrants after the date of this prospectus.
"AmericasDoctor.com," "America's Doctor," the AmericasDoctor logo and "AD
chatware" are some of our trademarks and service marks. This prospectus contains
trade names, trademarks and service marks of other companies, all of which are
the property of their respective owners.
This prospectus includes statistical data regarding the Internet and the
healthcare industries. This data was obtained from industry publications and
reports which we believe to be reliable sources. However, we cannot guarantee
the accuracy and completeness of this information. We have neither independently
verified this data nor sought the consent of any organization to refer to their
respective reports included in this prospectus. We have not commissioned any
industry publications or reports.
Unless the context requires otherwise, references to the "company,"
"AmericasDoctor.com," "we," "us" and "our" in this prospectus refer to
AmericasDoctor.com, Inc., a Delaware corporation, and AmericasDoctor.com Medical
Mall, Inc., its subsidiary.
4
<PAGE>
SUMMARY FINANCIAL DATA
We have calculated pro forma net loss per share assuming the conversion of
2,666,660 shares of Series A preferred stock issued on February 1, 1999 and
2,077,660 shares of Series B redeemable preferred stock issued on June 1, 1999
into common stock as of the date of issuance. For purposes of the balance sheet
data, we have given pro forma effect to the issuance of 188,880 shares of Series
B redeemable preferred stock on July 16, 1999, the conversion of Series A and
Series B preferred stock into common stock, the expiration of the put rights
which exist on shares of common stock held by management and the payment of
outstanding stock subscriptions receivable as if all had occurred on June 30,
1999. The "as adjusted" column reflects the receipt by AmericasDoctor.com of the
estimated net proceeds of this offering at an assumed initial public offering
price of $9.00 per share, after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us, and the
application of the estimated net proceeds from this offering. See "Use of
Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
AUGUST 8, 1997 SIX MONTHS ENDED
(INCEPTION) THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
------------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................. $ -- $ 62 $ -- $ 546
Operating loss......................................... (12) (4,604) (1,134) (12,874)
Net loss............................................... (41) (5,242) (1,393) (12,890)
------ ------------ --------- ----------
------ ------------ --------- ----------
Basic and diluted loss per common share................ $ (0.02) $ (1.63) $ (1.24) $ (2.51)
------ ------------ --------- ----------
------ ------------ --------- ----------
Weighted-average shares used in computing basic and
diluted loss per common share.......................... 2,475 4,690 2,636 10,152
------ ------------ --------- ----------
------ ------------ --------- ----------
Pro forma basic and diluted loss per common share........ $ (1.12) $ (1.02)
------------ ----------
------------ ----------
Weighted-average shares used in computing pro forma basic
and diluted loss per common share...................... 4,690 12,580
------------ ----------
------------ ----------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
<S> <C> <C> <C>
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 5,288 $ 6,078 $ 65,761
Working capital............................................................... 4,705 5,495 65,178
Total assets.................................................................. 8,557 9,347 69,030
Long-term obligations......................................................... 26 26 26
Common stock, subject to put rights........................................... 15,257 -- --
Redeemable convertible preferred stock........................................ 5,119 -- --
Total stockholders' equity (deficit).......................................... (13,831) 7,335 67,018
</TABLE>
5
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
BUYING SHARES OF OUR COMMON STOCK. OUR BUSINESS AND BUSINESS STRATEGY ARE NEW,
EVOLVING AND NOT PROVEN. IF ANY OF THESE RISKS OCCUR, OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS WOULD BE MATERIALLY ADVERSELY AFFECTED.
THESE RISKS ALSO COULD CAUSE A SIGNIFICANT DECLINE IN THE TRADING PRICE OF OUR
COMMON STOCK AND YOU COULD LOSE PART OR ALL OF THE MONEY YOU PAID TO BUY SHARES
OF OUR COMMON STOCK.
RISKS RELATING TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES FUTURE FORECASTING VERY DIFFICULT.
We were incorporated in August 1997 and are in the early stages of
development. We initiated our Internet operations on the subscriber service of
America Online, Inc. in September 1998, our Web site in February 1999 and our
first on-line community in March 1999. Our e-commerce operations commenced in
May 1999. Accordingly, we have a very limited operating history. An investor in
our common stock must consider the risks, uncertainties and difficulties
frequently encountered by companies with limited operating histories,
particularly Internet companies, which make forecasting future results very
difficult. These risks, uncertainties and difficulties include the following:
- our business strategy may not be successful;
- we may not generate significant revenues or achieve profitability;
- we may be unable to obtain the resources necessary to operate and grow our
business; and
- we may fail to compete successfully against our competitors
The Internet market and, in particular, the healthcare sector of the
Internet market, is in the early stage of development and is rapidly evolving.
The Internet market is characterized by an increasing number of market entrants
who are introducing competing products and services. Demand and market
acceptance for recently introduced products and services often are subject to a
high level of uncertainty and risk. We may not be able to attract larger
audiences to our site, including to our health condition-specific communities.
We cannot predict with any certainty that a market for our health-related
services will develop or that demand for our content, communities and services
will emerge, grow or last. If the market fails to develop, develops more slowly
than we expect or becomes saturated with competitors, our business, financial
condition and results of operations could be materially adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and related notes for
detailed information on our very limited operating history.
OUR BUSINESS STRATEGY IS NEW, EVOLVING, UNPROVEN AND SUBJECT TO CHANGE AND MAY
NOT GENERATE REVENUE OPPORTUNITIES. IN ADDITION, WE MAY NOT BE ABLE TO DEVELOP
OR EXPAND THE CONTENT OR SERVICES ON OUR SITE TO ATTRACT USERS.
Our business objective is to become a premier Internet healthcare
information site that customers trust for accurate, real-time answers to their
health questions and rely on as a preferred destination for healthcare content,
communities and services. Our business strategy is new, evolving and unproven.
Due to the rapidly changing nature of the Internet, we are continuously
modifying our business strategy and expect to continue to modify our strategy in
the future. Our business model assumes that consumers will be attracted to and
will use healthcare information and related services and e-commerce services
available on our site which will, in turn, allow us the opportunity to sell
sponsorships and advertising designed to reach those consumers. Our current
business strategy may not be successful, and, if it is not successful, we may
not be able to modify it in a timely and successful manner. In addition, we may
not be able to develop successful business strategies to capitalize on
opportunities in new and unproven areas.
6
<PAGE>
Furthermore, much of our content and many of our communities and services
are currently in development and are being offered on a limited basis. For
example, we currently have a library consisting of approximately 4,500 articles,
we offer products on our medical mall supplied by four suppliers and four of our
communities offer hosted community chats. We intend to expand our library,
increase the number of suppliers and increase the number of hosted community
chats, as well as expand other services currently offered on a limited basis.
However, we may not be able to effectively develop or expand the content,
communities and services we currently offer on a limited basis. As a result we
may not be able to attract a significant number of users. See "Business--Our
Business."
WE MAY FAIL TO ACCOMMODATE USER DEMAND FOR OUR FREE 24-HOUR DOCTOR CHAT SERVICE
WHICH COULD RESULT IN THE LOSS OF USERS AND SPONSORS. WE WILL INCUR
SIGNIFICANT EXPENSE TO OPERATE THIS SERVICE WHICH WILL REDUCE RESOURCES
AVAILABLE TO US FOR OTHER CORPORATE PURPOSES.
We believe our free 24-hour doctor chat service differentiates
AmericasDoctor.com from other Internet healthcare networks and Web sites. From
time to time, our users experience delays in accessing our doctor chat service,
and as a result of increasing traffic and costs, our users may experience
increasing delays or substantial difficulty in accessing our doctor chat service
in the future which could lead to dissatisfaction with our service and our site
as a whole. The costs of operating our free 24-hour doctor chat service and, in
particular, the costs of employing doctors, are significant and may limit the
resources we can devote to other corporate purposes. We anticipate the need to
add chat centers and increase the number of doctors available on our chat
service to accommodate increases in the number of visitors seeking to use our
chat service. We expect this expansion to elevate our cost structure
significantly. However, due to the cost of adding doctors and chat centers and
the availability of doctors, we do not intend to increase the number of doctors
proportionately to the anticipated increase in the number of our users. In light
of these cost issues, as well as training, recruitment and technological and
operational issues, we may not add chat centers or employ additional doctors to
the extent required to support the full volume of users entering our site
desiring to use our chat service. If our hospital sponsors perceive that our
users are becoming dissatisfied with our doctor chat service, or any other
features of our site, we may lose the support of our hospital sponsors and face
difficulty acquiring new hospital sponsors or renewing existing hospital
sponsorships. As described below there are additional risks involved in
operating our chat center because our chat center is operated by a third party.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES AND NEGATIVE CASH FLOW
WHICH COULD NEGATIVELY AFFECT OUR SHARE PRICE AND OUR BUSINESS.
Since our inception, we have incurred significant losses and negative cash
flow, and, as of June 30, 1999, we had an accumulated deficit of approximately
$18.2 million. We have not achieved profitability and expect to incur increasing
operating losses and negative cash flow for the foreseeable future as we fund
operating and other expenditures in areas, including fees for accessing the
sites of our strategic partners to attract visitors to our site, generally
referred to as "site access fees," marketing, expanding our free 24-hour doctor
chat service, advertising, including brand promotion, and sales, content and
service development and operating infrastructure. Our business model is not yet
proven, and our business may never achieve or sustain profitability. Future
losses and negative cash flow could negatively affect our share price and our
business. See "Use of Proceeds," "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
FUTURE REVENUES AND OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. IF WE
FAIL TO MEET EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET
PRICE OF OUR COMMON STOCK MAY DECLINE SIGNIFICANTLY.
Our revenues and our operating results may fluctuate significantly in the
future as a result of various factors, many of which are outside of our control.
We currently expect our primary sources of
7
<PAGE>
revenues to come from hospital sponsorships. We also seek to generate revenue
from e-commerce transactions, advertising and fees for assisting in the
recruitment of volunteers for clinical trial studies. Our hospital sponsorships
are generally one-year arrangements although some agreements permit earlier
termination. We cannot assure you that we will be able to attract additional
hospital sponsors or that our existing hospital sponsors will renew their
current agreements with us. We cannot forecast with any degree of certainty the
amount of sponsorship revenues, advertising revenues, e-commerce revenues or
other revenues we may be able to generate. In addition, our operating expenses,
including development costs, general and administrative expenses, advertising,
marketing and public relations expenses, may be committed in advance and in
anticipation of future revenues.
Due to the factors described above and other factors, we believe quarterly
comparisons of our results of operations will not be good indicators of our
performance. If our results of operations fall below the expectations of
securities analysts and investors in some future periods, our stock price may
decline significantly. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
IF WE DO NOT ESTABLISH, MAINTAIN AND STRENGTHEN OUR BRAND WE MAY NOT ATTRACT
USERS TO OUR SITE OR GENERATE SPONSORSHIP, ADVERTISING, E-COMMERCE AND OTHER
REVENUE OPPORTUNITIES.
We must expend significant resources to establish the AmericasDoctor.com
brand. Brand loyalty is essential to attract an increasing number of visitors to
our site and to the success of our business. We are in competition with a
substantial number of Internet companies currently seeking to establish their
names as dominant brands in the Internet healthcare market. The following
factors may affect our ability to successfully establish our brand:
- healthcare consumers must, among other things, perceive our healthcare
content as relevant and reliable;
- our sponsors must, among other things, consider our site to be
professional, reliable and well operated;
- pharmaceutical companies, medical device manufacturers and other
healthcare vendors must, among other things, view our healthcare site as
an effective marketing and sales channel for their products and services;
and
- clinical researchers seeking volunteers for trial studies must view our
healthcare site as an effective means of recruiting suitable volunteers.
We intend to use a significant portion of the proceeds from this offering to
pursue aggressive marketing campaigns on-line and in traditional media to
promote our brand. However, unlike our on-line advertising, which gives us
immediate feedback and allows us to promptly adjust our marketing messages, the
effectiveness of advertising in traditional print and broadcast media is more
difficult to determine. We also believe traditional media advertisements are
more expensive and more difficult to change. If our promotional efforts are
unsuccessful, we may fail to establish AmericasDoctor.com as a leading brand in
our market. See "Business--Marketing, Advertising and Public Relations."
WE MAY NOT BE ABLE TO RAISE ADDITIONAL FINANCING TO EFFECTIVELY EXECUTE OUR
BUSINESS STRATEGY, ENTER INTO VALUABLE STRATEGIC RELATIONSHIPS AND GENERATE
REVENUE OPPORTUNITIES.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. However, we may need to raise additional
funds in the form of equity, convertible debt securities or debt for the
following purposes:
- fund additional fees we pay to access the sites of our strategic partners;
- fund obligations to other strategic partners;
- fund more rapid expansion;
8
<PAGE>
- fund additional marketing expenditures;
- develop new or enhance existing content, features or services;
- respond to competitive pressures; or
- acquire complementary products, services or technologies.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
and these securities may have rights, preferences or privileges senior to those
of our stockholders. We cannot guarantee that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available on acceptable terms, or at all, our ability to fund our operations,
take advantage of unanticipated opportunities, develop and enhance our content,
features and services, enter into valuable strategic relationships or otherwise
respond to competitive pressures would be limited. Our business, financial
condition and results of operations could be materially adversely affected by
any limitations in raising additional required financing. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
IF OUR RELATIONSHIP WITH AOL IS TERMINATED WE WOULD LOSE USERS, SPONSORS AND
POTENTIAL REVENUE OPPORTUNITIES. WE EXPECT THE COST OF CONTINUING OUR
RELATIONSHIP WITH AOL TO INCREASE SIGNIFICANTLY WHICH WOULD LIMIT THE
RESOURCES WE CAN DEVOTE TO OTHER CORPORATE PURPOSES.
We have an agreement with AOL to position AmericasDoctor.com as an anchor
tenant on its subscriber service's Health Channel main screen. For the three
months ended June 30, 1999, AOL accounted for approximately 60% of the visitors
to our site. Our agreement with AOL became effective in April 1998 and expires
in June 2001. However, the fee we are obligated to pay AOL for the third year of
the agreement is not currently fixed. AOL has the right to set the rate for the
third year based on market rates and we currently expect the cost of our AOL
contract to increase significantly because market rates have increased. We
cannot assure you that it will be commercially viable to continue our agreement
for the third year with AOL or that we will be able to renew the agreement after
the third year. Our agreement with AOL does not prohibit AOL from carrying other
sites or developing and providing content that competes with portions of our
site. AOL is currently carrying, or has agreed to carry, additional competing
sites. Our expectations of an increase in the cost of our AOL contract, as well
as the increased competition we face on the AOL site, are based, in part, on the
fact that AOL has entered into a four-year agreement with drkoop.com, Inc., one
of our significant competitors, to carry drkoop.com, Inc. on AOL subscriber
sites, as well as AOL non-subscriber and affiliated sites including aol.com, for
aggregate cash consideration of about $89 million. This amount is significantly
more than the rate we currently pay AOL which is approximately $75,000 per
month. If AOL fails to support us as an anchor tenant on its subscription
service or our agreement with AOL is terminated, we may not be able to replace
these services on commercially reasonable terms with an adequate Internet
service provider or portal or at all. A termination of our agreement with AOL
would result in the loss of a substantial number of users, sponsors and revenue
opportunities, and would materially adversely affect our business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business--Strategic
Relationships" and "--Marketing, Advertising and Public Relations."
IF WE FAIL TO ESTABLISH AND MAINTAIN ADDITIONAL STRATEGIC RELATIONSHIPS AND
SPONSORSHIPS, WE MAY BE UNABLE TO INCREASE TRAFFIC ON OUR SITE AND ESTABLISH
OUR BRAND IDENTITY. WE MAY HAVE TO ISSUE EQUITY SECURITIES IN CONNECTION WITH
STRATEGIC RELATIONSHIPS WHICH WOULD CAUSE SIGNIFICANT DILUTION TO OUR
SHAREHOLDERS.
In addition to our relationship with AOL, we must establish and maintain
additional strategic relationships with popular Internet service providers,
portals, Web sites, traditional media companies and/or health companies to
increase the number of visitors to our site and establish our Internet
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presence. There is intense competition for relationships with these types of
companies, and we may not be able to enter into these relationships on
commercially reasonable terms or at all. Even if we enter into strategic
relationships with these types of companies, they may not be able to continue to
attract a significant number of users. As a result, our site may not receive the
expected additional users from these relationships. Moreover, we may have to pay
significant fees or issue significant amounts of additional securities to
establish these relationships, which could include issuances for non-cash
consideration. If we issue additional equity securities in connection with
establishing strategic relationships, our shareholders could experience
significant dilution.
We also may enter into agreements with hospital and other healthcare
sponsors, content providers or other Internet service providers, portals and Web
sites that require us to feature their services exclusively in areas of our site
and may prevent us from entering into other sponsorships, advertising
arrangements, content agreements or other strategic relationships. Our business
strategy depends, in part, on our ability to attract and maintain hospital
sponsorships. We may not be able to attract hospital sponsors and our existing
hospital sponsors may not renew current agreements with us. Many companies we
may pursue for strategic relationships also offer services that compete with our
services. As a result, these companies may be reluctant to enter into strategic
relationships with us. Our inability to enter into additional strategic
relationships and maintain and expand our existing relationships could have a
material adverse effect on our business, financial condition and results of
operations. See "Business--Strategic Relationships."
FAILURE OF OUR COMPUTER SYSTEM AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD DISRUPT OUR OPERATIONS AND CAUSE OUR USERS TO BECOME DISSATISFIED OR
UNWILLING TO USE OUR SITE.
We presently believe that our computer systems will be Year 2000 compliant
in a timely manner. We believe that we have identified substantially all of the
major computers, software applications and related equipment used in connection
with our internal operations that must be modified, upgraded or replaced to
minimize the possibility of a material disruption to our operations, but there
can be no assurance of this. Disruptions to our operations could cause our users
to become dissatisfied with or unwilling to use our site. We have commenced the
process of modifying, upgrading and replacing systems that have been identified
as potentially being adversely affected and expect to complete this process
before the end of the third quarter of 1999. We do not expect the costs related
to these efforts to be material to our business, financial condition or results
of operations.
We depend on third party suppliers for most of the services provided through
AmericasDoctor.com. We have limited or no control over the actions of our
content and service providers. While we expect that we will be able to resolve
any significant Year 2000 Problems with our systems, we cannot guarantee that
our content and service providers will resolve any or all Year 2000 Problems
with their systems before the occurrence of a material disruption to our
business. Any failure of third parties to resolve Year 2000 Problems with their
systems in a timely manner could have a material adverse effect on our business,
financial condition or results of operations.
We cannot accurately predict the nature, severity, duration or financial
consequences of Year 2000 Problems that may occur. As a result, we expect that
we could possibly suffer the following consequences:
- operational distortions to our service and content providers and our
consumers that may divert our time, attention and financial resources away
from our ordinary business activities; and
- serious system failures that may require significant efforts by us, our
service and informational content providers or our consumers to avoid a
material disruption of our business.
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IF WE ARE UNABLE TO DELIVER OUR SERVICES BECAUSE MEDICAL ADVISORY SYSTEMS OR
OTHER THIRD PARTIES FAIL TO PROVIDE RELIABLE SERVICES TO US, WE COULD LOSE
USERS, SPONSORS AND ADVERTISERS.
We currently rely on Medical Advisory Systems, Inc. to manage and operate
our 24-hour doctor chat center operations. An affiliate of Medical Advisory
Systems, recruits and hires doctors and other healthcare professionals to
operate our free 24-hour doctor chat service subject to our authorization. As of
June 30, 1999, Medical Advisory Systems owned approximately 14.4% of our
outstanding common stock. Pursuant to our agreement with Medical Advisory
Systems, we pay Medical Advisory Systems a fee which includes the costs of the
doctors and other healthcare professionals and other expenses related to our
chat center operations. If Medical Advisory Systems fails to deliver these
services or our arrangement with Medical Advisory Systems is terminated, we
would be required to obtain these services from another operator or provide them
internally. This could interrupt our services, involve significant costs and
could have a material adverse effect on our ability to deliver our featured
24-hour doctor chat service and on our business, financial condition and results
of operations.
The agreement with Medical Advisory Systems has an initial term which runs
through July 2000 and provides for two additional renewal terms of one and two
years, respectively. The Company and Medical Advisory Systems currently disagree
over what rights the parties have not to renew the agreement for the renewal
terms. We cannot predict how this disagreement will be resolved.
We also depend on other third parties for important aspects of our business,
including Internet access, housing, operation and maintenance of our computer
servers, the provision of products and services, the development of software for
new Web site features and telecommunications. We also depend on unrelated Web
site operators that provide advertising links to AmericasDoctor.com. We have
limited control over these third parties, and we may not be their only client.
As a result, we may not be able to maintain satisfactory relationships with any
of them on acceptable commercial terms or renew or replace these agreements on
the same terms or on other commercially acceptable terms.
We rely on independent content providers for the majority of healthcare
information provided through AmericasDoctor.com. Our arrangements with content
providers are typically short-term and non-exclusive and we currently rely on
one content provider for health and medical news. Due to the non-exclusivity of
our agreements with content providers, competitors offer, or could offer,
content that is similar to or the same as ours. Moreover, a competitor could
enter into an exclusive arrangement with key content suppliers. If content from
key suppliers becomes unavailable to us for any reason, our site may become less
attractive to our users, sponsors and advertisers.
IF WE ARE UNABLE TO MAKE ACQUISITIONS, INVESTMENTS OR ENTER INTO OTHER VENTURES
OR INTEGRATE THEIR OPERATIONS, WE MAY NOT BE ABLE TO EXECUTE OUR BUSINESS
STRATEGY, COMPETE SUCCESSFULLY OR GENERATE REVENUE OPPORTUNITIES.
Although we have no current agreements to enter into any material investment
or acquisition transactions, we may desire to acquire or make investments in
complementary businesses, technologies, services or products if appropriate
opportunities arise. From time to time, we have had discussions and negotiations
with companies regarding our acquisition of, or strategic investment in, their
businesses. We have no current agreements or commitments with respect to any
material acquisition or investment transaction, and we are not currently engaged
in any substantial negotiations with respect to any material transaction. We may
not be able to identify suitable acquisition or investment candidates in the
future, or if we do identify suitable candidates, we may not be able to make
those acquisitions or investments on commercially acceptable terms or at all. If
we acquire or invest in another company, we could have difficulty integrating
that company's personnel, operations, technology and software into our
operations. In addition, the key personnel of the acquired company may decide
not to work for us. These difficulties could occupy a substantial portion of the
time and resources of our management and employees, increase our expenses and
limit our ability to execute our business strategy, compete successfully and
generate revenue opportunities.
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We may also elect to pursue one or more investments or acquisition
transactions. Although, as of the date of this prospectus, we have no binding
agreement to enter into any material investments or acquisition transaction. If
we enter into an investment or acquisition we may issue additional equity or
debt securities, or pay cash or a combination of both, in exchange for services
or other non-cash consideration. Acquisitions may also involve the incurrence of
debt, the assumption of known and unknown liabilities, the write-off of software
development costs and the amortization of expenses related to goodwill and other
intangible assets, all of which could have a material adverse effect on our
financial condition and results of operations.
IF WE LOSE ANY OF OUR KEY PERSONNEL OR WE CANNOT ACQUIRE ADDITIONAL PERSONNEL TO
MANAGE OUR BUSINESS, WE MAY BE UNABLE TO EXECUTE OUR BUSINESS STRATEGY,
COMPETE SUCCESSFULLY OR GENERATE REVENUE OPPORTUNITIES.
Our future success depends, in large part, on the continued service of our
senior management team and other key employees, particularly Scott M. Rifkin,
M.D., our chief executive officer. The loss of the services of Dr. Rifkin would
likely have a material adverse effect on our business, financial condition and
results of operations. Although we intend to enter into employment agreements
with our key executive officers, we currently do not have employment agreements
with our president, our chief medical information and our chief information
officers. We also believe that our future success depends on our ability to
attract, integrate, motivate and retain additional highly skilled technical
personnel, particularly well-trained and experienced professionals capable of
marketing Internet-based services to healthcare institutions. In addition, in
order for us to deliver our free 24-hour doctor chat service, we must attract,
train and retain qualified doctors and other healthcare professionals. There is
intense competition for employees, at all levels, that possess knowledge of both
the Internet industry and the healthcare market. Our failure to retain our key
employees or attract, integrate and retain other highly qualified employees and
doctors in the future could limit our ability to execute our business strategy,
compete successfully or generate revenue opportunities. See "Management."
IF WE DO NOT EXPAND OUR INFRASTRUCTURE TO ACCOMMODATE GROWTH IN OUR BUSINESS, WE
COULD LOSE OUR USERS.
Presently, a relatively limited number of consumers use our site. However,
in order to execute our business strategy we must generate a high volume of
traffic on our site. Accordingly, we must continue to expand and adapt our
infrastructure and services, including our free 24-hour doctor chat service, to
accommodate additional traffic, new features and tools and changing consumer
requirements. We may fail to accurately project the rate or timing of increases,
if any, in the use of our site or to expand and upgrade our services, systems
and infrastructure to accommodate increases in consumer use. Our systems may not
accommodate increased use of our services, including our free 24-hour doctor
chat service, while maintaining acceptable overall performance. Operational
delays or other difficulties, including increased waiting time on our doctor
chat service, could cause us to lose users who become dissatisfied with our
services and prefer to use the services of our competitors. See "Business--
Technology, Infrastructure and Operations."
WE MAY LOSE USERS IF WE DO NOT ADAPT TO RAPID TECHNOLOGICAL CHANGE AND PROVIDE
TOOLS AND FEATURES WHICH MEET THE CHANGING DEMANDS OF OUR USERS.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new service and product announcements. We must
adapt to our rapidly changing market by continuing to improve the performance,
features and reliability of our site and, in particular, its functionality with
new versions of Web browsers and other platforms. We also could incur
substantial costs if we need to modify our services or infrastructure in order
to adapt to these changes. If we fail to keep pace with the technological
advancements, our consumers may not use our site and instead may use our
competitors' services. In addition, we must provide informational content,
interactive tools,
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e-commerce and other features that consumers demand in order to continue to
attract and retain our consumer audiences. We must allocate significant
resources to continue to improve our site, and we must properly anticipate,
identify and respond to changes in consumer demands. If we fail to respond to
changes in consumer demand, expand the scope of our content and services,
introduce new services quickly and efficiently, or our content and services fail
to achieve market acceptance, traffic on our site could be materially and
adversely affected.
OUR ABILITY TO DELIVER OUR SERVICES TO OUR USERS WOULD BE ADVERSELY AFFECTED BY
SYSTEM FAILURES AND CAPACITY CONSTRAINTS.
We believe we must be able to operate our site 24 hours each day without
interruption. Almost all of our content and Web services are provided by
third-party providers and the operation of our interactive features is dependent
upon Internet service providers. To operate without interruption, our content
providers and Internet service providers must guard against:
- damage from fire, power loss and other natural disasters;
- system failures;
- software and hardware errors, failures or crashes;
- security breaches, computer viruses and similar disruptive problems; and
- other potential interruptions.
Our Internet service providers' infrastructure must accommodate high volumes
of traffic and deliver current information, components or features. In the past
our site has suffered outages and experienced slower response times due to
equipment or software downtime or other operational difficulties, some of which
have been related to our service providers. Our site may, in the future,
experience increased response times or system failures due to increased traffic
or for a variety of other reasons. Any significant interruptions in our services
or an increase in response time could result in a loss of potential or existing
consumers, sponsors, strategic partners or advertisers and, if sustained or
repeated, could reduce the attractiveness of our site to those parties. Although
we maintain business interruption insurance, it is unlikely that all potential
situations or claims will come within the scope of our insurance coverage, or
that the amount of our insurance will be adequate to compensate us for all
losses that may occur or to provide reimbursement for indirect costs associated
with business interruptions.
RISK RELATING TO OUR INDUSTRY
IF WE DO NOT COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE COMPETITORS, WE MAY
NOT GENERATE REVENUE OPPORTUNITIES OR ACHIEVE PROFITABILITY.
Numerous Internet companies compete for users, sponsors, advertisers,
e-commerce transactions and other sources of on-line revenue. The number of Web
sites offering healthcare information and related products and services is
increasing rapidly. In addition, traditional media and healthcare providers
compete for consumers' attention both through traditional marketing channels as
well as through their own new Internet initiatives. We believe competition for
healthcare consumers will continue to increase as the Internet healthcare market
evolves.
We compete directly for users, sponsors, advertisers, e-commerce suppliers
and other affiliates with numerous Internet companies, including:
- healthcare Web sites;
- Web search engines and Internet portals;
- hospitals and other healthcare payors and providers which offer healthcare
information on-line;
- Web communities; and
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- e-commerce suppliers and conventional retailers for health-related
products.
Many of our existing competitors and potential new competitors are likely to
enjoy substantial competitive advantages compared to our company, including:
- the ability to offer a wider array of on-line products and services;
- more comprehensive health-related content and information;
- larger production and technical staffs;
- greater name recognition and larger marketing budgets and resources;
- larger customer and user bases; and
- substantially greater financial, technical and other resources.
To be competitive, we must respond promptly and effectively to the
challenges of rapid technological change, evolving consumer demands, evolving
Internet standards and our competitors' innovations by continuing to enhance our
services, as well as our sales and marketing channels. Competition is likely to
increase as new companies enter the market and current competitors expand their
services. We expect that competitive factors will create a continuing need for
us to improve and add to our healthcare content. Accordingly, we intend to seek
additional sources of healthcare information and expand the scope of our content
offerings and services. Increased competition and our failure to successfully
respond to our competitors could result in greater competition for users and
sponsorships, reductions in advertising rates, lower margins for healthcare
e-commerce transactions, greater operating losses or loss of market share, any
of which would have a material adverse effect on our revenue opportunities. See
"Business--Competition."
GOVERNMENT REGULATION AND LEGAL CONSIDERATIONS COULD LIMIT OUR OPERATIONS AND
SUBJECT US TO LITIGATION, POTENTIAL LIABILITIES AND INCREASED OPERATING COSTS.
Our business and industry are subject to extensive government regulation and
other legal considerations including state laws and ethical issues. Federal and
state laws, regulations and statutes have been or may be adopted with respect to
healthcare, the Internet, our industry or other on-line services. The
requirement that we comply with any existing or new legislation or regulation,
or the impact of the other legal considerations described below, may decrease
the demand for our services, increase our cost of doing business or otherwise
have a material adverse effect on our business, financial condition and results
of operations.
The delivery of healthcare services and products is heavily regulated under
federal and state law. For example, federal and state agencies regulate the
practice of medicine and the activities of doctors and other health
professionals. In addition, through fraud and abuse laws, federal and state
agencies prohibit payments for the referral of patients to a person
participating in, or for the order, purchase or recommendation of items or
services that are subject to reimbursement by, Medicare, Medicaid and other
federal or state healthcare programs or other third-party payors. We have not
researched the laws of each of the 50 states or obtained opinions or rulings
from federal and state agencies with authority to enforce these laws. While we
have attempted to structure our business activities including, in particular,
our 24-hour doctor chat service, in a manner that would not constitute the
practice of medicine or involve prohibited referrals, federal and/or state
healthcare regulatory authorities could determine that, in a particular case or
generally, we are engaged in the practice of medicine through the activities of
our doctors or other healthcare professionals on or through our Web site. We are
subject to the risk that our relationships with hospitals and other sponsors,
e-commerce vendors and other companies may implicate or violate laws governing
the sale of healthcare products and laws prohibiting referral arrangements. A
finding that our current or future business activities violate any of these laws
or statutes could force us to limit or restructure our operations and subject us
to litigation, potential liabilities and significantly increased operating
costs. Our current and planned business activities could also subject us to
malpractice claims, liability for improper disclosure of medical
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records, failure to comply with standards relating to recording of medical
information, ethical considerations relating to recruiting for clinical trials,
and regulation by the Food and Drug Administration.
There is also an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, on-line content regulation, user privacy, taxation and quality of
products and services. Any legislation or regulation pertaining to the Internet
may limit the growth of the use of the Internet and decrease the demand for our
services.
For a more complete description of the government regulation and other legal
considerations applicable to our business, see "Business--Government Regulation
and Other Legal Considerations."
IF THE USE OF THE INTERNET DOES NOT CONTINUE TO GROW OR ACCESS BY OUR CUSTOMERS
TO THE INTERNET IS SIGNIFICANTLY INTERRUPTED, OUR BUSINESS STRATEGY MAY PROVE
UNSUCCESSFUL AND WE MAY NOT BE ABLE TO GENERATE REVENUE OPPORTUNITIES.
Our market is new and rapidly evolving and our business strategy depends, in
part, on the continued availability and growth in the use of the Internet. Our
business strategy could prove unsuccessful and our business would be adversely
affected if Web usage does not continue to grow. Internet usage may be inhibited
for a number of reasons, including, without limitation:
- inadequate infrastructure;
- inadequate security precautions;
- inconsistent quality of service;
- unavailability of cost-effective, high-speed service; and
- increased government regulations.
If Internet usage grows, its infrastructure may not be able to support the
demands placed on it by this growth or its performance and reliability may
decline. Internet service providers and other Web sites have interruptions in
their service as a result of outages and other delays occurring throughout the
Internet infrastructure. If these outages or delays frequently occur in the
future, or last for extended durations, Internet usage, as well as usage of our
site, could be materially and adversely affected. See "Business--Strategic
Relationships."
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IF WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OR INFRINGE UPON THE
RIGHTS OF OTHERS, OUR BRAND AND REPUTATION COULD BE IMPAIRED AND WE COULD LOSE
USERS.
We rely on a combination of copyright, trademark and trade secret laws and
contractual provisions to establish and protect our proprietary rights. There
can be no assurance that the steps we have taken to protect our proprietary
rights will be adequate. It is also possible that our competitors or others will
adopt product or service names similar to ours, which may impede our ability to
build brand identity and possibly lead to customer confusion. In addition, we
may be subject to litigation for claims of infringement of the rights of others
or to determine the scope and validity of the intellectual property rights of
others. Further, we may have to litigate to enforce and protect our intellectual
property rights. Litigation would divert our management and financial resources
and may not effectively protect our intellectual property. Adverse
determinations in any litigated claims could result in the loss of our
proprietary rights, subject us to significant liabilities, require us to seek
licenses from third parties or prevent us from selling our services. Any of
these results could have a material adverse effect on the acceptance of the
AmericasDoctor.com brand. In addition, since we license a substantial portion of
our content from third parties, we are exposed to copyright infringement actions
for this content because we must rely upon their representations as to the
origin and ownership of third-party intellectual property.
In addition to our intellectual property rights, we benefit from our domain
name. Domain names are Internet "addresses" which derive value because they are
currently the easiest way to locate and access Web sites. There can be no
assurance that third parties will not bring claims for infringement against us
for the use of our domain name. In addition, our domain name may lose value if
reform measures or technological advances result in users ceasing to use domain
names to access Internet resources. Further, we cannot assure you that other
companies or individuals will not seek to obtain domain names similar to ours
resulting in confusion to, or loss of, our users and sponsors and advertisers.
See "Business--Intellectual Property."
IF WE ARE FOUND LIABLE FOR HARMFUL INFORMATION RETRIEVED FROM AND COMMUNICATIONS
ON OUR SITE, WE MAY HAVE TO PAY FINES OR DAMAGES OR INCUR OTHER COSTS.
In addition to the litigation risks described above, we may be subject to
third-party claims for defamation, negligence, copyright or trademark
infringement or other claims based on the nature and content of information
supplied on our site or information or statements made by healthcare
professionals on our chat service. These types of claims have been brought,
sometimes successfully, against Internet companies in the past. Claims also
could arise from inaccurate, offensive, harassing, or otherwise inappropriate
statements of participants in health condition-specific communities or
educational programs, over which we have no control. Similarly, claims may arise
from content or statements contained or made, or services made available on, Web
sites linked to our site. Our insurance may not cover potential claims of this
type or may not be adequate to cover all costs incurred in defense of these
claims or to indemnify us for all liability that may be imposed. To the extent
we are currently covered by insurance, the continued availability of this type
of insurance cannot be assured. Even if these claims do not result in liability
to us, our reputation could suffer and we could incur significant costs
litigating these claims, paying fines or damages or implementing measures to
reduce our exposure to liability.
IF A MARKET FOR HEALTHCARE E-COMMERCE TRANSACTIONS DOES NOT DEVELOP, OUR
BUSINESS STRATEGY MAY PROVE UNSUCCESSFUL AND OUR REVENUE OPPORTUNITIES MAY BE
SIGNIFICANTLY IMPAIRED.
We plan to develop relationships with retailers, manufacturers, suppliers
and other providers to conduct e-commerce transactions involving healthcare
products and services through our site. Our strategy, and these relationships,
involve numerous risks and uncertainties. There is no established business model
for the sale of healthcare products over the Internet. We have no significant
experience in the sale of healthcare products on-line or in the development of
relationships with retailers,
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manufacturers or other providers of healthcare products. In addition, we cannot
predict the rate at which consumers will elect to engage in e-commerce or the
compensation that we will receive for enabling these transactions. Our business
strategy may not prove successful and our revenue opportunities may be
significantly impaired if a market for the sale of health-related products via
the Internet does not develop.
WE MAY INCUR POTENTIAL PRODUCT LIABILITY, BECOME SUBJECT TO LITIGATION AND INCUR
SIGNIFICANT COSTS IF A PRODUCT SOLD ON OUR SITE IS DEFECTIVE, FAILS TO PERFORM
PROPERLY OR INJURES A CONSUMER.
We could be involved in litigation if any product or service sold through
our site is defective, fails to perform properly or injures a consumer, even if
this product or service is provided by an unaffiliated third party. However,
contractual provisions limiting our exposure to liability claims may not
prevent, and we may not be able to negotiate for protection against, all
potential claims, and our insurance may not adequately protect us from these
types of claims. Liability claims could require us to spend significant time and
money in litigation or pay significant damages. As a result, any liability
claims, whether or not successful, could seriously damage our reputation and our
business, financial condition and results of operations. See "Business--Our
Industry."
WE COULD LOSE USERS, BECOME SUBJECT TO LITIGATION AND INCUR SIGNIFICANT COSTS IF
SECURITY ON OUR SITE IS NOT ASSURED.
A significant barrier to e-commerce and communications over the Internet has
been the need for secure transmission of confidential information including
credit card and other personal information. Any well-publicized compromise of
security could limit the growth of e-commerce. We may incur significant costs to
protect against the threat of security breaches or to alleviate problems caused
by these breaches. If an unauthorized person were able to enter into our systems
and misappropriate personal information or credit card information of our
consumers, we could face legal claims, litigation or other potential
liabilities.
We also retain confidential customer information in our database. For
example, we retain basic user information, credit card informaton and
information about our users' interests. Therefore, it is critical that our
facilities and infrastructure remain secure and 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.
IF INTERNET ADVERTISING DOES NOT BECOME AN EFFECTIVE OR PROFITABLE MARKETING
MEDIUM, OUR REVENUE OPPORTUNITIES MAY BE IMPAIRED AND OUR BUSINESS MODEL MAY
PROVE UNSUCCESSFUL.
We expect to derive a portion of our revenues from banner advertising on our
Web site. However, we have not earned any banner advertising revenue to date,
and we cannot predict whether we will generate any significant advertising
revenues in the future. The Internet advertising market is new and rapidly
evolving. Most of our potential advertising customers, including our hospital
sponsors, have little or no experience advertising over the Internet and have
allocated only a limited portion of their advertising budgets to Internet
advertising. Those customers may find Internet advertising to be less effective
for promoting their products and services relative to traditional advertising
media. Advertisers that already have relied on other advertising methods may be
reluctant to adopt a new strategy. We cannot assure you that the market for
Internet advertising will emerge or become sustainable. Our business would be
adversely affected if the market for Internet advertising fails to develop or
develops more slowly than expected.
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. Our
advertising revenues could be adversely affected if we are unable to adapt to
new forms of Internet advertising. Moreover, "filter" software programs that
limit or prevent advertising
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from being delivered to a Web user's computer are available. Widespread adoption
of this software could adversely affect the commercial viability of Internet
advertising.
RISKS RELATING TO THIS OFFERING
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE AND INVESTORS MAY NOT BE ABLE TO
RESELL THEIR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in
AmericasDoctor.com will lead to the development of a trading market or how
liquid that trading market might become. The initial public offering price for
our shares will be determined by negotiation between us and the representatives
of the underwriters based upon several factors and may not be indicative of
future market prices. See "Underwriting" for factors to be considered in
determining the initial public offering price.
The trading price of our common stock could be subject to fluctuations in
response to factors, some of which are beyond our control, including, without
limitation, the following:
- actual or anticipated variations in our quarterly operating results;
- announcements of technological innovations or new products or services by
us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet and/or on-line commerce industries;
- changes in the economic performance and/or market valuations of other
Internet, on-line commerce or healthcare companies;
- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock; and
- potential litigation.
In addition, the stock market has experienced significant volatility, which
recently, in part, may be due to the expansion of trading on the Internet, that
has particularly affected the market prices of equity securities of companies
within several industry groups, including technology companies generally and
Internet-related companies in particular. This volatility has included rapid and
significant increases and decreases in the trading prices of several Internet
companies and large interday and intraday swings in the trading prices of their
securities. These fluctuations may materially adversely affect the trading price
of our common stock.
Investors in our stock may not be able to resell their shares of common
stock at or above the initial public offering price due to possible volatility
in our stock price after this offering. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has been instituted against the company. The institution of
securities class action litigation against us could result in substantial costs
and diversion of our management's attention and resources.
AFTER COMPLETION OF THE OFFERING WE WILL CONTINUE TO BE CONTROLLED BY OUR
EXISTING STOCKHOLDERS WHO WILL BE ABLE TO APPROVE CORPORATE ACTIONS WHICH
COULD DELAY OR PREVENT A CHANGE IN OUR CORPORATE CONTROL FAVORED BY OUR OTHER
SHAREHOLDERS.
Upon completion of this offering, our present directors and executive
officers, holders of more than 5% of our outstanding common stock and their
respective affiliates will beneficially own approximately 60.6% of the
outstanding common stock and approximately 58.1% of the outstanding
18
<PAGE>
common stock assuming full exercise of the underwriters' over-allotment option.
As a result, these stockholders, if they act as a group, will be able to control
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. This control may have the
effect of delaying or preventing a change in control. See "Management,"
"Principal Stockholders" and "Description of Capital Stock."
IF OUR MANAGEMENT DOES NOT EFFECTIVELY APPLY THE PROCEEDS FROM THIS OFFERING THE
MARKET PERCEPTION OF OUR COMPANY AND OUR ABILITY TO EXECUTE OUR BUSINESS
STRATEGY MAY BE IMPAIRED.
Our Board of Directors and management team will have significant flexibility
in applying the net proceeds of this offering. We currently intend to use the
net proceeds from this offering to fund operating losses and for general
corporate purposes, including a significantly expanded marketing campaign,
working capital and expenditures associated with possible acquisitions or
strategic investments. We have not yet determined the amount of net proceeds to
be used for each of these purposes.
The failure of our management team to apply the proceeds of this offering
effectively could have an adverse effect on the market perception of our
management and our ability to execute our business strategy. See "Use of
Proceeds" and "Management."
THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING BY OUR
NUMEROUS EXISTING STOCKHOLDERS COULD CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could decline as a result of sales of a
large number of shares of common stock in the market after this offering or the
perception that common stock sales could occur. These sales also might make it
more difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. After this offering, in addition to the
7,250,000 shares we are offering, we will have 18,131,740 outstanding shares of
common stock held by individual and institutional investors and 451,720 shares
issuable under currently exercisable warrants. All shares sold in this offering
will be freely tradeable except for any shares purchased by our affiliates.
Unless the provisions of the lock-up agreements described in "Underwriting" are
waived by the underwriters and us, shares held by our existing shareholders or
issuable upon exercise of outstanding warrants are expected to be eligible for
sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------
<S> <C>
At various times after 90 days from the date of this prospectus: .............................. 1,390,320
At various times after 180 days from the date of this prospectus: ............................. 16,741,420
</TABLE>
After this offering, we also will have 6,000,440 shares issuable under
outstanding options, 2,090,660 of which are currently exercisable. Substantially
all of our currently exercisable options are owned by our directors and
executive officers. We intend to file a registration statement to register for
resale, subject to the terms of the lock-up agreements, shares issuable upon
exercise of stock options. In addition, we have entered into a registration
rights agreement with shareholders holding an aggregate of 9,337,040 shares,
including shares issuable upon exercise of currently exercisable outstanding
options and warrants. Pursuant to the registration rights agreement, the
shareholders may require AmericasDoctor.com subject to the terms of the lock-up
agreements to register for sale to the public some or all of their shares at any
time after this offering. See "Certain Transactions--Amended and Restated
Registration Rights Agreement."
INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN
THE NET TANGIBLE BOOK VALUE OF THEIR SHARES.
Investors participating in this offering will:
19
<PAGE>
- pay a price per share that substantially exceeds the book value of
AmericasDoctor.com's assets after subtracting its liabilities; and
- contribute 78% of the total amount of equity funds raised to date by
AmericasDoctor.com, but will own only 32% of the outstanding shares.
Furthermore, to the extent that we issue additional shares of our common stock
pursuant to acquisitions or strategic relationships, or outstanding options or
warrants to purchase our common stock are exercised, investors could suffer
further dilution. For more information, see "Dilution."
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW COULD
MAKE IT MORE DIFFICULT FOR A THIRD-PARTY TO ACQUIRE CONTROL OF THE COMPANY AND
COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Upon the closing of this offering, our Board of Directors will have the
authority to issue up to 9,715,564 shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The issuance of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of our company, may
discourage bids for our common stock at a premium over the market price of the
common stock, and may adversely affect the market price of, and the voting and
other rights of the holders of, the common stock. We have no current plans to
issue additional shares of preferred stock.
We are also subject to provisions of Delaware law that could have the effect
of delaying, deterring or preventing a change in control of our company. In
addition, our proposed Restated Certificate of Incorporation and Bylaws contain
provisions that, together with the ownership position of our executive officers
and directors and their affiliates, could discourage potential takeover attempts
and make more difficult attempts by stockholders to change management which
could adversely affect the market price of our common stock. See "Description of
Capital Stock."
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE REALIZED.
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements may include statements about our business
strategy, plans and timing for the introduction or enhancement of our services,
plans for entering into sponsorships or strategic alliances, expected sources of
funds to finance our operations following this offering and other expectations,
intentions and plans contained in this prospectus that are not historical fact.
When used in this prospectus, the words "expects," "anticipates,"
"considering," "intends," "plans," "may," "believes," "seeks," "estimates,"
"strategy" and similar expressions are generally intended to identify
forward-looking statements. Actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risks faced
by us described above and elsewhere in this prospectus. We undertake no
obligation after the date of this prospectus to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future which could have a material
adverse effect on our business, financial condition and results of operations.
20
<PAGE>
USE OF PROCEEDS
We estimate that the proceeds from the sale by us of the 7,250,000 shares of
common stock offered by this prospectus at an assumed initial public offering
price of $9.00 per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses, will be approximately $59.7 million
and an additional $9.1 million if the underwriters' over-allotment option is
exercised in full.
We currently intend to use the net proceeds from this offering to fund
operating losses and for general corporate purposes, including fees we pay to
access the sites of our strategic partners to attract visitors to our site,
expansion of our site, marketing, expansion of our chat centers, content
development and working capital. We plan to spend a large portion of the
proceeds from this offering on a significantly expanded marketing campaign
including the use of traditional media as well as on-line advertising for brand
promotion. In addition, we also may use a portion of the proceeds for the
introduction of products or technologies that expand, complement or are
otherwise related to our current or planned content, communities and services or
for possible acquisitions or strategic investments. We have no current
agreements or commitments with respect to any material acquisition or investment
transaction, and we are not currently engaged in any substantial negotiations
with respect to any material transaction.
We have not yet determined the amount of net proceeds to be used
specifically for each of these purposes. Accordingly, management will have
significant flexibility in applying the net proceeds of this offering. Pending
the uses described above, the net proceeds of this offering will be invested in
short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We intend
to retain all of our future earnings, if any, for use in our business, and
therefore we do not expect to pay any cash dividends on our common stock in the
foreseeable future. Investors should not purchase our common stock with the
expectation of receiving cash dividends.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of AmericasDoctor.com
derived from our unaudited financial statements as of June 30, 1999 on an
actual, pro forma and as adjusted basis. The "actual" column reflects our
capitalization as of June 30, 1999 on a historical basis, without any
adjustments to reflect subsequent events or anticipated events. The "pro forma"
column reflects our capitalization as of June 30, 1999 with adjustments for the
following:
- the receipt of cash for all outstanding subscriptions;
- the expiration of put rights on shares of stock held by some members of
management upon the closing of this offering;
- the purchase by TD Origen Capital Fund, L.P. and TD Javelin Capital Fund,
L.P. of 188,880 shares of Series B redeemable convertible preferred stock
for aggregate proceeds of approximately $625,000; and
- the automatic conversion of all shares of outstanding preferred stock into
common stock immediately prior to the 20 for 1 split of our common stock
to occur upon the consummation of this offering.
- the exercise of warrants for 12,680 shares of common stock that occurred
after June 30, 1999.
The "as adjusted" column reflects our capitalization as of June 30, 1999
with the preceding "pro forma" adjustments plus:
- the sale by us of 7,250,000 shares of our common stock pursuant to this
offering at an assumed public offering price of $9.00 per share net of
estimated underwriting discounts and commissions and offering expenses.
The capitalization information set forth in the table below should be read
in conjunction with the financial statements and notes included elsewhere in
this prospectus. You should review notes 10 and 11 of our financial statements
included elsewhere in this prospectus for a description of our Series A
convertible preferred stock and Series B redeemable convertible preferred stock.
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................................. $ 5,288 $ 6,078 $ 65,761
--------- ----------- -----------
--------- ----------- -----------
Current portion of capital lease obligations.......................... $ 16 $ 16 $ 16
--------- ----------- -----------
--------- ----------- -----------
Capital lease obligations, net of current portion..................... $ 26 $ 26 $ 26
Common stock, subject to put rights, $0.01 par value; 2,119,080 shares
issued and outstanding, actual; no shares issued and outstanding,
pro forma and as adjusted........................................... 15,257 -- --
Series B redeemable convertible preferred stock, $0.01 par value;
3,022,060 shares authorized (split-adjusted), 2,077,660 shares
issued and outstanding, actual; no shares issued and outstanding,
pro forma and as adjusted........................................... 5,119 -- --
Stockholders' equity:
Series A convertible preferred stock, $0.01 par value; 2,666,660
shares authorized (split-adjusted), 2,666,660 shares issued and
outstanding, actual; no shares issued and outstanding, pro forma and
as adjusted......................................................... 27 -- --
Common stock, $0.01 par value; 50,000,000 shares authorized
(split-adjusted), 10,615,060 shares issued and outstanding,
including 210,867 shares subscribed, actual; 17,680,020 shares
issued and outstanding, no shares subscribed; pro forma; 24,930,020
shares issued and outstanding, no shares subscribed, as adjusted.... 106 177 249
Warrants.............................................................. 1,418 1,376 1,376
Additional paid-in capital............................................ 3,392 24,391 84,002
Stock subscriptions receivable........................................ (165) -- --
Deferred compensation................................................. (414) (414) (414)
Accumulated deficit................................................... (18,195) (18,195) (18,195)
--------- ----------- -----------
Total stockholders' equity (deficit).................................. (13,831) 7,335 67,018
--------- ----------- -----------
Total capitalization.................................................. $ 6,571 $ 7,361 $ 67,044
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
Immediately following completion of this offering, AmericasDoctor.com will
also have (1) 6,000,440 shares of common stock issuable upon the exercise of
outstanding options granted under our 1999 Long-Term Incentive Plan at a
weighted average exercise price of $2.60 per share and (2) 451,720 shares of
common stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.01 per share.
22
<PAGE>
DILUTION
The historical net tangible book value of AmericasDoctor.com as of June 30,
1999 after giving effect to the impact of the 20 for 1 stock split of our common
stock to occur upon the closing of this offering was approximately $6.5 million
or $0.62 per share of common stock. Historical net tangible book value per share
is equal to AmericasDoctor.com's total tangible assets less its total
liabilities, divided by the number of shares of common stock outstanding. After
giving effect to the following events, which occurred after June 30, 1999, our
pro forma net tangible book value would have been $7.3 million or $0.42 per
share of common stock:
- the receipt of all outstanding stock subscriptions receivable,
- the issuance by us on July 16, 1999 of 188,880 shares of our Series B
redeemable convertible preferred stock for an aggregate purchase price of
$625,000, net, and
- the conversion of preferred stock into 4,933,200 shares of common stock
upon the closing of this offering.
After giving effect to the sale of shares of common stock offered in this
prospectus at an assumed initial public offering price of $9.00 per share and
the receipt by AmericasDoctor.com of the estimated net proceeds from the sale of
common stock, after deducting estimated underwriting discounts and commissions
and offering expenses, the pro forma net tangible book value of
AmericasDoctor.com at June 30, 1999 would have been $67.0 million, or $2.69 per
share. This represents an immediate increase in pro forma net tangible book
value of $2.27 per share to existing stockholders and an immediate dilution of
$6.31 per share to new investors.
The following table illustrates our per share dilution to new investors:
<TABLE>
<S> <C> <C>
Historical net tangible par value per share as of June 30,
1999...................................................... $ 0.62
Increase in net tangible book value per share attributable
to the sale of 188,880 shares of Series B redeemable
convertible preferred stock on July 16, 1999 and the
payment of outstanding stock subscriptions receivable..... 0.07
Dilution to current investors attributable to the conversion
of preferred stock........................................ (0.27)
Pro forma net tangible book value per share as of June 30,
1999...................................................... 0.42
Increase per share attributable to new investors............ 2.27
---------
Pro forma net tangible book value per share after this offering........ 2.69
Assumed initial public offering price per share........................ 9.00
---------
Dilution per share to new investors.................................... $ (6.31)
---------
---------
</TABLE>
The following table summarizes, as of June 30, 1999, the number of shares of
common stock purchased from AmericasDoctor.com, the total consideration paid to
AmericasDoctor.com on a pro forma basis, and the average price per share paid by
existing stockholders and by the investors purchasing shares of common stock in
this offering, before deducting estimated underwriting discounts and commissions
and estimated offering expenses, at an assumed initial public offering price of
$9.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 17,667,340 71% $ 20,674,541 24% $ 1.17
New investors...................................... 7,250,000 29% 65,250,000 76% 9.00
------------ --- ------------- --- ------
Total.......................................... 24,917,340 100% $ 85,924,541 100% $ 3.45
------------ --- ------------- --- ------
</TABLE>
Immediately following completion of this offering, AmericasDoctor.com will
also have (1) 6,000,440 shares of common stock issuable upon the exercise of
outstanding options granted under our 1999 Long-Term Incentive Plan at a
weighted average exercise price of $2.60 per share and (2) 451,720 shares of
common stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.01 per share. The exercise of these options and
warrants will result in further dilution of new investors in this offering.
23
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and notes to the financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this prospectus. The statement of operations data for the
period from our inception on August 8, 1997 to December 31, 1997 and the year
ended December 31, 1998 and the balance sheet data as of December 31, 1997 and
1998 are derived from the financial statements of AmericasDoctor.com which have
been audited by Arthur Andersen LLP, independent public accountants, and are
included elsewhere in this prospectus. The statement of operations data for the
six months ended June 30, 1998 and 1999 and the balance sheet data as of June
30, 1999 are derived from unaudited consolidated financial statements, which, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
statements. The results of operations for the six months ended June 30, 1999 are
not necessarily indicative of the results for a full year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." We
have calculated pro forma basic and diluted net loss per share assuming the
conversion of the outstanding preferred stock into common stock on the date of
issuance.
<TABLE>
<CAPTION>
AUGUST 8, 1997 YEAR SIX MONTHS ENDED
(INCEPTION) TO ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------
1997 1998 1998 1999
--------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................................... $ -- $ 62 $ -- $ 546
Operating expenses:
Content, product and production............................ -- 2,473 231 4,949
Product development........................................ -- 974 465 565
Sales and marketing........................................ -- 587 155 964
General and administrative................................. 12 596 283 6,824
Depreciation and amortization.............................. -- 36 -- 117
------ ------------ --------- ----------
Total operating expenses............................... 12 4,666 1,134 13,419
------ ------------ --------- ----------
Operating loss......................................... (12) (4,604) (1,134) (12,873)
Other expense, net......................................... (30) (638) (259) (17)
------ ------------ --------- ----------
Net loss................................................... $ (42) $ (5,242) $ (1,393) $ (12,890)
------ ------------ --------- ----------
------ ------------ --------- ----------
Basic and diluted loss per common share...................... $ (0.02) $ (1.63) $ (1.24) $ (2.51)
------ ------------ --------- ----------
------ ------------ --------- ----------
Weighted-average shares used in computing basic and diluted
loss per common share...................................... 2,475 4,690 2,636 10,152
------ ------------ --------- ----------
------ ------------ --------- ----------
Pro forma basic and diluted loss per common share............ $ (1.12) $ (1.02)
------------ ----------
------------ ----------
Weighted-average shares used in computing pro forma basic and
diluted loss per common share.............................. 4,690 12,580
------------ ----------
------------ ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 67 $ 271 $ 5,288
Working capital.................................................................... 83 286 4,705
Total assets....................................................................... 141 1,843 8,557
Long-term obligations.............................................................. -- 6 26
Stockholders' equity (deficit)..................................................... 91 (1,803) (13,831)
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE
RELATED NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE CAUTIONARY STATEMENTS SET FORTH IN THIS SECTION, IN "RISK
FACTORS," "GOVERNMENT REGULATION AND OTHER LEGAL CONSIDERATIONS" AND ELSEWHERE
IN THIS PROSPECTUS IDENTIFY IMPORTANT FACTORS RELATING TO THESE TYPES OF
FORWARD-LOOKING STATEMENTS, INCLUDING RISKS AND UNCERTAINTIES THAT COULD CAUSE
OUR ACTUAL RESULTS OF OPERATIONS TO DIFFER FROM THOSE EXPRESSED OR IMPLIED IN
THESE TYPES OF FORWARD-LOOKING STATEMENTS.
OVERVIEW
We operate an interactive Internet healthcare information site for
consumers. We offer consumers free, real-time interaction with doctors and other
healthcare professionals and easy access to relevant and reliable healthcare
information. AmericasDoctor.com was founded by Scott M. Rifkin, M.D. in August
1997 under the name Ask-A-Doctor, Inc. Our site features our free 24-hour doctor
chat service that enables consumers to have live on-line, one-on-one chats with
doctors and other healthcare professionals and a growing library of health and
medical information for consumers. Our site includes community Web pages focused
on the interests and needs of people sharing specific health conditions. Our
objective is to establish AmericasDoctor.com as a premier Internet healthcare
information destination that consumers trust for accurate, real-time answers to
health questions and prefer for healthcare content, communities and services.
We initiated our service in September 1998, initially accessible only by AOL
subscribers. We introduced our service on the Internet in February 1999 at our
domain address, WWW.AMERICASDOCTOR.COM. Since the launch of our service we have
focused on broadening its functionality, incorporating additional interactive
tools and features and increasing awareness of the AmericasDoctor.com brand.
Our business strategy is to derive revenue from hospital sponsors, sales of
health-related products on our site, including access fees charged to our
e-commerce partners, sales of advertising, commercial sponsorship and fees for
recruiting volunteers for clinical studies. We began recognizing revenue in
November 1998, and through the end of 1998 our revenues were derived exclusively
from hospital sponsorships and commercial sponsorships. We commenced sales of
health-related products on our site in May 1999, initially focusing on our
strategic relationship with Smith & Nephew.
We generate hospital sponsorship revenue from the sale of promotional
opportunities that go beyond banner advertising. We enter into sponsorship
arrangements that typically provide for a term of one year and make the hospital
the exclusive sponsor of our Internet services within a market defined by zip
code. We also provide the sponsors with opportunities for on-line program
sponsorships featuring each sponsor's personnel, integrated Web pages on our
site and links to the hospital's Web site. Revenues from hospital sponsorships
are recognized during the period of the sponsorship, which generally commences
when the hospital sponsor goes on-line. Sponsorship fees vary depending on the
nature of the promotional activities involved, the size of the sponsor's market
and the extent of regional exclusivity. As of September 1, 1999, we had 49
contracts with hospital sponsors, 39 of which currently appear on-line on our
site. Our 49 contracts grant exclusive sponsorship for geographic areas
representing approximately 33% of the United States population. The fees for the
49 contracts vary widely, and these contracts would provide for aggregate fees
accruing at the rate of approximately $283,000 per month when all hospitals
covered by these contracts are on-line. As of September 1, 1999, our hospital
contracts had a weighted average remaining life of between seven and eight
months. Our hospital sponsorship agreements generally provide for monthly
payments, but may permit upfront payments with a discount.
25
<PAGE>
We intend to generate e-commerce revenues through alliances with suppliers
and retailers of health-related products. We do not intend to maintain any
significant inventories of the goods we may offer and we generally intend to
enter into arrangements where our e-commerce suppliers will directly ship
products purchased through our site. We may receive revenue from direct sales of
products we buy for resale, access fees to our site paid by product suppliers,
fees based on percentages of sales made through our site, other than sales of
products, the cost of which is reimbursable by Medicare/Medicaid or similar
federal or state programs, and fixed fees for contacts or transactions made by
an e-commerce partner through our site. We will recognize revenue from sales as
made, access fees generally over the term of the related contract and
transaction fees payable by our e-commerce partners upon notification from the
e-commerce partner of sales attributable to users of our site. We have had
minimal revenue to date from e-commerce other than limited access fees paid in
connection with our launch activities as a part of our contract with Smith &
Nephew.
We may generate advertising revenues primarily through the sale of banner
advertisements and commercial sponsorship. Although we expect to negotiate each
of our advertising arrangements, we currently intend to enter into advertising
contracts under which we may guarantee a minimum number of user "impressions,"
which are the number of times that an advertisement is displayed on the screen
of our users, to be delivered over a specified period for a fixed fee.
Advertising rates, if measured on a cost per thousand impressions basis, would
be dependent on whether the impressions are for general rotation throughout our
site or targeted at specific audiences or users on our site. We have had limited
revenues from commercial sponsorship of educational programs and have not had
any advertising revenue to date. We do not currently have any contracts that
provide us with revenue from advertising or commercial sponsorships.
We may generate contract research services revenue primarily through fees
for assisting in the recruitment of volunteer participants for clinical trials
through our site. These revenues may consist of annual fees paid by
organizations to recruit on our site and fees based on the number of volunteers
recruited from our site who meet the general criteria for a trial and who are
accepted into a study. We currently intend to enter into contracts with a
limited number of healthcare companies seeking volunteers for clinical trials,
including pharmaceutical companies, contract research organizations that offer
comprehensive clinical research services and site management organizations that
offer some similar services, including data collection, but do not perform
research. We have not had any revenue from clinical trial recruitment to date
and do not currently have any contractual arrangements that provide us with
revenue for clinical trial recruitment.
We incurred net losses of approximately $42,000 for the period from August
8, 1997 (inception) through December 31, 1997, approximately $5.2 million for
the year ended December 31, 1998 and approximately $12.9 million for the
six-month period ended June 30, 1999. At June 30, 1999, we had an accumulated
deficit of $18.2 million. The net losses and accumulated deficit resulted
primarily from the costs associated with the start-up of our business,
developing and operating our site, obtaining healthcare information, attracting
users to our site and establishing the AmericasDoctor.com brand. Since we plan
to invest heavily in marketing, advertising, site access, content development,
hiring additional employees and continuing to develop our site and operating we
expect to incur significant net losses for the foreseeable future.
The costs of operating our free 24-hour doctor chat service, and, in
particular, the costs of providing doctors, are significant. Our agreement with
Medical Advisory Systems provides that we reimburse Medical Advisory Systems for
all costs of operating the service in addition to the salary of healthcare
professionals in respect of which we make payments of cost plus 20%. We
anticipate the need to add call centers and increase the number of doctors
available on our chat service to accommodate increases in the number of visitors
seeking to use our chat service. We expect this expansion to elevate our cost
structure significantly; however, due to the cost of adding doctors and call
26
<PAGE>
centers, we do not intend to increase the number of doctors proportionately to
the anticipated increase in the number of users to our site.
The Internet markets, and, in particular, the healthcare sector of the
Internet market, is in an early stage of development, rapidly evolving and
characterized by an increasing number of market entrants who are introducing
competing products and services. Demand and market acceptance for recently
introduced products and services often are subject to a high level of
uncertainty and risk. We cannot predict with any certainty that demand for our
content, communities and services will emerge, grow or be sustainable.
We have a very limited operating history with which to evaluate our business
and prospects. Our business strategy is new, evolving and unproven. Due to the
rapidly changing nature of the Internet we are continuously modifying our
business strategy and expect to continue to modify our strategy in the future.
In addition, our prospects must be considered in light of the risks,
difficulties, uncertainties and expenses often encountered by companies with
limited operating histories, particularly Internet companies, which makes
forecasting future results very difficult. Our ability to earn revenues may be
limited by the application of healthcare regulations and laws to our business,
as well as the application of existing and future laws to the Internet,
including e-commerce activities. The requirement that we comply with any
existing or new legislation or regulation may decrease the demand for our
services, increase our cost of doing business or otherwise have a material
adverse effect on our business, financial condition and results of operations.
Although we have experienced some revenue in recent periods, we may never
achieve significant revenues or profitability, or if we achieve significant
revenues they may not be sustained in future periods.
Because of these and other factors, we believe quarterly comparisons of our
results of operations are not good indicators of our future performance. If our
operating results fall below the expectations of securities analysts and
investors in some future periods, our stock price may fall significantly.
RESULTS OF OPERATIONS
For purposes of the discussion set forth below, the period from our
inception on August 8, 1997, through December 31, 1997 is referred to as 1997
and the year ended December 31, 1998 is referred to as 1998.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 TO THE SIX MONTHS ENDED
JUNE 30, 1998.
REVENUE. Revenue for the six months ended June 30, 1999 was $546,000 and
consisted of sponsorship fees from hospitals, commercial sponsorships of
education programs, site development and access fees charged to our e-commerce
partners and product sales. No revenue was recognized for the same period in
1998. Hospital sponsorship revenue accounted for $455,000 or 83% of our revenues
for the six months ended June 30, 1999.
E-commerce revenues for the six months ended June 30, 1999 were $71,000 or
13% of our revenues for the six months ended June 30, 1999 and were primarily
comprised of site development fees and access fees. Our e-commerce medical mall
opened on May 26, 1999. Revenues from commercial sponsorships were $20,000 or 4%
of our revenues for the six months ended June 30, 1999.
CONTENT, PRODUCT AND PRODUCTION EXPENSE. Content, product and production
expense increased to $4.9 million for the six months ended June 30, 1999
compared to $231,000 for the same period in 1998. Content, product and
production expense in the 1999 period consists primarily of physician salaries
of $1.6 million, payments to Premier Research Worldwide, Ltd. for consulting
services in connection with our clinical trials recruitment business of $1.2
million, carriage fees of $692,000, salaries of our operations, content,
communities and e-commerce personnel of $587,000 and management fees paid to
Medical Advisory Systems of $225,000. Content, product and production expense in
the 1998 period consisted primarily of carriage fees. We believe that our level
of expenditures in this area will continue
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to increase as we further develop the content available on our site, increase
the capacity of our call center in connection with our planned advertising and
promotion campaign and further develop our e-commerce strategies.
PRODUCT DEVELOPMENT EXPENSE. Product development expense consists primarily
of costs incurred to maintain our Web site and further refine our chat tools, as
well as costs incurred in connection with the development of software and
systems to support our e-commerce strategies. Product development expense
increased to $565,000 for the six months ended June 30, 1999 compared to
$465,000 for the same period in 1998. Our product development expenses during
1999 consisted of costs to develop our on-line medical mall and upgrade our chat
tool. Most of these expenses were comprised of payments to third-party software
developers. During 1998, product development expense consisted of costs to
develop the web site and the initial version of the chat tool. We expect that
additional significant investments in technology will be required for us to
remain competitive and to complement the expansion of our business into
additional business areas, including the development of new e-commerce
opportunities. We expect that product development expense will continue to
increase for the foreseeable future.
SALES AND MARKETING EXPENSE. Sales and marketing expense increased to
$964,000 for the six months ended June 30, 1999 compared to $155,000 for the
same period in 1998. Sales and marketing expense for 1999 consisted primarily of
salaries of our sales and marketing personnel, advertising costs, public
relations costs and travel expenses. The increase is primarily attributable to
the hiring of additional sales personnel resulting in additional salary costs of
approximately $303,000, additional advertising costs of approximately $245,000,
including the addition of the Lycos contract and additional public relations
costs of approximately $147,000. Sales and marketing expense during the six
months ended June 30, 1998 consisted primarily of costs incurred with sales
consultants and advertising costs. We expect that our sales and marketing
expense will continue to increase significantly as we begin to implement an
expanded marketing campaign including the use of traditional media as well as
on-line advertising in order to increase the traffic to our site. We expect
these expenses to continue to increase for the forseeable future.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses
increased to $6.8 million for the six months ended June 30, 1999 compared to
$283,000 for the same period in 1998. General and administrative expense for the
1999 period consisted primarily of a charge of approximately $5.6 million for
stock-based compensation as a result of the vesting of options granted to our
CEO, which occurred with the sale of the Series B redeemable convertible
preferred stock. Other significant components of general and administrative
expense for the 1999 period include salaries, professional fees and recruiting
fees. The increase in general and administrative costs was attributable to the
stock-based compensation charge related to the vesting of the CEO's options of
$5.6 million, the hiring of additional executive and administrative personnel
resulting in additional salary costs of $200,000 and increases in professional
fees of $221,000 and recruiting fees of $215,000 as the size of our business has
grown. General and administrative expense for the 1998 period consisted
primarily of executive salaries, rent and travel costs. We expect to incur
additional general and administrative expenses as we hire additional personnel
and incur incremental costs related to the growth of our business and compliance
with public company obligations. Therefore, we expect general and administrative
expenses to continue to increase in absolute dollar terms.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $117,000
for the six months ended June 30, 1999. There was less than $1,000 of
depreciation and amortization expense recorded for the same period in 1998.
OTHER EXPENSE. Other expense consists primarily of interest on convertible
debt, notes payable and capital leases. Other expense decreased to $17,000 for
the six months ended June 30, 1999 compared to $259,000 for the same period in
the prior year. This decrease was primarily due to the amortization of
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interest recorded in connection with the beneficial conversion provision on our
promissory notes which were converted in July 1998.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE PERIOD FROM AUGUST 8,
1997 (INCEPTION) THROUGH DECEMBER 31, 1997.
REVENUE. Revenue for 1998 was comprised exclusively of sponsorship fees
paid by hospitals and educational program sponsors. We initiated our site on AOL
in September 1998. We recorded revenue of $62,000 for 1998. No revenue was
recognized in 1997. Hospital sponsorship revenue accounted for $22,000 or 35% of
our revenues for 1998. Commercial sponsorship revenue was $40,000, or 65% of our
revenue for 1998.
CONTENT, PRODUCT AND PRODUCTION EXPENSE. Content, product and production
expense was $2.5 million in 1998. Content, product and production expense
consisted primarily of AOL carriage fees of $1.1 million, reimbursement for
physician salaries of $738,000 and other call center costs of $311,000. There
was no content, product and production expense in 1997.
PRODUCT DEVELOPMENT EXPENSE. Product development expense consists of costs
incurred to support the development of our web site and related tools. Product
development expense was $974,000 in 1998. Product development costs were paid to
third-party developers and were for the initial design of our web site and the
initial version of our chat tool. No product development expense was incurred in
1997 as we had not yet begun to develop our site.
SALES AND MARKETING EXPENSE. Sales and marketing expense consists primarily
of salaries and related costs, commissions, advertising, promotion and other
related costs. We incurred $587,000 of sales and marketing expense in 1998 as we
commenced our sales activities and began to build the infrastructure for our
marketing campaign and commencement of sales activities. Sales and marketing
expense is comprised primarily of marketing and promotion costs of $167,000,
public relations fees of $112,000, salaries and fees paid to a contracted sales
force of $118,000. There was no sales and marketing expense in 1997.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of salaries and other costs for our general corporate
functions including executive and finance, facilities costs, professional fees
and travel costs. General and administrative expense increased to $596,000 in
1998 from $12,000 in 1997 as a result of the initial growth and build-up of our
operations. General and administrative expenses consists primarily of salaries
of $193,000, professional fees of $74,000, office expenses of $72,000 and
consulting fees of $70,000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $36,000 in
1998. There was no depreciation and amortization recorded for the same period in
1997. Depreciation and amortization increased due to the purchase of property
and equipment as we have expanded our operations.
OTHER EXPENSE. Other expense consists primarily of interest expense on
convertible debt, notes payable and capital leases. Other expense was $638,000
in 1998 compared to $30,000 in 1997. Other expense increased as a result of
increased borrowings in 1998 and the amortization of interest recorded in
connection with the beneficial conversion feature on the Company's promissory
notes which were converted in July 1998.
INCOME TAXES. At December 31, 1998, we had total net operating loss
carryforwards for federal and state income tax purposes of $4.6 million which
expire in 2012 and 2013. For financial reporting purposes, we have recorded a
valuation allowance to reduce our net deferred tax assets to zero as a result of
uncertainties related to our ability to generate enough taxable income prior to
expiration of the carryforwards in order to realize the deferred tax assets that
we have recorded.
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SEASONALITY
We believe that advertising sales in traditional media, including television
and radio, generally are lower in the first and third calendar quarters of each
year. If similar seasonal and cyclical patterns emerge in Internet advertising,
our revenues and operating results also may vary based upon these patterns.
Given the early stage of development of the Internet and our company, however,
we cannot predict to what extent, if at all, our operations will prove to be
seasonal. In addition, although we cannot predict the effects of seasonality
with respect to our e-commerce sales, we expect that similar trends may develop
in our e-commerce business to those experienced in the healthcare product and
medical device industries of our e-commerce partners. The Company is not
currently aware of any trends affecting the industries of our e-commerce
partners.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the sale of equity and
debt securities as we have generated negative cash flow from operations since
our inception. To date, we have received approximately $18.4 million in net
proceeds from the sale of common stock, convertible preferred stock and
unsecured convertible promissory notes. At June 30, 1999, we had approximately
$5.3 million in cash and cash equivalents and a $165,000 receivable from the
sale of common stock. Our principal commitments consist of obligations under our
capital and operating leases as well as our contracts with Premier Research, AOL
and Lycos.
From November 1997 to July 1998 we sold convertible unsecured notes for an
aggregate amount of $420,000. The notes were converted to common stock in
October 1998. In May 1998 we borrowed $900,000, $400,000 of which was repaid in
November 1998 and $500,000 of which was refinanced in November 1998. This loan
was repaid in full in February 1999.
From June 1998 through October 1998, we sold a total of 1,997,000 shares of
common stock for an aggregate amount of $1,997,000. In addition, in July 1998,
we sold 1,000,000 shares of common stock for services valued at $360,000 and
$640,000 in cash payable monthly over a 12 month period which commenced in
October 1998 (of which $160,000 as of June 30, 1999 is unpaid). In October 1998,
in connection with the sales described in this paragraph, we issued an
additional 829,180 shares to the purchasers for no additional consideration for
the failure to achieve financial milestones.
From September 1998 through October 1998, we sold 500,000 shares of common
stock for an aggregate amount of $500,000. From October 1998 through January
1999, we sold 2,000,000 shares of common stock for an aggregate amount of
$2,500,000, $25,000 of which was paid in the form of a promissory note which was
fully paid in March 1999. In addition, in October 1998 we sold 800,000 shares of
common stock for an aggregate amount of $300,000 paid upon subscription and the
balance paid over five months, at $140,000 per month.
In February 1999 we sold 2,666,660 shares of Series A convertible preferred
stock for an aggregate amount of $3,999,990. In addition, in February 1999, we
sold 555,560 shares of common stock for an aggregate amount of $1,000,008.
In June 1999 we sold 2,077,660 shares of Series B redeemable convertible
preferred stock for an aggregate amount of $6,874,977. In June 1999 we sold
199,160 shares of common stock for an aggregate amount of $659,020. In July 1999
we sold 188,880 shares of Series B redeemable convertible preferred stock for an
aggregate amount of $625,000.
Net cash used in operating activities was $6.8 million for the six months
ended June 30, 1999, $5.0 million in 1998 and $56,000 in 1997. The principal use
of cash for all periods was to fund our losses from operations, and additions to
prepaid expenses, particularly carriage fees. These uses are partially offset by
non-cash stock-based compensation charge in 1999, increases in accounts payable
and accrued expenses and non-cash interest charges.
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Net cash used in investing was $759,000 for the six months ended June 30,
1999, $472,000 in 1998 and $0 in 1997. Cash used in investing activities has
consisted of capital expenditures for computers, office furniture and equipment.
Net cash provided by financing activities was $12.6 million for the six
months ended June 30, 1999, $5.7 million in 1998 and $123,000 in 1997. As
described above, cash provided by financing activities has consisted of sales of
our common stock and preferred stock and proceeds from notes payable and
convertible debt, net of principal repayments of capital lease obligations and
notes payable.
Our contract with Premier Research requires us to make quarterly cash
payments of $575,000 through December 2000. As of August 31, 1999, approximately
$3.7 million remains outstanding under our agreement with Premier Research. Our
contract with AOL requires us to make payments of $75,000 per month through June
2000. The amount of payments for the third year of the AOL agreement have not
been fixed at this time.
Warrants to purchase aproximately 755,000 shares of Series B redeemable
convertible preferred stock for $3.31 per share may become exercisable on
October 16, 1999. If exercised, these warrants would result in proceeds of
approximately $2.5 million.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future and that our
operating expenses will be a material use of our cash resources. We believe that
our existing working capital and cash flows from operations combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus.
However, we may need to raise additional funds, for the following purposes:
- fund additional site access fees;
- fund obligations to strategic partners;
- fund more rapid expansion;
- fund additional marketing expenditures;
- fund greater development of editorial content, features or services;
- enhance our operating infrastructure;
- respond to competitive pressures; or
- acquire complementary products, services or technologies.
We may also elect to pursue one or more strategic investments or acquisition
transactions. As of the date of this prospectus, we have no binding agreement to
enter into any material strategic investments or acquisition transaction. If we
enter into a strategic investment or acquisition we may issue additional equity
or debt securities in exchange for services or other non-cash consideration, or
pay cash or a combination of both.
If we raise additional funds through the issuance of equity securities or
issue additional equity securities in connection with acquisitions or alliances,
our existing shareholders may experience significant dilution. Furthermore,
additional financing may not be available when needed or, if available,
financing may not be on terms favorable to us or our stockholders. If financing
is not available when required or is not available on acceptable terms, we may
be unable to develop or enhance our site or our products or services. In
addition, we may be unable to take advantage of business opportunities or
respond to competitive pressures. Any of these events could have a material
adverse effect on our business, financial condition and results of operations.
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YEAR 2000 COMPLIANCE
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches and are commonly referred to as the "Year 2000 Problem."
ASSESSMENT. The Year 2000 Problem could affect computers, software and
other equipment that we use. Accordingly, we are reviewing our internal computer
programs and systems to determine if they will be Year 2000 compliant. We
believe that our computer systems will be Year 2000 compliant in a timely
manner. However, while we do not expect the cost of these efforts to be material
to our financial position or any year's operating results, there can be no
assurance to this effect. We believe that we have identified substantially all
of the major computers, software applications and related equipment used in
connection with our internal operations that must be modified, upgraded or
replaced to minimize the possibility of a material disruption to our business.
We have commenced the process of modifying, upgrading and replacing systems that
have been identified as potentially being adversely affected and expect to
complete this process before the end of the third quarter of 1999. We do not
expect the cost related to these efforts to be material to our business,
financial condition or results of operations.
SERVICES PROVIDED TO CONSUMERS. We depend on third party suppliers for most
of the services provided through AmericasDoctor.com. If these parties are
affected by the Year 2000 Problem, our ability to provide services to our
consumers may be materially adversely affected. We have been gathering
information from and have initiated communications with our service and content
providers to identify and, to the extent possible, resolve issues involving the
Year 2000 Problems. However, we have limited or no control over the actions of
our service and content providers. Thus, while we expect that we will be able to
resolve any significant Year 2000 Problems with our systems, we cannot guarantee
that our service and content providers will resolve any or all Year 2000
Problems with their systems before the occurrence of a material disruption to
our business. Any failure by third parties to resolve Year 2000 Problems with
their systems in a timely manner could have a material adverse effect on our
business, financial condition or results of operations.
Jaspin Interactive, from whom we license proprietary software used to
operate our chat service, has represented to us that the proprietary software
they provide us is Year 2000 compliant. Smith & Nephew, one of our e-commerce
partners, and Qwest Internet, to whom we are transferring the hosting and
maintenance of our servers, are currently taking active steps to address Year
2000 compliance of their systems and to avoid any interruption of their regular
business operations. We have contacted AOL to seek representations that their
site is Year 2000 compliant. Currently, AOL is in the process of testing all of
its applications and systems for Year 2000 compliance.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of our office and facilities equipment,
including fax machines, photocopiers, telephone switches, security systems and
other common devices may be affected by the Year 2000 Problems. We have
completed our review of our non-information technology systems and we believe
that our non-information technology systems are Year 2000 compliant.
MOST LIKELY CONSEQUENCES TO OUR BUSINESS OF YEAR 2000 PROBLEMS. Although we
expect to identify and resolve all Year 2000 Problems that could materially
adversely affect our business, financial condition or results of operations, we
cannot anticipate all Year 2000 Problems that may affect our company. In
addition, we cannot accurately predict the nature, severity, duration or
financial consequences of Year 2000 Problems that may occur. As a result, we
expect that we could possibly suffer the following consequences:
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- operational distortions to our service and content providers and our
consumers that may divert our time, attention and financial resources away
from our ordinary business activities, and
- serious system failures that may require significant efforts by us, our
service and informational content providers or our consumers to avoid a
material disruption of our business.
CONTINGENCY PLANS. We currently are developing contingency plans to be
implemented as part of our efforts to identify and correct Year 2000 Problems
affecting our internal systems. We expect to complete our contingency plans by
the end of the third quarter of 1999. Depending on the systems affected, these
plans could include:
- accelerated replacement of affected equipment or software;
- short to medium-term use of backup equipment and software;
- increased work hours for our personnel or use of contract personnel to
correct on an accelerated schedule any Year 2000 Problems which arise or
to provide manual workarounds for information systems; and
- other similar approaches.
If we are required to implement any of these contingency plans, these plans
could have a material adverse effect on our business, financial condition or
results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131 "Disclosure About Segments
of an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires that public companies
report specific information about operating segments in their annual financial
statements and in subsequent condensed financial statements of interim periods
issued to shareholders. This statement also requires that public companies
report specific information about their products and services, the geographic
areas in which they operate and their major customers. Reportable operating
segments are determined in accordance with the management approach, as defined
in SFAS No. 131. The management approach is based on the way that the chief
operating decision-maker organizes the segments within an enterprise for making
operating decisions and assessing performance. We have adopted SFAS No. 131
effective January 1, 1998. We only had one material reportable segment for the
year ended December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 requires that entities
capitalize applicable costs related to internal use software once applicable
criteria have been met. We are required to adopt SOP 98-1 effective January 1,
1999. Adoption of SOP 98-1 did not have a material impact on our capitalization
policy, cash flows, financial condition or results of operations.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities." SOP
98-5, which is effective for fiscal years beginning after December 15, 1998,
provides guidance on the financial reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred. As we have historically expensed these costs, the adoption
of SOP 98-5 is not expected to have a significant impact on our cash flows,
financial conditions or results of operations.
The FASB is currently addressing significant current practices relating to
accounting for stock-based compensation awards under APB 25. The FASB is also
addressing the accounting for the repricing of stock options. Tentatively, the
FASB has decided that awards to non-employee directors would be charged to
operations based upon the fair value of the award.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING THOSE ARISING FROM THE FACT THAT OUR BUSINESS IS NEW
AND EVOLVING AND OUR BUSINESS STRATEGY IS UNPROVEN. OUR ACTUAL RESULTS OF
OPERATIONS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS OF OPERATIONS DISCUSSED IN
THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
OUR BUSINESS
AmericasDoctor.com operates an interactive Internet healthcare information
site for consumers. We offer consumers free, real-time interaction with
healthcare professionals and access to relevant and reliable healthcare
information. Our site features our free 24-hour doctor chat service that enables
consumers to have live on-line, one-on-one chats with doctors and other
healthcare professionals, interactive lectures and a growing library of
information on ailments, illnesses, nutrition, pharmacology and other topics, as
well as health and medical publications and news. We have designed our doctor
chat service to enable our users, through the assistance, expertise and insight
of doctors and other healthcare professionals, to successfully find relevant and
reliable healthcare information on-line in response to their health questions.
We are also expanding our site to include community Web pages focused on the
needs of people sharing specific health conditions and interests. We offer
hospitals the opportunity to be exclusive sponsors of our site within a market
defined by zip code. We also provide sponsors opportunities to feature their
healthcare professionals on our site. As of September 1, 1999 we had 49
contracts with hospital sponsors, 40 of which currently appear on-line. Our goal
is to establish AmericasDoctor.com as a premier Internet site that consumers
trust for accurate, real-time answers to their health questions and rely on as a
preferred site for healthcare content, communities and services.
We initiated our service in September 1998, initially accessible only to AOL
subscribers. In February 1999, we introduced our service on the Internet at our
domain address, WWW.AMERICASDOCTOR.COM, and for the quarter ended June 30, 1999
we estimate that we had approximately 1.4 million user sessions and
approximately 13.3 million page views. In general, a user session is a period of
on-line activity by a user separated by a period of at least 30 minutes of
inactivity on our site by that user. We introduced our first free health
condition-specific community on-line in April 1999. We plan for each of our
free, health condition-specific communities to offer the full range of our
healthcare content, products and services, including our free 24-hour doctor
chat service. Our communities are intended to foster an interactive experience
for people who share similar health conditions and interests.
We have established several key strategic relationships, and we intend to
pursue additional strategic relationships in the future. We believe our
relationship with AOL provides significant growth opportunities for our site. In
particular, we are one of four anchor tenants on the AOL subscriber service's
Health Channel main page, an on-line position that provides AOL's subscribers
easy access to our content, communities and services. In addition to our
relationships with AOL, we have entered into agreements with Lycos Corporation,
a leading Internet portal, to increase traffic to our site; CenterWatch, Inc., a
publishing company focusing on the clinical trials industry, to help develop and
market our ability to recruit volunteers for clinical studies and Smith &
Nephew, a distributor and manufacturer of home health products and devices to
develop e-commerce opportunities.
We are developing our site to generate revenue opportunities from multiple
sources, including hospital sponsorship of health-related products through our
site, sales of advertising and commercial sponsorships and fees for assisting in
the recruitment of volunteers for clinical research studies.
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OUR INDUSTRY
The Internet is one of the fastest growing media in history and has rapidly
become a significant global medium for information, communications, news and
commerce. The Internet enables users to quickly retrieve and transfer
information, share their experiences in on-line communities and purchase a
variety of products and services. The Internet is distinct from other media
because it permits the dissemination of content without geographic limits or
print costs. The Internet also permits the direct transfer of information to
specific demographic groups on both a national and local basis.
THE HEALTHCARE INDUSTRY
According to the Health Insurance Association of America, the healthcare
industry is the largest segment of the U.S. economy, representing approximately
$1 trillion or 14% of U.S. gross domestic product, annually. We believe changes
in the healthcare industry, including the development of managed care and the
emergence of new medical and pharmaceutical treatments, are placing increasing
pressure on consumers to inform themselves of their healthcare options. As
consumers become more involved in managing their personal health, and that of
their relatives or other people close to them, they are searching for clear
answers to their health questions and reliable information about medical
conditions, treatments and outcomes. According to Cyber Dialogue, the number of
adults searching on-line for healthcare information is projected to grow from
approximately 17 million in 1998 to about 30 million by the year 2000.
In addition, the healthcare industry is experiencing consolidation and
increased competition, pressuring hospitals and other healthcare organizations
to find new ways to attract patients and deliver services more efficiently. We
believe successful hospitals and other healthcare organizations must facilitate
consumer access to accurate information about their organizations and
disseminate reliable healthcare information to consumers. The healthcare
industry also continues to research and market new drugs and treatments
requiring volunteers for clinical trials. However, traditional methods for
recruiting volunteers are both time-consuming and costly. We believe on-line
methods of recruitment may be significantly less time-consuming and costly than
traditional methods.
THE EMERGING INTERNET HEALTHCARE MARKET
We believe participants in the healthcare industry can benefit from the
Internet's open, low-cost, flexible technology for exchanging information and
executing commercial transactions. The Internet has the potential to help
healthcare consumers quickly access relevant healthcare information, identify
and communicate with hospitals, doctors, other patients and healthcare
organizations and make better informed evaluations of treatment alternatives and
healthcare products. We believe the Internet is empowering consumers to educate
themselves on health conditions and treatments, share experiences with other
patients, and better manage their health. Healthcare information is already one
of the fastest growing areas of interest on the Internet with an abundance of
Web sites providing healthcare information. Traditional sources of healthcare
information, as well as many new on-line sources, are diffuse, unclear,
voluminous and difficult for many consumers to evaluate. Although we believe
useful healthcare information currently is available through traditional media
and on the Internet, a significant portion of the healthcare information on the
Internet is unorganized and difficult for consumers to find, access and
evaluate. We believe a successful Internet solution must clearly present
healthcare information to consumers through trusted and organized channels.
INTERNET HEALTHCARE MARKET OPPORTUNITIES
The Internet is distinct from other media in that it can offer instant
access to interactive content targeted to specific demographic groups on both a
national and local basis. We believe this enables hospitals and other healthcare
organizations to promote their services directly to consumers in better
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defined markets and geographic areas. In addition to providing healthcare
information, we believe the Internet can be used effectively to attract and
communicate with large audiences of people who may have an interest in clinical
research issues and in volunteering for clinical trials. For example, we believe
Web sites and on-line communities may enable pharmaceutical companies to
disseminate information about new drugs and treatments to consumers with
specific health conditions, possibly leading to improved consumer understanding
and compliance with drug treatment protocols and better medical outcomes. The
Internet also may enable advertisers and e-commerce suppliers to target consumer
audiences sharing specific interests and preferences. In particular, we believe
the Internet's interactive nature makes the Internet an attractive vehicle for
direct-to-consumer advertising of health-related products and services. The
Internet can also provide opportunities to capture both business-to-consumer and
business-to-business on-line commerce and can provide consumers with greater
selection and lower prices than conventional retail channels. We believe the
Internet will capture an increasing portion of sales in the healthcare market as
companies begin to capitalize on e-commerce for the sale of their products and
services.
THE AMERICASDOCTOR.COM SOLUTION
We believe healthcare consumers seek accurate, real-time answers to their
health questions and clearly presented, objective and up-to-date healthcare
information. We believe a significant opportunity exists for AmericasDoctor.com
to offer the expertise and insight of doctors and other healthcare professionals
on a 24-hour, real-time basis to help users quickly find and understand reliable
healthcare information. We also believe we have an opportunity to create an
engaging and interactive destination where consumers will find access to
hospitals, educational programming, current healthcare news, on-line communities
focused on specific health conditions and opportunities to purchase
health-related products on-line.
THE AMERICASDOCTOR.COM STRATEGY
Our objective is to become a premier interactive Internet healthcare
information destination that consumers trust for accurate, real-time answers to
their health questions and rely on as a preferred on-line destination for
healthcare information and health-related products and services. We believe our
healthcare content, communities and services, featuring our free 24-hour doctor
chat service, will enable us to attract loyal consumer audiences that are highly
attractive to hospitals and other healthcare providers, pharmaceutical companies
and other healthcare suppliers, advertisers and research organizations.
Key elements of our business strategy include:
- ESTABLISH AMERICASDOCTOR.COM AS A LEADING BRAND.
We intend to establish AmericasDoctor.com as a leading and trusted brand for
on-line healthcare information, products and services. We must build brand
recognition to attract, retain and increase the number of our users, partners
and sponsors. We intend to market AmericasDoctor.com through promotional
campaigns in traditional and on-line media and the unique presentation of our
health content, communities and services. We intend to pursue distribution
partnerships with Internet and media companies to create additional exposure for
the AmericasDoctor.com brand.
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- DIFFERENTIATE OUR USER EXPERIENCE WITH OUR FREE 24-HOUR DOCTOR CHAT
SERVICE AND OTHER INTERACTIVE FEATURES.
We intend to differentiate our health content, communities and services by
featuring our free 24-hour doctor chat service and designing additional
easy-to-use interactive features. We intend to promote our free 24-hour doctor
chat service as a premier Internet tool that offers consumers the expertise and
insight of doctors to help them navigate and understand healthcare information
to get accurate, real-time answers to their health questions.
- PURSUE AND EXPAND RELATIONSHIPS WITH LOCAL HOSPITAL SPONSORS.
We intend to pursue and work with our hospital sponsors in their local
communities to establish a shared brand image that features our on-line health
content, communities and services, including our free 24-hour doctor chat
service, and the doctors of our hospital sponsors. We offer hospital sponsors
the opportunity to be exclusive sponsors of our Internet services within a
market defined by zip code. We also provide hospital sponsors with opportunities
to feature their doctors on our site in our on-line lectures.
- EXPAND OUR STRATEGIC DISTRIBUTION RELATIONSHIPS.
We will pursue relationships with companies, including Internet companies,
that have the ability, among other things, to promote the AmericasDoctor.com
brand, drive additional consumers to our site and enhance the quality of our
healthcare content, communities and services. Our relationship with AOL provides
AOL's subscribers easy access to our content, communities and services. In
addition, we have entered into an agreement with Lycos, a leading Internet
portal, to make AmericasDoctor.com a preferred source of information associated
with approximately 400 keywords, phrases and advertising.
- PURSUE AND EXPAND OUR STRATEGIC RELATIONSHIPS WITH TRADITIONAL HEALTHCARE
COMPANIES.
We will continue to pursue strategic relationships with traditional
healthcare suppliers and other healthcare companies to strengthen key areas of
our business. We would like to establish AmericasDoctor.com as an information
and commerce conduit that offers traditional healthcare companies the
opportunity to use the Internet in their businesses. For example, in addition to
our hospital sponsorship agreements, we have entered into an agreement with
Smith & Nephew, a distributor and manufacturer of home health products and
devices, to develop our healthcare medical mall e-commerce activities. We also
intend to leverage our on-line communities and strategic relationships to
provide a service to recruit volunteers for clinical trial studies.
- INTEGRATE AND EXPAND OUR HEALTH CONDITION-SPECIFIC COMMUNITIES INTO OUR
SITE.
We plan to develop our on-line communities, dedicated to specific health
conditions, to become destinations combining relevant and reliable information
and community activities with the full range of our healthcare content, products
and services. We are designing our communities to facilitate on-line interaction
among people sharing similar health conditions and interests. Our communities
will offer interactive features, including our free 24-hour doctor chat service,
and community chat rooms. We also plan to provide services within each of our
on-line communities, including opportunities to volunteer for clinical trials in
an on-line medical mall offering a range of healthcare products available from
our e-commerce suppliers. We believe our communities may be an effective means
of attracting and maintaining loyal audiences on our site.
- GENERATE MULTIPLE ON-LINE REVENUE STREAMS.
We are designing our site to generate revenue from multiple sources
including hospital sponsorships, sales of health-related products through our
site, including access fees charged to our e-commerce suppliers, fees for
clinical trial recruitment and sales of advertising.
THE AMERICASDOCTOR.COM SITE
The AmericasDoctor.com main Web page provides access to our free 24-hour
doctor chat service, the full range of our personal health information resources
and our other interactive tools, including
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our interactive expert lectures and our on-line medical mall. Our main Web page
also provides an entry point into our health condition-specific communities. We
are designing our communities to provide consumers with resources and
interactive tools, including moderated support group chats, in each case,
tailored to the relevant community's focus. We believe the original presentation
of our health content, communities and services is essential to establishing our
brand and consumer trust.
FREE 24-HOUR DOCTOR CHAT SERVICE
Our free 24-hour doctor chat service allows our consumers to question
doctors or other healthcare professionals who have a range of experience and
expertise. Our chat service provides real-time, instant-messaging between a
doctor and a single user to answer the user's healthcare questions, explain and
interpret medical information and point the user to relevant on-line resources.
When visitors enter our site, they can begin a private chat with a doctor or
another type of healthcare professional by simply clicking on the "Ask the Doc"
button. Visitors are then prompted to read and agree to the terms of our service
which inform users that on the navigation bar we instruct our doctors not to
prescribe medicine or diagnose medical conditions on our site. In addition,
users are instructed, among other things, not to use our doctor chat service for
emergency medical services.
After accepting the terms of the service, visitors are asked to select a
topic in connection with which they would like information. Current topics
include the following:
- Children's Health
- Women's Health
- Dietary
- Pharmaceutical
- Medical
Doctors conducting chats may refer to comprehensive reference manuals, other
in-depth medical reference materials and on-line services to enhance the
resources available to our users. If a visitor requests an article from our
library, or the doctor engaged in the chat session desires to provide specific
information available through our library, this information will be transmitted
directly to the visitor's screen. Chat sessions are terminated when doctors
conclude the chat session and users close the chat window. At the end of chat
sessions, before users close the chat window, users in zip codes where a
hospital sponsor exists are prompted to indicate whether they would like
additional information on the chat topic. Users are also asked whether they
would like information about the hospital sponsor and whether they would like to
schedule an appointment with a hospital sponsor. Visitors who request hospital
sponsor information are required to provide basic contact information that we
forward to our hospital sponsors so that our sponsors may contact our visitors.
Depending on the number of visitors to our site, visitors may wait in a
queue until a doctor, or healthcare professional in a field selected by the
user, is available. While waiting in the queue our users can minimize the doctor
chat screen and browse other resources on our site. We have hired two employees
to help develop an additional service that would permit users to e-mail a
question to a research staff member who will search our resources under the
supervision of our medical personnel and e-mail a response to the user.
We have created guidelines for healthcare professionals operating our chat
service intended, in part, to help maintain consistent quality in our content
and services. Chat center doctors, and other healthcare professionals, are
trained to answer general health and medical questions, but are instructed not
to practice medicine. Doctors and other healthcare professionals may explain
medical conditions and medications, provide relevant articles on-screen and
direct users to relevant health-related information, among other things, but are
not permitted to diagnose, prescribe, keep medical records or provide continuing
or follow-up care. The text of chat sessions engaged in by our users generally
are not recorded or otherwise stored by AmericasDoctor.com. We may archive
information forwarded to
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our hospital sponsors to assist our hospital sponsors. Our staff may include a
variety of other healthcare professionals, including pharmacists and registered
nutritionists. We require our doctors and other healthcare professionals to have
appropriate credentials and meet current professional standards. Doctors and
other healthcare professionals participating in our chat sessions are recruited,
hired and trained by Medical Advisory Systems, or an affiliate of Medical
Advisory Systems, in accordance with our guidelines through an exclusive
agreement to operate our chat centers. Chat center staff, including healthcare
professionals, are supervised and monitored by Medical Advisory Systems to
ensure compliance with our guidelines.
HEALTH CONDITION-SPECIFIC COMMUNITIES
We established our first on-line health condition-specific communities in
April 1999. Our communities have experienced low user activity to date. We
currently have 21 on-line health condition-specific communities focused on
health conditions listed in the table below:
AMERICASDOCTOR.COM
HEALTH-CONDITION SPECIFIC COMMUNITIES
- ALLERGY
- ARTHRITIS
- ASTHMA
- ADD/ADHD
- BREAST CANCER
- CARDIOVASCULAR
- DEPRESSION
- DIABETES
- DIGESTIVE CONDITIONS
- EATING DISORDERS
- FIBROMYALGIA
- FITNESS
- LYME DISEASE
- MEN'S HEALTH
- MIGRAINE
- MULTIPLE SCLEROSIS
- NUTRITION
- SENIOR HEALTH
- SKIN CONDITIONS
- SLEEP DISORDERS
- WOMEN'S HEALTH
We are considering the introduction of a number of additional on-line
communities in 1999. We are designing our communities to bring together people
sharing similar health conditions and interests. We believe our communities will
enable our visitors to share and gain valuable insight, practical knowledge and
support and better manage their personal health.
Visitors will be able to access each of our communities through our site's
main Web page or independently at the particular address of the relevant
community. Although first time visitors are required to register by providing a
username of their choice, there are no registration fees for using our on-line
communities. The front Web page of each community contains an index of features
available on our site, including our doctor chat service, calendar of events,
hospital contacts and medical mall, each with point and click access. The front
Web page of each community also provides access to an interactive community chat
room, a community message board, a community reading room, which contains
library articles focused on the community health focus, and links to related Web
sites. Our community chat rooms enable our members to participate in group chat
sessions using instant-messaging technology.
From time to time we may offer educational program sponsors the opportunity
to educate our audiences on current health issues by sponsoring programs
intended to highlight new and alternative treatments, risks and side effects of
treatments, and other healthcare issues.
HEALTH AND MEDICAL INFORMATION AND NEWS
We believe our site provides users with easy access to a variety of
healthcare information and news. Our site contains full-text health and medical
news headlines from Screaming Media updated periodically throughout each day. In
addition, our users can search our healthcare information resources which
include a library of approximately 4,500 easy-to-read medical and health-related
articles written on healthcare issues. In addition, we intend to expand our
information resources to include textbook articles, commentaries and other
health-related publications as well as transcripts from
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programs broadcast in our communities. Our users can peruse our community
reading rooms to find information specifically relating to a community's health
condition focus. In addition, our hospital sponsors may provide healthcare
content for our site and, if they operate their own Web sites, allow our users
to link to their Web sites where additional information may be found. We intend
to update our content on a regular basis to ensure that our information is
current and meets our standards of quality.
INTERACTIVE TOOLS AND FEATURES
We are developing interactive tools and features, in addition to our doctor
chat service, to allow our users to take advantage of the healthcare information
resources available on our site. Our interactive tools and features may also
assist us in better understanding and responding to the interests of our users
and provide more accurate feedback to our sponsors and advertisers. Examples of
our interactive tools and features include:
AMERICASDOCTOR.COM MEDICAL MALL. In May 1999, we opened our medical mall
which offers home health products supplied by Smith & Nephew, Tempur-Pedic,
Inc., Kimberly-Clark Corporation and Kendall Confab Retail Group. We intend to
offer a broad range of healthcare products to our consumers through our medical
mall. We intend to make our medical mall accessible to, and highlight relevant
products in, each of our health condition-specific communities to sell
healthcare products focused on the community's needs. We are also considering
implementing a service for our consumers to benefit from free 24-hour on-line
assistance from customer sales representatives with regard to home health
products. In addition, we are considering upgrading our e-commerce technology to
provide additional features and improve the effectiveness of our medical mall.
AMERICASDOCTOR.COM ON-LINE LECTURES. We schedule on-line lectures on our
main Web page that are hosted by healthcare professionals. We promote our
lectures on our main Web page and, where relevant in our communities. Our
on-line lectures may address issues of importance to one or more of our
communities, but are not limited to community topics. We offer our hospital
sponsors the opportunity to have their doctors present lectures to our users.
AMERICASDOCTOR.COM COMMUNITY CHAT. Each of our health condition-specific
communities features an interactive 24-hour community chat room that allows
members of the community to engage in real-time conversations with other
members, typically during scheduled chat group discussions. As of June 1999,
four of our communities had regularly scheduled support group chat discussions
moderated by non-professional chat group leaders selected by us. We are planning
to schedule moderated support group chat sessions on a regular basis in
additional community chat rooms.
THE AMERICASDOCTOR.COM NEWSLETTER. As of June 30, 1999, we had circulated
two electronic newsletters informing our users of developments on our site and
current healthcare events. We are contemplating developing newsletters for
general circulation in each of our communities addressing each community's
health focus and highlighting community events including lectures and support
group chat discussions.
THE AMERICASDOCTOR.COM SEARCH ENGINE. Our site provides an easy-to-use
search engine. This tool allows our users to search and retrieve healthcare
information available in the libraries on our site and within our health
condition-specific communities.
We believe our interactive tools and features, and, in particular, our free
24-hour doctor chat service, will enable us to attract loyal audiences to our
health condition-specific communities and improve our responsiveness to our
audiences and sponsors. We intend to invest in infrastructure, make
technological improvements and develop additional interactive community tools
and features in response to the needs and interests of our audiences.
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STRATEGIC RELATIONSHIPS
DISTRIBUTION
We are pursuing high-quality, strategic relationships to increase the
traffic to our site and further establish the AmericasDoctor.com brand. We
believe relationships with Internet service providers, Internet portals, Web
sites, media companies and healthcare companies, and the quality of their
content and services, will strengthen our brand. In addition, we believe these
distribution partners will have the ability to drive additional consumers to our
site, promote the AmericasDoctor.com brand and enhance our content, communities
and services. We also believe these relationships create a significant
competitive advantage in our industry, and, accordingly, we will pursue partners
that are prepared to invest their resources to realize mutual benefits.
AMERICA ONLINE, INC. We have an agreement with AOL to position
AmericasDoctor.com as one of four anchor tenants on its subscriber Health
Channel main screen. This arrangement applies only to AOL's subscriber service
and excludes AOL.com, Digital City, Net Find or any other service that may be
distributed by or through AOL. For the three months ended June 30, 1999, AOL
accounted for approximately 60% of the visitors to our site. AOL has agreed to
provide our logo or banner on the main screen and secondary screens of its
Health Channel main screen. AOL also has agreed to provide us with keywords
which link to the home page of our site, and to include AmericasDoctor.com in
AOL's "directory of services" and "find" features. Our agreement with AOL became
effective in April 1998 and expires in June 2001. We are obligated to pay AOL
$75,000 per month through June 2000. However, the fee we are obligated to pay
AOL for the third year of the agreement is not currently fixed. AOL has the
right to set the rate for the third year based on market rates. Our agreement
with AOL does not prohibit AOL from carrying other sites or developing and
providing content that competes with portions of our site.
LYCOS CORPORATION. We entered into a one-year agreement, effective June 1,
1999, with Lycos pursuant to which we have purchased over 400 keywords and
phrases and advertising. The purchase of keywords and phrases will result in the
association of AmericasDoctor.com, including our on-line communities, as a
designated source of information relating to the purchased keywords and phrases.
Searches conducted by Lycos users using one or more of the keywords or phrases
covered by the Lycos agreement will generally return search results that
highlight AmericasDoctor.com in a prominent position in the listing of the
search results.
CLINICAL TRIAL RECRUITMENT
CENTERWATCH, INC. In June 1999 we entered into a two-year agreement with
CenterWatch, Inc., a publishing company focused on the clinical trial industry,
to license the use of CenterWatch's databases of clinical trial studies and
related information and potential volunteers. Pursuant to the agreement, we will
create a hyperlink from our site to CenterWatch's databases of clinical trials
and clinical trial volunteers. CenterWatch has granted us an exclusive license
to use the clinical trial volunteers databases it is currently developing for
recruiting, organizing or screening clinical trial candidates for research
companies. We have paid CenterWatch an upfront fee of $100,000 and have agreed
to pay CenterWatch a quarterly fee of $50,000 and a percentage of the clinical
trial recruitment fees generated by our site. The agreement terminates in June
2001 and renews automatically for successive one-year periods unless 180 days'
prior notice is given by either party.
COVANCE, INC. In August 1999 we entered into a six-month agreement with
Covance, Inc., a clinical trial recruitment company, terminable by Covance at
any time on 30 days notice. Under the agreement, AmericasDoctor.com will
initiate a Internet clinical recruitment campaign with respect to clinical
development trials conducted by Covance and provide Covance with individuals who
meet the applicable criteria of the clinical trials, including by using the
database licensed from CenterWatch. Covance, in its sole discretion, will
determine whether to recommend to its clients that our services be used to
recruit clinical trial candidates through the Internet.
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Covance will pay us a fee based upon the number of individuals assigned to a
Covance treatment or control group in a clinical trial as a direct result of our
recruitment services to be negotiated in connection with each clinical trial.
The price paid for each enrolled individual will depend on a number of factors,
including the rarity of the screening conditions for the trial. In the event we
cannot agree on pricing with respect to a clinical trial within five days of the
intiation of pricing discussions, Covance has the right to recommend persons
other than AmericasDoctor.com to recruit clinical trial candidates through the
Internet for the benefit of Covance or its clients. We have agreed not to
provide recruitment services to either PAREXEL International Corp or Quintiles
Transnational Corp. during the term of this agreement, provided that Covance's
sole remedy for a breach of this provision is to terminate the agreement.
CLINTRIALS RESEARCH, INC. In July 1999 we entered into an agreement with
ClinTrials Research, Inc., a clinical trials recruitment company. Under the
agreement, we will develop and promote a trials volunteer questionnaire for
those users on our site who are interested in participating in a clinical trial.
We will be the provider of Internet clinical trial recruitment services to
ClinTrials and its clients, but ClinTrials may obtain similar services from
another recruitment service if AmericasDoctor.com is unable to provide the
necessary number of participants within 45 days or if the ClinTrials client for
a particular trial requests, in writing, that ClinTrials use another recruitment
service. AmericasDoctor.com has agreed to spend $10 million over the next two
years to promote its recuitment services, which may be part of our other
promotions.
The fee paid to AmericasDoctor.com for providing ClinTrials these trial
recruitment services will be based upon the number of qualified applicants and
characteristics of these applicants, including the rarity of screening
conditions for the trial and length of time for recruiting the candidate,
identified to ClinTrials for each trial. The fee will be negotiated separately
for each clinical trial. This agreement has a term of two years, but may be
terminated after nine months provided 45 days' prior written notice is given to
the non-terminating party.
PREMIER RESEARCH WORLDWIDE, LTD. In March 1999, we entered into a two-year
marketing service agreement with Premier Research. Under the agreement, Premier
Research has agreed to provide marketing services in connection with the
development of our clinical trials recruitment business and consultation
regarding the recruitment, quantification and qualification of volunteers for
clinical trial studies.
We have agreed to pay Premier Research approximately $4.8 million in cash,
to be paid in quarterly installments commencing in March 1999, in connection
with the Premier Research agreement. As of August 31, 1999, approximately $3.7
million remains outstanding under the agreement. The Premier Research agreement
expires on December 31, 2000. Our agreement with Premier Research supplemented
an earlier agreement we entered into with Premier Research which, among other
things, provides Premier Research the right to recruit volunteers for clinical
trials from our site and promote its business on our site. The right of Premier
Research to recruit volunteers from our site is not limited in duration. The
former agreement required that we recruit clinical trial volunteers for Premier
Research's studies on an exclusive basis. Our new agreement with Premier
Research removed this exclusivity provision.
CHAT CENTER OPERATIONS
MEDICAL ADVISORY SYSTEMS, INC. In July 1998, we entered into an exclusive
call center service agreement with Medical Advisory Systems to operate the chat
centers for our 24-hour doctor chat service subject to our authorization.
Medical Advisory Systems, or an Medical Advisory Systems affiliate, hires,
trains, monitors and supervises all healthcare professionals and staff for our
chat service. We require all healthcare professionals, operating our chat
service, including pharmacists and registered nutritionists, to have
professional qualifications. We own or license the principal hardware and
software utilized by Medical Advisory Systems to operate our 24-hour chat
centers. Our agreement with Medical Advisory Systems provides that we reimburse
Medical Advisory Systems for all costs of operating the
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service in addition to the salary of healthcare professionals in respect of
which we make payments of cost plus 20%. The Medical Advisory Systems agreement
entitles Medical Advisory Systems to operate additional 24-hour chat centers
opened by AmericasDoctor.com. In addition, Medical Advisory System has agreed
not to provide a service that competes with our 24-hour doctor chat service by
not providing real-time medical information and related services via the
Internet, for the term of the agreement plus one year.
The agreement with Medical Advisory Systems has an initial term which runs
through July 2000, and provides for two additional renewal terms of one and two
years, respectively. The Company and Medical Advisory Systems currently disagree
over what rights the parties have not to renew the agreement for the renewal
terms. We cannot predict how this disagreement will be resolved. We believe that
each party has the right not to renew the agreement for the final two-year
renewal term for any reason, while Medical Advisory Systems has informed us that
it believes that the agreement may only not be renewed for cause. We believe
that whenever our agreement with Medical Advisory Systems terminates, we will be
able to provide our chat center operations ourselves or through a third party at
the same or lower costs. We have no current intention to terminate the agreement
and are not aware that Medical Advisory Systems has any intention to terminate
the agreement.
Medical Advisory Systems is a 24-hour medical services company that provides
medical assistance, telemedicine, medical equipment/pharmaceutical distribution,
training and occupational health services. We have agreed to provide promotional
space on our site for Medical Advisory Systems to use for Medical Advisory
Systems business purposes. As of June 30, 1999, Medical Advisory Systems owned
approximately 14.4% of our outstanding common stock.
OUR REVENUE OPPORTUNITIES
HOSPITAL SPONSORSHIP REVENUE
Our site provides hospital sponsors, including hospital systems, with
exclusive access to an audience of potential consumers located in the geographic
area, defined by zip code, served by the hospital. We provide each hospital
sponsor with its own Web page on our site which may feature an image of the
hospital, a description of its services and facilities, directions to the
hospital and a link to its Web site, if one exists, or other promotional content
provided by the sponsor. Through the interactive features on our site, we offer
our hospital sponsors opportunities to provide consumers free medical
information and exposure to the sponsors' own doctors. When visitors enter our
site for the first time they are requested to provide their state and zip code
information. Each time after the initial visit that the user visits our site,
our site will automatically identify the applicable sponsor hospital, delivering
the sponsor's marketing message directly to the user's screen. After the
conclusion of every doctor chat session, a user located in a geographic area,
defined by zip-code, where one of our sponsors is located is provided a screen
that enables the visitor to contact that hospital. Visitors who request hospital
sponsor information are required to provide basic contact information, including
an e-mail address, that we forward to our hospital sponsors so that our
hospitals may contact our visitors.
We believe that our geographically exclusive sponsorship arrangements result
in significant marketing benefits to our hospital sponsors because the
hospital's message is delivered directly to consumers in their communities who
are seeking health information. In addition, we believe that our site offers the
following benefits to our hospital sponsors:
- enhances the sponsor's image by providing the sponsor's community a
comprehensive, personal health information resource;
- offers the sponsor national exposure to our audiences of healthcare
consumers which enhances the sponsor's Internet presence; and
- enables the sponsor to promote the sponsor's services by hosting on-line
events and promoting health education programs featuring their doctors.
We prepare reports for our hospital sponsors that include detailed
information about our audiences' interests, the topics researched by our
visitors and the number of visitors by zip code using different areas of our
site.
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As of September 1, 1999 we had 49 hospital sponsorship contracts with the
following hospitals:
HOSPITAL SPONSORS ON-LINE
<TABLE>
<S> <C>
- - Glendale Adventist Hospital (California)
- - University of California, Irvine Medical Center (California)
- - Yale Hospital (Connecticut)
- - St Francis Healthcare Services (Delaware)
- - The University of Miami/Jackson Memorial Medical Center (Florida)
- - Memorial Health (Georgia)
- - Central DuPage Health System (Illinois)
- - Evanston Northwestern Healthcare (Illinois)
- - Ingalls Health System (Illinois)
- - McNeal Health Network (Illinois)
- - St. Joseph's Hospital (Indiana)
- - Saint Margaret Mercy Healthcare Centers (Indiana)
- - St. Francis Hospital and Health Center (Indiana)
- - CHRISTUS Schumpert Health System (Louisiana)
- - St. Mary's Regional Medical Center (Maine)
- - Laurel Regional Hospital (Maryland)
- - Lifebridge Health (3 hospitals) (Maryland)
- - Henry Ford Healthcare Corporation (Michigan)
- - Lake Region Health (Minnesota)
- - New York Presbyterian Hospital-The University Hospital of Columbia & (New York)
Cornell (multiple hospitals)
- - Duke University Health System (North Carolina)
- - St. Alexius Medical Center (North Dakota)
- - University Hospital at Syracuse (New York)
- - SummaHealth (Ohio)
- - The Community Hospital (Ohio)
- - The Ohio State University Medical Center (Ohio)
- - ProMedica Health Systems, Inc. (4 hospitals) (Ohio)
- - St. Anthony Hospital (Oklahoma)
- - Thomas Jefferson University Hospital (Pennsylvania)
- - PennState Geisinger Health System (Pennsylvania)
- - Lehigh Valley Hospital & Health Network (Pennsylvania)
- - Doylestown Hospital (Pennsylvania)
- - University of Pittsburgh Medical Center Health System (Pennsylvania)
- - Vanderbilt University Medical Center (Tennessee)
- - UT Medical Group, Inc. (physician practice group) (Tennessee)
- - Good Shepherd Medical Center (Texas)
- - St. Luke's Episcopal Health System (Texas)
- - Trinity Mother Francis Health System (Texas)
- - The University of Virginia Medical Center (Virginia)
- - Froedert Memorial Lutheran Hospital (Wisconsin)
</TABLE>
HOSPITAL SPONSORS TO BE INTRODUCED ON-LINE
<TABLE>
<S> <C>
- - The University of Chicago Hospitals (2 hospitals) (Illinois)
- - Northwest Community Healthcare (Illinois)
- - Cleveland Clinic (Ohio)
- - St. Joseph Regional Health Network (2 hospitals) (Pennsylvania)
- - Care Alliance Health Services (South Carolina)
- - AveraHealth (South Dakota)
- - Memorial Health System of East Texas (Texas)
- - Swedish Medical Center (Washington)
- - Mount Sinai Hospital (Toronto, Canada)
</TABLE>
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We typically enter into one-year sponsorship agreements with hospitals that
make the hospital the exclusive sponsor of our Internet services within a market
region defined by zip code. Our sponsorship agreements also typically provide
for a limited license for us to use the sponsor's name on our site and a
requirement that we provide reports to our sponsors regarding usage of our site
by users in the sponsor's geographic service area as defined by zip code. Our
hospital sponsors currently pay a flat fee based upon the number of consumers in
their market, the scope of geographic exclusivity, the number of zip codes
purchased, and the competitiveness of the hospital's market. Hospital
sponsorship fees are not based on, in whole or in part, and do not vary with,
the volume or value of consumers who contact a hospital sponsor. The agreements
with our hospitals are generally not terminable other than for breach of
contract, except that in a limited number of our contracts we have agreed to
give the hospitals the option to terminate their relationship after a trial
period. As of June 30, 1999, three of our hospital contracts had terminated
their agreements pursuant to these provisions.
E-COMMERCE REVENUE
We plan to develop our e-commerce operations during the remainder of 1999 to
address the increasing number of consumers who we believe are interested in
buying health-related products over the Internet. We opened our medical mall in
May 1999 and initially focused our sales efforts on Smith & Nephew home health
product supplies. We are considering providing consumers with additional
e-commerce options including pharmaceuticals, over-the-counter drugs, vitamins,
responsible natural products, durable medical equipment and health-related
books. We are also considering implementing a free 24-hour service to help
consumers make better informed purchases by using our chat technology to provide
real-time access to the sales representatives of our e-commerce suppliers. We do
not intend to make healthcare professionals available on this service. We
believe that our health condition-specific communities will allow us to serve
the special e-commerce needs of consumers with specific healthcare conditions
and interests.
Part of our e-commerce strategy is to develop relationships with companies,
like Smith & Nephew, that we believe have established, recognizable and trusted
names and national product fulfillment capabilities. We do not intend to
maintain significant inventory or establish our own warehousing, shipping or
fulfillment operations at our facilities. We intend to enter into arrangements
where our e-commerce suppliers will provide inventory space and shipping
services in connection with the sale of products. When we need to purchase
inventory products from our suppliers, we expect that the products will remain
at the warehouse of the supplier or other e-commerce suppliers until sold by us.
In addition to our relationship with Smith & Nephew, we have entered into
arrangements with Tempur Pedic, Kendall Confab Retail Group, Inc. and
Kimberly-Clark Corporation to sell a range of home health-related products.
Our relationship with Smith & Nephew includes the promotion of the
AmericasDoctor.com brand, site and health condition-specific communities in
Smith & Nephew print catalogs and the provision of warehouse space and inventory
management by Smith & Nephew for all products purchased by us, including
products we purchase from other e-commerce suppliers. The Smith & Nephew product
catalogue will also be available on-line through our medical mall. We plan to
resell Smith & Nephew products to our consumers through our medical mall and
introduce other business customers to Smith & Nephew through our site.
CLINICAL TRIAL RECRUITMENT REVENUE OPPORTUNITY
We believe a significant business opportunity exists in the on-line
recruitment of volunteers to participate in clinical trials. The speed with
which clinical trials can be completed is significantly affected by the rate at
which participants are enrolled. We believe the inability to recruit a
sufficient number of patients in a timely manner is a recurring problem and one
of the most frequent causes of clinical trial delays, as well as a major cost
for clinical research sponsors. We believe that our site can
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provide us with the ability to recruit potential participants for clinical
trials on behalf of pharmaceutical companies, contract research organizations
and site management organizations. Through our relationships with CenterWatch,
Inc., Clintrials and Covance our users will have access to a growing database of
clinical trial studies and we will have access to a database of potential
volunteers. We believe that our health condition-specific communities may
provide an advantage in recruiting clinical volunteers by enabling us to target
an audience of volunteers meeting the basic criteria of a study.
ADVERTISING REVENUE OPPORTUNITY
Open access to the Internet and the rapidly increasing number of Web users
have resulted in the emergence of the Web as a potential new medium for
advertising. We believe the effectiveness of Internet advertising is not proven
and the success of business models relying principally on advertising revenue is
uncertain. However, to the extent that Internet advertising and related business
models prove successful, we believe our site is being designed to generate
advertising revenue opportunities because of its interactivity, flexibility,
targetability and measurability. In particular, we believe our site is designed
to enable advertisers to reach large consumer audiences and target
advertisements to specific regional populations, specific consumer audiences or
selected individuals. Our site is designed to display "banner" advertisements
that allow consumers to link directly to the advertiser's Web site. We plan to
market banner advertising on our site, including in our health
condition-specific communities, to traditional advertisers, including
pharmaceutical companies, medical device manufacturers and other healthcare
companies. Although we expect to negotiate each of our advertising arrangements,
we currently intend to enter into advertising contracts under which we may
guarantee a minimum number of user "impressions," which are the number of times
that an advertisement is displayed on the screen of our users, to be delivered
over a specified period for a fixed fee. Advertising rates, if measured on a
cost per thousand impressions basis, would be dependent on whether the
impressions are for general rotation throughout our site or targeted at specific
audiences or users on our site. We also plan to feature educational programs
sponsored by healthcare companies and hosted by healthcare professionals. We
currently expect to negotiate the fees charged for educational program
sponsorships based on criteria similar to those described above for advertising
on our site.
MARKETING, ADVERTISING AND PUBLIC RELATIONS
Our marketing program is managed by our in-house staff and, recently, with
the assistance of an outside public relations firm. Our goals are to increase
AmericasDoctor.com brand recognition, attract and maintain visitors, additional
hospital sponsors, nonprofit healthcare sponsors and educational program
sponsors. We intend to pursue these goals through an aggressive public relations
program, direct advertising, marketing on our own site and other on-line
opportunities as well as co-marketing opportunities with our strategic partners.
We plan to allocate significant resources to building brand awareness of
AmericasDoctor.com.
HOSPITAL SPONSORSHIP MARKETING AND SALES
Marketing of our hospital sponsorship program is carried out by our in-house
hospital marketing and sales team. Our hospital marketing and sales staff
contacts hospital executives or program directors through direct advertising and
mailings. A representative of our hospital marketing and sales team contacts
each interested hospital to arrange for a complete marketing presentation. Our
hospital marketing and sales team works closely with potential hospital sponsors
to determine how best to satisfy the sponsor's particular needs. We intend to
allocate additional resources to marketing our content, communities and services
to strengthen hospital awareness of the AmericasDoctor.com brand.
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CO-MARKETING ARRANGEMENTS
We have entered into, and intend to continue to enter into, strategic
arrangements with parties having established audiences or customer bases and an
anticipated need for the content, communities and services provided by
AmericasDoctor.com. We have established a number of significant co-marketing
arrangements to increase the exposure of the AmericasDoctor.com brand. These
arrangements consist of:
AOL. As part of our agreement with AOL, we provide our free 24-hour doctor
chat service as one of four anchor tenant to AOL's subscribers. AOL also has
agreed to display our logo on the main screen of its Health Channel main screen,
to provide us with the keywords to include our site in its "directory of
services" and "find" features and provide our content on its Health Channel main
screen.
SMITH & NEPHEW. Our agreement with Smith & Nephew provides for the
inclusion of our domain name, WWW.AMERICASDOCTOR.COM, on the printed version of
all of Smith & Nephew's consumer product catalogs and promotion and marketing of
AmericasDoctor.com as a site for healthcare products.
AMERICAN EXPRESS. We have a relationship with American Express Company
pursuant to which American Express promotes the AmericasDoctor.com brand to
American Express card-members nationwide and provides access to local and
regional marketing programs. We have agreed to accept payment with American
Express cards on our site. American Express may also provide funding for both
traditional and on-line media promotions. We do not have a written agreement
with American Express.
ADVERTISING
We intend to engage in a significant advertising campaign, which may include
on-line and traditional media, to increase awareness of the AmericasDoctor.com
brand. We will employ a combination of advertising tools aimed at establishing
AmericasDoctor.com as a trusted Internet brand for healthcare consumers,
increasing traffic on our site and developing revenue opportunities. We also
intend to promote our content, community and services through traditional print
media, including trade journals, newspapers and magazines targeted at healthcare
consumers, and participate in tradeshows, conferences and other engagements as
part of our ongoing public relations program.
PUBLIC RELATIONS PROGRAM
Our public relations program is carried out by our in-house staff and,
recently, by an outside public relations consultant. Our in-house public
relations staff is separate from our hospital marketing and sales team. We
pursue public relations opportunities to build awareness of the
AmericasDoctor.com brand, content, communities and services, and in particular
our free 24-hour doctor chat service. We have gained significant recognition
within the industry by participating in tradeshows and through our public
relations efforts. We have been featured on GOOD MORNING AMERICA, which did a
live telecast from our doctor chat center, and on CNN. We have been the subject
of articles in TIME MAGAZINE, USA TODAY and other national and local
publications. In October 1998, our free 24-hour doctor chat service was featured
in a live demonstration for the FIRST INTERNET HEALTH DAY sponsored by Intel
Corporation.
TECHNOLOGY, INFRASTRUCTURE AND OPERATIONS
TECHNOLOGY
The various features of our site are implemented using a combination of
commercially available and proprietary software components. We favor licensing
and integrating what we believe to be "best of breed" technology from industry
leaders. We reserve internal development of software for those components that
are either unavailable on the market or that have strategic advantages when
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developed internally. We believe that this component style approach is more
manageable, reliable and scalable than single-source solutions. In addition, the
emphasis on commercial components speeds development time, which is an advantage
when competing in a rapidly evolving market. Consistent with our preference for
off-the-shelf software components, we rely primarily on industry-standard
Microsoft operating systems, development and infrastructure components.
Our innovative 24-hour doctor chat service uses proprietary software
licensed to us by Jaspin Interactive, Inc. The proprietary software provides a
user interface for real-time, text dialogue on-line. Jaspin Interactive has
granted us a worldwide, perpetual, irrevocable, fully paid, royalty-free and
exclusive license to use the proprietary software in connection with any medical
or health-related purpose. We do not pay a license fee to Jaspin in connection
with the license agreement; however, we pay Jaspin Interactive for maintenance
services. We may terminate the Jaspin Interactive licensing agreement, at any
time, with or without cause. Jaspin Interactive may terminate the licensing
agreement if we materially breach, and fail to cure our breach, a provision of
the licensing agreement. Jaspin Interactive has represented to us that the
proprietary software is year 2000 compliant. Jaspin Interactive has agreed to
perform maintenance and support for the AD Chatware for a minimum of one year.
We are in the process of developing new chat technology with Qwest Internet
Solutions, Inc. that we believe will handle increased traffic to our site better
than our existing technology. We have completed functional and technical
specifications for the new technology. We intend to spend significant resources
to develop our new chat technology.
INFRASTRUCTURE
Our site's operating infrastructure has been designed and implemented to
support significant user traffic and to accommodate additional traffic. Web
pages are assembled from a database of images, objects and text and are
delivered in response to individual user requests. We believe our infrastructure
is a distributed, scalable solution that provides reliable and secure
performance and service availability.
OPERATIONS
Our site architecture currently operates on two Pentium servers, one
Webserver/Application Server and one Database server, with one spare server that
supports Web applications and database functions as a temporary emergency
backup. Our Web server runs Microsoft Windows NT 4.0 and utilizes Microsoft SQL
Version 7.0. Our servers are currently maintained by Epoch Internet, Inc. We are
in the process of transferring the location and maintenance of our production
servers to the New Jersey Data Center of Qwest Internet. We are currently
conducting tests of the systems. Each of the servers is dedicated to our
business. Our operations will become dependent upon Qwest Internet's ability to
protect its systems against damage from fire, hurricanes, power loss,
telecommunications failure, break-ins and other destructive events. Qwest
Internet will provide comprehensive facilities management services including
human and technical monitoring of all production servers 24 hours per day, seven
days per week. Qwest Internet will provide the means of connectivity for our
servers to our users via the Internet through multiple connections. The facility
is powered by multiple power supplies. Qwest has guaranteed the performance of
all network services during the term of our agreement for the maintenance and
hosting of our production servers. Qwest has guaranteed us 100% network up-time
over the course of each one-month period. If we should experience any "network
downtime" in any calendar month, Qwest will provide us a credit allowance equal
to the pro-rated charges for one day of network connectivity for the affected
service for each hour of network downtime. "Network Downtime" means the number
of minutes the network is unavailable to us during a given calendar month. The
term of the agreement is one year and termination of the agreement may be made
at any point on 60 days prior written notice.
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Our production data is copied to DAT tape nightly and is stored off-site on
a weekly basis. Copies of our production data are maintained on servers residing
with our current developers. We are in the process of developing a disaster
recovery plan to respond to system failures. We keep all of our production
servers behind firewalls for security purposes. Access to the production servers
is restricted to appropriate individuals and is subject to strict username and
password protocols.
CHAT CENTER OPERATIONS
Medical Advisory Systems operates our Owings chat center and our Owings
Mills chat center, in each case using the Microsoft Windows 98 operating system.
COMPETITION
The market for Internet information and commercial products and services is
intensely competitive and rapidly changing. An abundance of Web sites already
provide healthcare information and related products and services. In addition,
traditional media and healthcare organizations are competing actively for
consumers' time and attention through traditional means as well as through
Internet initiatives. We believe competition for healthcare consumers will
continue to increase as the Internet and the healthcare market evolve.
We also compete for consumers' time and attention, sponsors, advertisers,
e-commerce merchants and other affiliates with a multitude of informational Web
sites operated by governmental agencies, educational institutions, businesses
and other organizations and individuals. We expect competition to intensify and
the number of our competitors to increase significantly in the future. In
addition, as we expand the scope of our informational content, products and
services, we will compete with a greater number of Internet companies. Since the
operations and strategic plans of many Internet companies are undergoing rapid
change, it is difficult to anticipate which companies are likely to offer
competitive services in the future.
In particular, our competitors may include:
- healthcare Web sites, by domain name, including accesshealth.com, ahn.com,
betterhealth.com, drkoop.com, drweil.com, healthcentral.com,
healthgate.com, intelihealth.com, mayohealth.org, mediconsult.com,
onhealth.com, thriveonline.com and webmd.com;
- Web search engines, Internet portals and Internet media companies,
including aol.com, Excite, Inc., Infoseek Corporation, Lycos Corporation,
Microsoft Network, and Yahoo! Inc;
- HMOs, managed care organizations, insurance companies, hospitals and other
healthcare providers and payors including Columbia/HCA Healthcare
Corporation, Kaiser Permanente and VHA Inc. which offer healthcare
information on-line;
- Web communities, including the American Association of Retired Persons,
SeniorNet and ThirdAge Media, Inc., which offer healthcare-related
information and programming to special demographic groups; and
- e-commerce suppliers and conventional retailers including CVS,
Drugstore.com, Express Scripts, Inc., Merck-Medco Managed Care, L.L.C.,
Planet Rx, Rite Aid Corporation, Walgreens and other companies that sell
healthcare products and services through the Internet that may be
competitive to those that may become available through our site.
We also may compete less directly with traditional information media,
including print, radio and television, for our audience, sponsorships, commerce
and advertising dollars. We believe we must develop a loyal consumer audience
that is attractive to our sponsors, e-commerce suppliers and advertisers. We
believe key competitive factors in attracting a loyal consumer audience include
the quality and usefulness of services and the comprehensiveness and relevance
of our content.
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Many of our existing competitors and potential new competitors are likely to
enjoy substantial competitive advantages compared to our company, including the
ability to offer a wider array of on-line content, products and services, larger
production and technical staffs, greater name recognition and larger marketing
budgets and resources, larger customer and user bases and substantially greater
financial, technical and other resources. In addition, our competitors may have
longer operating histories on the Internet, lower cost structures and higher
amounts of user traffic. Our competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, make more
attractive offers to potential employees, distribution partners, advertisers and
content providers and may be able to respond more quickly to new or emerging
technologies and changes in Web user requirements.
To be competitive, we must respond promptly and effectively to the
challenges of rapid technological change, evolving consumer demands, evolving
Internet standards and our competitors' innovations by continuing to enhance our
products and services as well as our sales and marketing channels. Competition
is likely to increase as new companies enter the market and current competitors
expand their services. We expect that competitive factors will create a
continuing need for us to improve and add to our healthcare content.
Accordingly, we intend to seek additional sources of healthcare information and
expand the breadth of our content offerings. Increased competition or our
failure to successfully respond to our competitors could result in greater
competition for sponsorships, reductions in advertising rates, lower margins,
greater operating losses or loss of market share, any of which would materially
adversely affect our business, financial condition and results of operations.
INTELLECTUAL PROPERTY
We rely primarily on a combination of copyrights, trademarks, trade secret
laws, our user policy and restrictions on disclosure to protect our intellectual
property and our content, trademarks, trade names and trade secrets. We have
filed trademark applications for "AmericasDoctor.com," "America's Doctor,"
"America's Doctor On-line," "AD Family Protect," "AD Chatware," the "AD" logo
and other derivative trade names. We may pursue foreign registrations of our
trademarks if international use of our site expands. If our competitors prepare
and file applications in the United States that claim trademarks used or
registered by us, we may oppose those applications and be required to
participate in proceedings before the United States Patent and Trademark Office
to determine the entitlement and priority of rights to the trademark. These
types of proceedings could cause us to incur substantial costs. We cannot assure
you the measures we have taken will adequately protect our intellectual property
rights or that our competitors will not develop proprietary technology that is
equivalent or superior to ours.
We license information, technology, data and other content from third
parties. For example, we license healthcare news from Screaming Media, our chat
technology from Jaspin Interactive and a database of clinical trial studies from
CenterWatch Licensing this material from third parties increases our exposure to
infringement actions by requiring us to rely on third-party representations as
to the origin and ownership of the licensed material. We may seek to license
additional material in order to enhance our site and community features or
introduce new interactive services. The inability to obtain or maintain
requisite licenses could impair our site and communities and result in delays in
the introduction of new interactive services until the requisite material is
identified, licensed and integrated into our site.
In addition, we may be subject to litigation for claims of infringement of
the rights of others or to determine the scope and validity of the intellectual
property rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to the mark, which
could result in substantial costs to us due to the diversion of management's
attention and the expense of infringement litigation, even if the eventual
outcome is favorable to us. Adverse determinations in this
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type of litigation could result in the loss of related proprietary rights,
subject us to significant liabilities, require us to seek licenses from third
parties or prevent us from selling our services. In addition, since we license a
substantial portion of our content from third parties, our exposure to copyright
infringement actions may increase because we must rely upon their
representations as to the origin and ownership of third-party intellectual
property.
Domain names are the user's Internet "address" and derive value because they
are currently the simplest way to access Web sites. The current system for
registering, allocating and managing domain names has been the subject of
litigation and of proposed regulatory reform in the United States. There can be
no assurance that third parties will not bring claims for infringement against
us for the use of our domain name. Further, since the value of domain names
derives from users' ability to remember the domain names, there can be no
assurance that our domain names will not lose value if, for example, users stop
using domain names to access Internet resources. There can be no assurance that
litigation or reform efforts resulting in a restructuring of the current system
of registering domain names will not require us to obtain new domain names in
addition to, or in lieu of, our current domain names.
EMPLOYEES
As of September 1, 1999, we had 58 full-time employees, none of whom is
represented by a labor union or covered by a collective bargaining arrangement.
We believe that our employee relations are good.
FACILITIES
Our corporate headquarters currently occupy approximately 31,302 square feet
of office space in Owings Mills, Maryland under a sublease expiring in May 2001.
Our Owings Mills call center currently occupies approximately 7,850 square feet
under a sublease expiring on September 29, 2000, with an option to renew the
sublease term for five years. In addition, we lease approximately 1,500 square
feet of space for our call center in Owings, Maryland under a lease expiring at
the end of our Medical Advisory Systems chat center service agreement. See
"--Strategic Relationships--Chat Center Operations" regarding the termination of
our Medical Advisory Systems call center service agreement. We intend to build
an additional call center at our corporate headquarters. We believe additional
leased space can be obtained, if needed, on acceptable terms.
LEGAL PROCEEDINGS
There are no claims or proceedings pending or threatened against us, the
ultimate disposition of which would have a materially adverse effect on our
business. However, from time to time, we may be involved in regulatory
proceedings or litigation relating to claims arising out of our operations. We
may be subject to third-party claims for defamation, negligence, copyright or
trademark infringement or other claims based on the nature and content of
information supplied on our site by us, including statements made by healthcare
professionals on our chat services, our users or third parties, including our
content, product and service providers. Claims also could arise from inaccurate,
offensive, harassing, or otherwise inappropriate statements of participants in
public health condition-specific communities or special programs, over which we
have no control. See "Risk Factors--Our Business is Subject to Extensive
Government Regulation and Other Legal Considerations."
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GOVERNMENT REGULATION AND OTHER LEGAL CONSIDERATIONS
GENERAL
Our business and industry are subject to extensive government regulation.
Federal and state laws, regulations and statutes have been or may be adopted
with respect to healthcare, the Internet, our industry or other on-line
services.
The delivery of healthcare services and products is heavily regulated under
federal and state law. For example, federal and state agencies regulate the
practice of medicine, establish licensing and reimbursement requirements. In
addition, through fraud and abuse laws, federal and some state agencies prohibit
payments for the referral of patients to a person participating in, or for the
order, purchase or recommendation of items or services that are subject to
reimbursement by, Medicare, Medicaid and other federal or state healthcare
programs or third-party payors. While we have attempted to structure our
business activities in a manner that would not constitute the practice of
medicine or involve prohibited referrals, federal and/or state healthcare
regulatory authorities could determine that, in a particular case or generally,
we are engaged in the practice of medicine through the activities of our doctors
or other healthcare professionals on or through our Web site. There is also a
risk that our relationships with hospital and other sponsors, e-commerce vendors
and other companies may implicate or violate laws governing the sale of
healthcare products and laws prohibiting referral arrangements. We have not
researched the laws of each of the 50 states or obtained opinions or rulings
from federal and state agencies with authority to enforce these laws. A finding
that our current or future business activities violate any of these laws or
statutes could cause a material adverse effect on our business, financial
condition and results of operations.
There is also an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, on-line content regulation, user privacy, taxation and quality of
products and services. Moreover, it may take years to determine whether and how
existing laws addressing intellectual property, privacy, libel, copyright,
trademark, trade secret, obscenity, personal privacy, taxation and regulation of
the sale of products and services apply to the Internet and Internet
advertising. Any requirements imposed by any legislation or regulation may limit
the growth of the use of the Internet. Any limitations could decrease the demand
for our services, increase our cost of doing business or otherwise have a
material adverse effect on our business, financial condition and results of
operations.
REGULATION OF THE PRACTICE OF MEDICINE AND OTHER LICENSING LAWS
The practice of medicine, generally defined by state law as engaging in,
with or without compensation, medical diagnosis, healing, treatment, including
the prescription of medications, or surgery, requires licensing under applicable
state law. The practice of medicine without a license can be a civil or criminal
violation depending on state law. We have endeavored to structure our site, and
in particular our free 24-hour doctor chat service, to avoid violation of state
licensing requirements. Our guidelines provide and we instruct that chat center
doctors and other healthcare professionals will not practice medicine. However,
chat center doctors and other healthcare professionals may fail to follow our
guidelines, or interaction between our doctors and consumers could elicit
responses which may be claimed or deemed to be a diagnosis or other element of
the practice of medicine. Furthermore, the application of this area of the law
to Internet services like ours is novel and, accordingly, a state regulatory
authority may allege that one or more elements of our business requires a
license under existing or future laws or statutes. Any application of the
regulation of the practice of medicine to our business, and in particular our
free 24-hour doctor chat service, could result in a material adverse effect on
our business, financial condition or results of operation.
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We also contract with healthcare professionals who are not physicians. For
example, pharmacists and nutritionists communicate with users in our chat
sessions in the same manner as doctors. Pharmacists engaging in the practice of
pharmacology are regulated by state law, and nutritionists may also be licensed
under state law, depending on the jurisdiction. As is the case with doctors,
these healthcare professionals are instructed not to prescribe drugs, diagnose,
or treat consumers. While we take steps to ensure that our non-physicians do not
engage in professional practices that require them to be licensed, we cannot
guarantee that a local professional licensing board would not seek to impose its
state law requirements on the activities of our non-physician healthcare
professionals.
We plan to engage in the sale of a range of home health-related products
on-line. We have entered into an agreement with Smith & Nephew to develop this
e-commerce business. Smith & Nephew has historically employed or contracted with
healthcare professionals, including occupational therapists, who are available
to answer customer questions about product purchases. We plan to utilize Smith &
Nephew's call center for our users who wish to purchase products from us. If it
were determined that this Smith & Nephew service constituted the delivery of
services for which professional healthcare license is required, we could lose
the ability to provide this service, and we could be subject to penalties for
making this service available.
FEDERAL AND STATE HEALTHCARE REGULATION
Provisions of the Social Security Act, also referred to as the "Federal
Anti-Kickback Law," prohibit knowingly or willfully, directly or indirectly,
paying or offering to pay, or soliciting or receiving, any remuneration in
exchange for the referral of patients to a person participating in, or for the
order, purchase or recommendation of items or services that are subject to
reimbursement by, Medicare, Medicaid and similar other federal or state
healthcare programs. Violations may result in civil and criminal sanctions and
penalties. Civil penalties include exclusion from government health programs.
Criminal sanctions include imprisonment for up to five years, fines up to
$25,000 or both, for each violation. Recent federal legislation expanded the
sanctions to include civil monetary penalties up to $50,000 for each prohibited
act and up to three times the total amount of remuneration offered, paid,
solicited or received, even in circumstances where a portion of the remuneration
is offered, paid, solicited or received for a lawful purpose. There is
increasing scrutiny by federal and state law enforcement authorities with both
civil and criminal jurisdiction, over financial arrangements between healthcare
providers and referral sources. Courts reviewing the statute have taken a broad
view of the Federal Anti-Kickback Law and have ruled that it can be violated if
only one purpose of a payment arrangement is to induce referrals. Although there
are safe harbors under the Federal Anti-Kickback Law for personal services and
recruitment services our agreement does not fully comply with the requirements
of these safe harbors. For example, because our Smith & Nephew arrangement does
not require fixed annual payments and our hospital agreements do not require
retention of written records evidencing the disclosures we make to users, they
may not fully satisfy these or other elements of the personal services or
recruitment services safe harbors, respectively. Compliance with a safe harbor
is not required for our activities to comply with the Federal Anti-Kickback Law.
Further, while we believe it is unclear how the Federal Anti-Kickback Law will
be applied to Internet businesses, use of the safe-harbors as a guideline is
beneficial. Accordingly, we have taken steps to structure our agreements in
accordance with the safe harbors. For example, our hospital sponsors are paid a
fixed, annual fee and we do not receive information about whether our users
ultimately use services at a hospital sponsor. Doctors participating in chats
are reimbursed on an hourly basis and do not receive compensation based on
services or products provided to our users by hospital sponsors or suppliers to
our medical mall. Many states also have enacted similar local anti-kickback
laws.
We earn revenues by selling exclusive geographical sponsorships to
hospitals. Each time a user located in the zip code of our sponsor concludes a
chat with a doctor, a screen appears enabling the user to obtain further
information about the sponsor in his area if one exists, or to provide
information
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to a hospital regarding appointments or further information. While we have taken
steps to structure our sponsorship arrangements so that they would not be deemed
to violate the anti-kickback laws, there can be no assurances that regulators
would not reach a contrary conclusion. Our hospital sponsors pay a fixed, annual
fee and we do not receive information about whether our users ultimately use
services at a hospital sponsor. Doctors participating in chats are reimbursed on
an hourly basis and do not receive compensation based on services or products
provided to our users by hospital sponsors or suppliers to our medical mall.
Further, we seek to use our disclaimer and terms of service, which each user is
required to accept before using our chat service, to make the disclosures of the
kind described by the recruitment services safe harbor. However, it is possible
that facilitation of contacts between hospitals or other sponsors and potential
patients could result in the allegation or finding that we or the physicians
arranged for or recommended the provision of reimbursable healthcare services by
our sponsors. We expect to earn revenues from e-commerce activities, including
the on-line sale of products which are subject to Medicare and Medicaid
reimbursement. We do not hold any Medicare, Medicaid or other provider
certifications numbers and do not submit any claims to payers. Structuring our
arrangements to comply with federal anti-kickback and similar state laws may
limit the revenues we can earn from e-commerce sales of reimbursable items.
Limited "safe harbor" regulations promulgated by the Department of Health
and Human Services define a narrow range of practices that are exempted from
federal prosecution or other enforcement under the Federal Anti-Kickback Law.
These regulations fail to exempt a wide range of activities in which healthcare
providers and others engage. Activities that fall outside the safe harbor
regulations are not necessarily illegal, though they could be the subject of
increased scrutiny, investigation or prosecution. Our existing and planned
sponsorship and e-commerce activities may not qualify for safe harbor
protection. Given the breadth of the Federal Anti-Kickback Law and the limited
scope of the existing safe harbors, the possibility of adverse regulatory
positions cannot be eliminated. The Office of Inspector General is authorized to
issue advisory opinions regarding the interpretation and applicability of the
Federal Anti-Kickback Law, including whether an activity or proposed activity
constitutes grounds for the imposition of civil or criminal sanctions. We have
not sought an advisory opinion and are aware of no opinion that has been issued
with respect to our sponsorships or existing or planned Internet sales
activities.
If our activities were deemed to be inconsistent with the Federal
Anti-Kickback Law or similar laws which have been adopted by various states, we
could face civil and criminal penalties or be barred from conducting any
business activities, any of which could have a material adverse effect on our
business, financial condition or results of operations. Further, we could be
required to restructure our existing or planned sponsorship compensation
arrangements and e-commerce activities in a manner which could have a material
adverse effect on our business, financial condition and results of operations.
SELF-REFERRAL PROHIBITIONS
The federal physician self-referral statute, sometimes identified as the
"Stark Law," generally forbids payments under Medicare or Medicaid based on a
physician referral for "designated health services" to any entity with which the
physician, or an immediate family member, has a financial relationship, which
can take the form of a direct or indirect ownership or investment interest or a
compensation relationship. A referral, under the Stark Law, can include
prescribing or requesting designated health services, and also, establishing a
plan of care for the designated health service. The Stark Law applies to
clinical laboratory services and other designated health services, including
outpatient prescription drugs and durable medical equipment. Penalties for
violating the Stark Law include denial of payment from Medicare and Medicaid
programs for any services referred to an entity in violation of the Stark Law,
civil monetary penalties of up to $15,000 for each offense and exclusions
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from the Medicare and Medicaid programs. Many states have adopted referral laws
which may extend to governmental and third-party payors. If it were determined
that
- doctors operating our chat service were engaged in the practice of
medicine;
- those doctors were, in turn, deemed to have made referrals for designated
health services; and
- no exemption covered the manner in which those doctors are compensated, we
could be subject to action under the Stark Law, which could have a
material adverse effect on our business, financial condition and results
of operations and subject us to sanctions under these laws.
OPERATION AS A HEALTHCARE PROVIDER
We intend to engage in e-commerce by delivering healthcare products to
members of the public, including participants in Medicare, Medicaid and other
governmental payment programs. These activities may include sales of
pharmaceuticals, durable medical equipment and other items. Accordingly, we may
be considered to be a healthcare supplier and may be required to obtain federal
and state licenses and permits, including pharmaceutical licenses and permits,
as well as certifications to participate in the Medicare, Medicaid or other
programs. We cannot guarantee that we will be able to obtain and maintain the
necessary licenses, permits and certifications. In addition, Medicare, Medicaid
and other third-party payment programs are under pressure to control healthcare
costs and the rates paid for products we may sell are subject to change. Federal
and state law enforcement authorities scrutinize closely the claims of
healthcare providers. The submission of false or fraudulent claims by any
healthcare providers or suppliers carries the risk of prosecution under
applicable federal and state criminal and civil statutes.
MALPRACTICE
Due to the nature of our business, we may become involved in litigation
regarding the information transmitted over the Internet by doctors or other
healthcare professionals operating our chat service or involving claims against
our hospital sponsors, with the risk of adverse publicity, significant defense
costs and substantial damage awards. If we or healthcare professionals with
which we contract or who provide information on or through our Web site or
suppliers are deemed to be engaged in the practice of medicine, including as a
result of a doctor or other healthcare professional failing to follow our
guidelines, we could be subject to claims and/or malpractice liability exposure
for which we may not be insured. In recent years, participants in the healthcare
industry, including doctors, nurses and other healthcare professionals, have
been subject to an increasing number of lawsuits alleging malpractice, product
liability and related legal theories, many of which involve large claims and
significant defense costs. We have adopted policies and procedures intended to
reduce the risk of claims, and to date, we have not been the subject of any
claim involving the operation of our site. However, there can be no assurance
that claims will not be brought against us. Even if malpractice claims
ultimately prove to be without merit, defending against them can be
time-consuming and expensive, and any adverse publicity associated with
malpractice claims could have a material adverse effect on our business,
financial condition or results of operations.
While we maintain liability insurance, which provides limited coverage for
malpractice, claims may arise that would not come within the scope of or be
covered by our insurance or, if covered, may exceed the limits of our coverage.
In addition, we expect to seek increased coverage as the business grows. There
can be no assurance that we will be able to maintain existing coverage or expand
its scope to address evolving risks, or obtain increased amounts of coverage on
acceptable terms or at all.
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USE OF MEDICAL INFORMATION AND DATA
There are currently, and continue to be adopted, amended and implemented,
federal and state laws governing the storage and disclosure of medical
information and healthcare records. We may collect and use basic non-identifying
data about users seeking information on our site in compliance with legal
standards. While this information is not intended to constitute or be treated as
medical records, users or regulatory agencies may seek to characterize this
information as medical records and impose requirements and/or sanctions upon us
related to the maintenance and handling of medical records. Maintaining this
information could expose us to claims if unauthorized persons gain access to it
notwithstanding our efforts to maintain its security or if the consumer wishes
to have us transmit or give access to others, and we fail or are unable to do
so.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
The recently enacted Health Insurance Portability and Accountability Act of
1996, mandates the use of standard transactions, standard identifiers, security
and other provisions by the year 2000 with regard to healthcare issues on the
Internet. Depending on the final requirements of federal law, it may be
necessary for our platform and for the applications that we provide to be in
compliance with the proposed regulations. Congress is also likely to consider
legislation that would establish uniform, comprehensive federal rules about an
individual's right to access his own medical information. This legislation would
likely define what is to be considered "protected health information" and
outline steps to ensure the confidentiality of this information.
RELATIONSHIPS WITH RESEARCH COMPANIES
We expect to have relationships with companies that recruit volunteers for
clinical trial studies and to earn revenue from these relationships. Users on
our site will have the opportunity to volunteer to participate in research
studies through organizations with which we have a relationship. Certain ethical
rulings by national and state medical societies at the Federal or state level
may limit or prohibit compensation to physicians for making referrals of
patients to research studies. We do not believe these issues apply to our
planned operations because physicians will not make referrals on our sites, but
we cannot guarantee that regulatory agencies or associations asserting authority
to regulate our activities, including our chat service operations and healthcare
professionals, would not seek to apply their ethical rulings to us.
FDA REGULATION
We do not believe that our current services are regulated by the Food and
Drug Administration; however, our services may become subject to FDA regulation.
Additionally, we may expand our business into areas that subject us to FDA
regulation. We have no experience in complying with FDA regulations. We believe
that complying with FDA regulations would be time consuming, burdensome and
expensive and could delay or prevent the introduction of new services. We
provide access to other health related Web sites through our site. One or more
of those may make available computer programs designed to assist in healthcare
decision making. We do not know whether those programs are subject to regulation
as medical devices. We cannot assure you that those programs comply, or are
capable of complying, with any applicable FDA regulations.
PROTECTION OF PRIVACY
The Federal Trade Commission is considering adopting regulations regarding
the collection and use of personal identifying information obtained from
individuals, particularly children, while accessing
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Web sites. The FTC regulations may include requirements that companies operating
Web sites establish procedures that, among other things:
- give adequate notice to consumers regarding information collection and
disclosure practices;
- provide consumers with the ability to have personal identifying
information deleted from a company's database;
- provide consumers with access to their personal information and with the
ability to rectify inaccurate information;
- clearly identify affiliations or a lack thereof with third parties that
may collect information or sponsor activities on a company's Web site; and
- obtain express parental consent prior to collecting and using personal
identifying information on children under 13 years of age.
We cannot assure that our services will conform with regulations adopted by
the FTC. Even in the absence of FTC regulations, the FTC may investigate the
privacy practices of companies that collect information on the Internet. One
investigation resulted in a consent decree pursuant to which an Internet company
agreed to establish programs to implement the principles noted above. If we
become subject to an FTC investigation, the FTC's regulatory and enforcement
efforts may adversely effect our ability to collect personal information from
our users, which, in turn, could have an adverse effect on our ability to
provide effective opportunities for advertisers and e-commerce marketers. This
could have a material adverse effect on our business, financial condition and
results of operations.
It is also possible that "cookies" employed to track user information and
trigger profiled sponsorships and advertising may become subject to laws
limiting or prohibiting their use. "Cookies" are files stored on a user's hard
drive, possibly without the user's knowledge, to identify a specific server,
file pathway or directory location. Internet browsers may allow users to remove
cookies or prevent cookies from being stored on their hard drives. In addition,
a number of Internet commentators, advocates and governmental bodies in the
United States and other countries have urged the passage of laws limiting or
abolishing the use of cookies. We currently use cookies to identify the zip code
of users of our site in order to trigger the display of information about the
appropriate hospital sponsor on the user's screen. Limitations on or elimination
of our use of cookies could limit the effectiveness of our sponsorship and
advertising opportunities, which could have a material adverse effect on our
business, financial condition and results of operations.
The European Union has adopted a directive that imposes restrictions on the
use of personal data in the EU. Under the directive, EU citizens are guaranteed
rights, which include the right of access to their data, the right to know where
the data originated, the right to have inaccurate data rectified, the right to
recourse in the event of unlawful processing and the right to withhold
permission to use their data for direct marketing. The directive could, among
other things, affect U.S. companies that collect information over the Internet
from individuals in EU member countries, and may impose restrictions that are
more stringent than current Internet privacy standards in the United States. In
particular, companies with offices located in EU countries will not be allowed
to send personal information to countries that do not maintain adequate
standards of privacy. The directive does not, however, define what standards of
privacy are adequate. As a result, there can be no assurance that the directive
will not adversely effect the activities of entities including companies like
ours that engage in data collection from users in EU member countries.
Planned features of our site include the retention of personal information
about our users which we would obtain with their consent. We currently do not
share personal identifying information retained on our site. We plan to
implement a more stringent privacy policy covering this information which may
not fully comply with EU directives. However, if third persons were able to
penetrate our site security and gain access to, or otherwise misappropriate, our
users' personal information, we could
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be subject to liability which could include claims for the misuse of personal
information, including 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
resources. Moreover, to the extent any of the data constitute or are deemed to
constitute patient health records, a breach of privacy could violate federal or
state law.
TAXATION OF E-COMMERCE
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of legislative proposals have been made at the federal, state and local
level, and by several foreign governments, that would impose additional taxes on
e-commerce and at least on state has taken measures to tax other
Internet-related activities. Although the United States Congress recently placed
a three-year moratorium on state and local taxes on Internet access and on
discriminatory taxes on e-commerce, existing state or local laws were expressly
excepted from this moratorium. A new commission, established by the Internet Tax
Freedom Act, is mandated to study the question of whether this exemption should
remain in place. During 2000, the commission is supposed to submit its report to
Congress. Further, when the moratorium expires, some type of federal and/or
state taxes may be imposed upon e-commerce. Tax legislation or other attempts at
regulating e-commerce may substantially impair the growth of e-commerce and, as
a result, adversely affect our opportunity to earn income from e-commerce
activities.
PRESENCE IN MULTIPLE JURISDICTIONS
Due to the global reach of the Internet, it is possible that, although our
Internet transmissions originate primarily in the State of New Jersey, the
governments of other states and foreign countries may attempt to regulate our
activity or take action against us for violations of their laws. There can be no
assurance that state or foreign governments will not allege that we are
violating their laws or that such laws will not be modified, or new laws
enacted, in the future. Any of the foregoing could have a material adverse
effect on our business, financial condition and results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding the executive officers
and directors of AmericasDoctor.com.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Scott M. Rifkin, M.D................... 40 Chief Executive Officer and Chairman of the Board of Directors
Charles R. Bland....................... 50 President
Jeffrey J. Lefko....................... 55 Executive Vice President of Sales and Marketing and Director
Laura Gill............................. 45 Chief Operating Officer
Alan L. Kimmel, M.D.................... 45 Chief Medical Information Officer
Jonathan R. Roth....................... 32 Chief Information Officer
Allan C. Sanders....................... 36 Chief Financial Officer, Secretary and Treasurer
Jonathan E. Missner.................... 30 Executive Vice President, Business Development
Michael E. Cryor....................... 53 Vice President of Corporate Communications
Luther H. Ridenhour.................... 43 Vice President of E-Commerce
Lewis S. Goodman....................... 42 Vice Chairman of the Board of Directors(1)(2)
Thomas P. Dickerson.................... 49 Director(1)(2)
Joseph Esposito........................ 45 Director
Richard Miller......................... 40 Director
Fred L. Brown.......................... 58 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
SCOTT M. RIFKIN, M.D., Chairman of the Board and Chief Executive Officer. In
February 1995, Dr. Rifkin founded Doctors Health, Inc. and served as Chairman of
the Board of Directors from February 1995 until he resigned from his
directorship in September 1998. He also served as Executive Vice President of
Doctors Health, Inc. from February 1995 until he resigned in May 1998. Since May
1998 Dr. Rifkin has been engaged as a consultant to Doctors Health, Inc. From
May 1992 to October 1998, Dr. Rifkin was President of the Baltimore Medical
Group, a Baltimore area multi-specialty group practice. Dr. Rifkin is also a
practicing physician. Dr. Rifkin received a Bachelors Degree in Biology from the
University of Maryland's Baltimore County Campus and graduated from the George
Washington University School of Medicine and is Board Certified in Internal
Medicine. See "Doctors Health, Inc." below for additional information regarding
the bankruptcy of Doctors Health, Inc.
CHARLES R. BLAND, President. From February 1998 until June 1999, Mr. Bland
was Chief Operating Officer for Quark Incorporated. During 1997, Mr. Bland was
President of Windemere Consultants. From 1995 to 1996, Mr. Bland was President,
Africa/Latin American Operations for Owens Corning Fiberglas. From 1993 to 1995,
Mr. Bland was President, Asia Pacific Operations for Owens Corning Fiberglas.
From 1991 to 1993, Mr. Bland was a Vice President and Corporate Controller for
Owens Corning Fiberglas. From 1986 to 1991, Mr. Bland was Vice President,
Operations and Strategic Planning for Owens Corning Fiberglas. Mr. Bland
graduated from Ohio State University and received his MBA from the Sloan School
at the Massachusetts Institute of Technology.
JEFFREY J. LEFKO, Director and Executive Vice President of Sales and
Marketing. From 1994 to 1998, Mr. Lefko was Vice President, Planning and
Marketing for St. Joseph Medical Center, Towson, Maryland. From 1984 to 1985,
Mr. Lefko was President of the American Hospital Association's Society for
Healthcare Planning and Marketing. From 1985 to 1986, Mr. Lefko was Chairman of
American
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Hospital Association's Personal Membership Committee. Mr. Lefko has been a
member of the American College of Healthcare Executives since 1994. From 1986 to
1989, Mr. Lefko was on the Board of the Duke Endowment Memorial Library. Mr.
Lefko graduated from the University of Nebraska and received his Masters in
Hospital Administration from Washington University in St. Louis, Missouri.
LAURA GILL, Chief Operating Officer. From January 1991 to April 1998, Ms.
Gill operated her own healthcare consulting firm. From April 1987 to December
1990, Ms. Gill was Director of Product Management/Product Implementation/Product
Design for Blue Cross/Blue Shield of Maryland and a member of a Research and
Development team for Blue Cross/Blue Shield Association. Ms. Gill graduated from
The City College of New York.
ALAN L. KIMMEL, M.D., Chief Medical Information Officer. From February 1995
until he resigned in November 1998, Dr. Kimmel was Executive Vice President and
Chief Medical Officer for Medical Policy and Practice for Doctors Health, Inc.
From May 1992 to November 1998, Dr. Kimmel was Chairman of the Baltimore Medical
Group. Dr. Kimmel is also a practicing physician. Dr. Kimmel graduated from the
University of Maryland School of Medicine and is Board Certified in Internal
Medicine. See "Bankruptcy of Doctors Health, Inc." below for additional
information regarding the bankruptcy of Doctors Health, Inc.
JONATHAN R. ROTH, Chief Information Officer. From March 1996 to November
1998, Mr. Roth was the Vice President, Technical Operations of AssureNet, Ltd.
From December 1994 to March 1996, Mr. Roth was President of RothNet, Inc., a Web
presence provider. From April 1992 to December 1994, Mr. Roth worked as an
administrator in Columbia University's Department of English and Comparative
Literature. Mr. Roth graduated from Columbia University.
ALLAN C. SANDERS, Chief Financial Officer, Secretary and Treasurer. Mr.
Sanders is a certified public accountant and from July 1996 to March 1998, was a
Senior Manager at Grant Thornton, LLP. From February 1995 to July 1996, Mr.
Sanders was Vice President of Finance at Doctors Health, Inc. From December 1985
to February 1995, Mr. Sanders practiced public accounting primarily in the
healthcare industry, for Kananitz, Uhlfelder P.A. Since January 1996, Mr.
Sanders has served on the Board of Directors for the Baltimore chapter of the
Cystic Fibrosis Foundation. Since January 1997, Mr. Sanders has served as
President of Sports Boosters of Maryland. Mr. Sanders graduated from the
University of Baltimore. See "Bankruptcy of Doctors Health, Inc." below for
additional information regarding the bankruptcy of Doctors Health, Inc.
JONATHAN E. MISSNER, Executive Vice President, Business Development. From
January 1998 to October 1998, Mr. Missner was Business Development Manager for
Ancillary Products for Kaiser Permanente. From September 1997 to January 1998,
Mr. Missner was Director of Marketing and New Product Development for Doctors
Health, Inc. From June 1991 to September 1997, Mr. Missner was Vice President of
Operations and Business Development at Applied Medical Research, Ltd. Mr.
Missner graduated from Johns Hopkins University and received his MBA from George
Washington University. See "Bankruptcy of Doctors Health, Inc." below for
additional information regarding Doctors Health, Inc.
MICHAEL E. CRYOR, Vice President of Corporate Communications. From January
1994 to November 1998, Mr. Cryor was the President and CEO of the Mellen
Corporation. From 1989 to 1994, Mr. Cryor was Executive Vice President of Susan
Davis International, a public affairs firm headquartered in Washington, D.C. and
from 1992 to 1998, Mr. Cryor was co-host of the CBS affiliate, WJZ-TV public
affairs program, "On Time." From 1973 to 1980, Mr. Cryor, a psychologist, served
as an Associate Dean at Morgan State University and as a frequent lecturer in
its Department of Psychology after directing the Department of Consultation and
Education at the Albert Einstein College of Medicine in New York. Mr. Cryor's
other past affiliations include serving as Chairman of the Board of Associated
Black Charities of Maryland and as a Director of the Constellation
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Foundation, the Downtown Partnership, Baltimore Advisors and the Afro-American
Publishing Company. Since 1993, Mr. Cryor has been a member of the Board of
Visitors at the University of Maryland Medical School and, since 1995, a member
of the Board of Sturdivant & Co., a financial investment company. Mr. Cryor
graduated from Morgan State University and holds a master's degree from
Montclair State University.
LUTHER H. RIDENHOUR, Vice President, E-Commerce. In 1996, Mr. Ridenhour
founded LifeLynx, Inc., a medical product engineering, marketing and consulting
company. During 1997 and 1998, Mr. Ridenhour served as a consultant to Smith &
Nephew on product development and marketing issues. From October 1993 to July
1996, Mr. Ridenhour was a financial consultant for Merrill Lynch, and also
served on a venture capital board for the Enterprise Corporation of Western
Pennsylvania. Mr. Ridenhour graduated from the U.S. Naval Academy in Annapolis,
Maryland, and served as a highly decorated Naval Officer and pilot in numerous
key leadership positions, culminating in a tour as Commanding Officer of Naval
Reserve Center, San Juan, Puerto Rico, and selection for tactical squadron
command.
LEWIS S. GOODMAN, Director and Vice Chairman. In August 1997, Mr. Goodman
co-founded AmericasDoctor.com. From October 1996 to present, Mr. Goodman has
been Managing Director of The Wyndhurst Capital Group, LLC. From June 1992 to
September 1996, Mr. Goodman headed the Bankruptcy and Business Reorganization
Practice Group of the Washington, D.C.-based law firm Shaw, Pittman, Potts &
Trowbridge. Mr. Goodman is a graduate of the University of Maryland School of
Law.
THOMAS P. DICKERSON, Director. Mr. Dickerson has served as President of
Tullis-Dickerson & Co., Inc., a venture capital management company, from 1990 to
1997, and as Chairman of Tullis-Dickerson & Co., Inc. since 1997. Mr. Dickerson
is a principal of the venture capital partnerships managed by the
Tullis-Dickerson & Co., Inc. Mr. Dickerson serves as a director of a number of
private companies in the Tullis-Dickerson portfolio. Mr. Dickerson graduated
from Harvard College, the Harvard Law School and Harvard Business School.
JOSEPH ESPOSITO, Director. Mr. Esposito joined Premier Research as President
of DLB Systems in October 1997 and became President and Chief Operating Officer
of Premier Research Worldwide in April 1998. From May 1997 until joining Premier
Research, Mr. Esposito had served as President of DLB Systems, Inc. In addition,
Mr. Esposito served as President, Worldwide Operations for Computron from 1994
to 1997 and held various senior management positions at Ross Systems, Inc. from
1991 to 1994. From 1979 to 1991, Mr. Esposito held various senior management
positions with Wang, which produced computing equipment related to peripheral
devices and workflow/image management software.
RICHARD MILLER, Director. Mr. Miller is an Executive Vice President of
OnSite Access, a broadband communication services company. From 1996 to 1999,
Mr. Miller served as a Senior Vice President of GE Equity, a division of GE
Capital. Prior to GE Equity, Mr. Miller was a general partner with RFE
Investment Partners, a venture capital firm, for six years. Mr. Miller is a
graduate of Le Moyne College and Pace University's Graduate School of Business.
FRED L. BROWN, Director. Mr Brown is the current Chairman of the American
Hospital Association. From June 1993 to December 1998, Mr. Brown was President
and Chief Executive Officer of BJC Health System and Vice Chairman and Trustee
from January 1999 to present. Mr. Brown was President and Chief Executive
Officer of Christian Health Services from January 1986 to May 1993. From
February 1992 to May 1993, Mr. Brown was Chairman and Chief Executive Officer of
the Christian Hospital Northeast-Northwest. From February 1991 to February 1992,
Mr Brown was Vice Chairman of the Christian Hospital Northeast-Northwest. Mr.
Brown graduated from Northwestern University and received his M.B.A. from the
George Washington University.
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BANKRUPTCY OF DOCTORS HEALTH, INC.
As described above, Dr. Rifkin, Dr. Kimmel and Mr. Sanders were officers and
directors with Doctors Health, Inc. Doctors Health, Inc., which was founded in
February 1995, operated as a medical care management company which conducted its
business through a network consisting of primary care physicians, specialists,
hospitals and other healthcare providers. Doctors Health, Inc. operated in the
Baltimore and Washington D.C. metropolitan area, Northern Virginia and
surrounding regions. On November 16, 1998, Doctors Health, Inc. filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Maryland, Baltimore Division.
OUR BOARD AND BOARD COMMITTEES
Our Board of Directors is currently composed of seven persons. There are
currently two vacancies on our Board of Directors. Although our shareholders'
agreement provides for the designation of board members, we currently do not
expect these vacancies to be filled prior to this offering.
Our Board of Directors established the Compensation Committee and the Audit
Committee in July 1998.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all our key executive officers and establishes
and reviews general policies relating to compensation and benefits of our
employees.
The Audit Committee has the responsibility to review the audited financial
statements and accounting practices of AmericasDoctor.com and to consider and
approve the employment of independent accountants for both the audit function
and for advisory and other consulting services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the date of this offering, our Board of Directors ratified all
decisions of the Compensation Committee. No interested director voted on
decisions with respect to his compensation. Upon completion of this offering,
the Compensation Committee will make all compensation decisions. No interlocking
relationship exists between our Board of Directors or Compensation Committee and
the board of directors or compensation committee of any other company, nor has
any interlocking relationship existed in the past.
DIRECTOR COMPENSATION
Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at Board and Board
committee meetings.
Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at Board and Board
committee meetings.
In January 1999, our Board of Directors adopted, subject to stockholder
approval, an omnibus stock incentive plan, identified as the "1999 LTIP". A
total of 150,000 shares of common stock have been issued in the form of stock
options to members of our Board of Directors who are not our employees or
employees of any affiliated company. Option grants to these "outside directors"
are automatic and nondiscretionary. The exercise price of these options is the
fair market value of the common stock on the date of grant.
Each eligible outside director who joins the Board of Directors on or after
the effective date of the Registration Statement of which this prospectus forms
a part will be granted an option to purchase 30,000 shares. The options have
three-year terms. They will generally terminate three months after the date the
director ceases to be a director of AmericasDoctor.com but will remain
outstanding one year after the date the outside director ceases to be a director
due to death or disability. All options granted
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to outside directors will vest as to one-third of the shares on each anniversary
of the option grant date. Additionally, immediately prior to the dissolution or
liquidation of AmericasDoctor.com or a "change in control," as is defined in the
1999 LTIP, the vesting of the options will accelerate.
EXECUTIVE COMPENSATION
The following table sets forth summary information regarding the
compensation awarded to, earned by, or paid for services rendered to
AmericasDoctor.com in all capacities during fiscal year 1998 by our Chief
Executive Officer and our other four most highly compensated executive officers,
other than our Chief Executive Officer, who were serving as executive officers
at the end of fiscal 1998. No other executive officer of AmericasDoctor.com met
the definition of "most highly compensated officer" for fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- -----------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ------------------------------------------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Scott M. Rifkin, M.D.(1)...................
Chief Executive Officer 1998 $ 60,000 -- -- 2,000,000
Allan C. Sanders(2)........................
Chief Financial Officer 1998 65,000 -- -- 100,000
Laura Gill(3)..............................
Chief Operating Officer 1998 65,000 -- -- 100,000
Jeffrey J. Lefko(4)........................
Executive Vice President, Sales and
Marketing 1998 55,000 -- -- 60,000
Alan L. Kimmel, M.D.(5)....................
Chief Medical Information Officer 1998 10,000 -- -- 100,000
</TABLE>
- ------------------------
(1) Scott M. Rifkin, M.D. began receiving his salary in April 1998.
(2) Allan C. Sanders became Chief Financial Officer in April 1998.
(3) Laura Gill became Chief Operating Officer in April 1998.
(4) Jeffrey J. Lefko became a Director and Executive Vice President in July
1998.
(5) Alan L. Kimmel, M.D. became Chief Medical Information Officer in December
1998.
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OPTION GRANTS IN FISCAL YEAR
The following table sets forth information regarding stock options granted
during 1998 to our Chief Executive Officer and our other four most highly
compensated executive officers, other than our Chief Executive Officer, who were
serving as executive officers at the end of 1998. Except for Dr. Rifkin's
options which vested in full in June 1999, the options described below will vest
as to one-third of the shares on each anniversary of the employment date of the
named individuals. These options expire upon the earlier of (x) a specified
period of time after the termination of employment of the named individuals and
(y) ten years following the date the option was granted.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERMS(3)
FISCAL OPTIONS EMPLOYEES IN PER EXPIRATION -------------------------------------
NAME YEAR GRANTED(1) FISCAL YEAR(%) SHARE(2) DATE 0% 5% 10%
- --------------------- ------ ---------- -------------- -------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott M. Rifkin,
M.D................ 1998 2,000,000(4) 83.6% $ 0.50 July 2008 $17,000,000 $28,320,103 $45,687,364
Allan C. Sanders..... 1998 100,000 4.2% 0.50 April 2008 850,000 1,416,005 2,284,368
Laura Gill........... 1998 100,000 4.2% 0.50 April 2008 850,000 1,416,005 2,284,368
Jeffrey J. Lefko..... 1998 60,000 2.5% 0.50 July 2008 510,000 849,603 1,370,621
Alan L. Kimmel,
M.D................ 1998 100,000 4.2% 0.50 December 2008 850,000 1,416,005 2,284,368
</TABLE>
- ------------------------
(1) We granted options for an aggregate of 2,392,000 shares to our employees
under the 1999 LTIP during the year ended December 31, 1998. In addition, we
granted options for an aggregate of 3,608,440 shares to our employees under
the 1999 LTIP during 1999, at a weighted average exercise price of $3.99,
including options for an aggregate of 2,180,440 shares to individuals named
above. These options generally vest as to one-third of the shares on each
anniversary of the option grant date.
(2) Options were granted at an exercise price less than the fair market value of
the common stock, as determined by the Board of Directors on the date of
grant.
(3) The potential realizable value is calculated assuming the exercise price on
the date of grant appreciates at the indicated rate for the entire term of
the option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price. All options listed
have a term of 10 years. Stock price appreciation of 5% and 10% is assumed
pursuant to the rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price will appreciate over the 10-year
option term at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the named
executive officers.
(4) In addition, in the event Dr. Rifkin's employment is terminated without
cause, Dr. Rifkin may cause us to repurchase all or any portion of his
common stock at a price equal to the fair market value of the stock. Dr.
Rifkin has agreed to waive this rights upon consummation of this offering.
For purposes of the employment agreement, "cause" generally means (i) fraud,
(ii) embezzlement, (iii) any other crime involving moral turpitude, (iv)
gross or willful neglect of duty or (v) the material breach of any of the
duties and obligations to be performed by Dr. Rifkin under the employment
agreement.
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FISCAL YEAR-END OPTION VALUES
The following table sets forth for our Chief Executive Officer and our other
four most highly compensated executive officers, other than our Chief Executive
Officer, who were serving as executive officers at the end of 1998, the number
and year-end value of exercisable and unexercisable options for the year ended
December 31, 1998. The value of unexercised in-the-money options was calculated
using the assumed offering price of $9.00 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Scott M. Rifkin, M.D...................................... -- 2,000,000 -- $ 17,000,000
Allan C. Sanders.......................................... -- 100,000 -- 850,000
Laura Gill................................................ -- 100,000 -- 850,000
Jeffrey J. Lefko.......................................... -- 60,000 -- 510,000
Alan L. Kimmel, M.D....................................... -- 100,000 -- 850,000
</TABLE>
No options were exercised during 1998 by the Chief Executive Officer or any
other executive officer of AmericasDoctor.com. No cash compensation intended to
serve as incentive for performance to occur over a period longer than one year
was paid pursuant to a long-term incentive plan during 1998 to the Chief
Executive Officer or any other executive officer of AmericasDoctor.com. We do
not have any defined benefit or actuarial plan under which benefits are
determined primarily by final compensation and years of service with the Chief
Executive Officer or any other executive officer of AmericasDoctor.com.
Our Board of Directors adopted the Amended and Restated AmericasDoctor.com,
Inc. 1999 LTIP on January 27, 1999, subject to approval by our shareholders. Our
Board of Directors believes that in order to advance the interests of
AmericasDoctor.com and its stockholders, we must provide a means to attract,
retain and reward directors, officers and other key employees more directly for
improvement in the common stock price. It is critical for us to adopt a flexible
stock incentive plan, which is both responsive to our growth and competitive
with other stock incentive plans in the industry. The 1999 LTIP is designed to
permit us to take a deduction under Section 162(m) of the Internal Revenue Code
of 1986, as amended with respect to performance-based awards. The 1999 LTIP is
to be administered by the compensation committee of our Board of Directors,
members of which must consist solely of at least two individuals who are
"outside directors" for purposes of Section 162(m) of the Code.
SUMMARY OF THE 1999 LONG-TERM INCENTIVE PLAN
PURPOSE. The 1999 LTIP is designed to encourage selected individuals to
acquire or increase proprietary interests in AmericasDoctor.com, promoting a
closer identity of interest between the selected individuals and our
stockholders.
PARTICIPANTS. All employees and directors of, and consultants to,
AmericasDoctor.com and its affiliates of outstanding ability may be selected by
the compensation committee to become participants in the 1999 LTIP.
NUMBER OF SHARES. The 1999 LTIP provides that 7,200,000 of the authorized
shares of the common stock, including treasury shares, are available for
issuance as awards under the 1999 LTIP and that the maximum number of shares
that may be granted in a calendar year to any participant shall be 400,000. The
1999 LTIP also provides that the number of shares of common stock available for
issuance as awards under the 1999 LTIP will be automatically increased on the
first trading day of
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January each year, beginning in January 2000, by a number of shares equal to two
percent of our outstanding shares on the last trading day of the prior calendar
year.
In the event that an award of a stock option expires or is not exercised or
any other award is forfeited, the shares of common stock allocated to this award
are again available for grant under the 1999 LTIP.
The 1999 LTIP restricts the number of shares that can be awarded as
"performance-based awards", as described below, to 400,000 shares in any
calendar year and restricts the maximum amount that can be awarded as
performance-based awards to at the then prevailing fair market value in any
calendar year.
TERM. No awards may be made after the tenth anniversary of the date the
Board of Directors approves the 1999 LTIP (January 27, 1999).
AWARDS. Our Board of Directors, or a committe thereof, has the power to
determine the terms of the options, including the exercise price of the options,
the number of shares subject to each option, the exercisability thereof, and the
form of consideration payable on such exercise. Unless otherwise determined by
the compensation committee, an award shall not be transferable or assignable by
a participant otherwise than by will or by the laws of descent and distribution.
An award exercisable after the death of a participant may be exercised by the
legatees, personal representatives or distributees of the participant. No award
may be granted under the 1999 LTIP after the tenth anniversary of the effective
date of the 1999 LTIP.
In addition, the 1999 LTIP provides for individual maximum limits on the
number of shares available for issuance in the form of stock options and other
stock-based awards. These annual limits per participant are 400,000 shares. The
1999 LTIP also provides that the compensation committee may specify performance
targets in connection with awards. The performance targets would be determined
with respect to the following criteria:
- annual earnings before payment of taxes and interest;
- annual earnings per share;
- book value per share; and
- annual return on common equity. These performance targets further ensure
that the incentive goals are aligned with shareholder interests.
The forms of the awards that may be granted under the 1999 LTIP are:
STOCK OPTIONS. The compensation committee may award a stock option in
the form of an incentive stock option or a non-qualified stock option. These
awards expire no more than ten years after the date they are granted. The
exercise price per share of common stock, which may be purchased pursuant to
an option, is determined by the compensation committee, but, with respect to
incentive stock options, shall not be less than 100% of the fair market
value of a share of common stock on the date the option is granted. The
exercise price is payable, as a participant may elect, in cash, by tendering
shares of already owned common stock, which shares have been held by the
participant for no less than six months, or any combination thereof, or by
delivery of irrevocable instruments to a broker to deliver to us.
STOCK APPRECIATION RIGHTS. The compensation committee may award a stock
appreciation right, the amount of which shall equal the excess of the fair
market value of one share of common stock on the date of exercise of the
award over the grant price of the stock appreciation right, determined by
the compensation committee as of the date of grant, which shall not be less
than the fair market value of one share of common stock on the date of
grant. The compensation
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committee may, in its sole discretion, determine the manner of exercise of a
stock appreciation right, which may include a limited stock appreciation
right that may only be exercised upon the occurrence of a "change in
control". No stock appreciation right shall have a term longer than ten
years from the date of grant, or a shorter period as may be required under
applicable law.
For the purpose of the 1999 LTIP, a "change in control" generally means:
- any third party becomes, directly or indirectly, the beneficial owner of
voting securities representing 50% or more of the total voting power of
all of the then-outstanding voting securities of AmericasDoctor.com;
- stockholder approval of, or consummation of, a merger, consolidation,
recapitalization, or reorganization of AmericasDoctor.com, a reverse stock
split of outstanding voting securities, unless at least 75% of the voting
power continues to be controlled by 75% of our existing stockholders;
- stockholders approval for a plan of complete liquidation of
AmericasDoctor.com or an agreement for the sale or disposition of 50% or
more of the total assets of AmericasDoctor.com.
RESTRICTED STOCK. The compensation committee may award shares of common
stock that are subject to restrictions on transferability and other
restrictions, which restrictions may lapse separately or in combination at
the times, under the circumstances, in the installments, as the compensation
committee may determine. Upon the termination of employment or service of
the participant, as determined under criteria established by the
compensation committee, restricted stock shall be forfeited and reacquired
by AmericasDoctor.com. A holder of an award of restricted stock shall have
the same rights of any other holder of common stock, including the right to
vote and receive dividends on the restricted stock.
DEFERRED STOCK. The compensation committee may award to the participant
the right to receive, upon the expiration of a deferral period specified by
the compensation committee, an award of common stock. This deferred stock
may be subject to restrictions as imposed by the compensation committee,
including which restrictions may lapse upon expiration of the deferral
period or at earlier times, separately or in combination, in installments,
or otherwise. Upon the termination of employment or service of the
participant, as determined under criteria established by the compensation
committee, the deferred stock shall be forfeited and reacquired by
AmericasDoctor.com. The compensation committee may also permit the
participant to elect to defer receipt of any other common stock vested in
the participant, to be acquired by the participant under the 1999 LTIP or
otherwise. This deferred stock shall not be forfeited upon the participant's
termination of employment or service.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The compensation
committee may grant common stock as a bonus, or grant common stock or other
awards in lieu of AmericasDoctor.com obligations to pay cash under other
plans or compensatory arrangements, provided that this grant complies with
all applicable securities law. Those grants shall be subject to terms as
determined by the compensation committee.
DIVIDEND EQUIVALENTS. The compensation committee may grant the right to
receive cash, common stock, or other awards to the participant that is equal
in value to dividends paid with respect to a specified number of shares of
common stock, or other periodic payments. The compensation committee may
provide that the dividend equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional common
stock, awards or other investment vehicles as the compensation committee may
specify.
OTHER STOCK-BASED AWARDS. The compensation committee may grant other
types of awards of common stock, or awards based in whole or in part by
reference to the fair market value of
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common stock. Other stock-based awards shall be in the form, and dependent
on the conditions, as the compensation committee shall determine, including,
without limitation, the right to receive one or more shares of common stock,
or the equivalent cash value of these shares, upon the completion of a
specified period of service, the occurrence of an event and/or the
attainment of performance objectives, other stock-based awards may be
granted alone or in addition to any other awards granted under the plan. The
compensation committee shall determine whether other stock-based awards
shall be settled in cash, common stock or any combination of cash and common
stock.
ACCELERATION UPON A CHANGE IN CONTROL. Unless otherwise provided by the
compensation committee in an award agreement, all conditions and/or
restrictions relating to the continued performance of services and or
achievement of performance objectives with respect to the exercisability or
full enjoyment of an award shall immediately lapse upon a change in control,
as defined in the 1999 LTIP.
ADJUSTMENTS. In the event of any change in the outstanding shares by
reason of any share dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of shares or any
other corporate exchange, combination or transaction, or any distribution to
shareholders of shares other than regular cash dividends, the compensation
committee may make an equitable adjustment in
- the number or kind of shares or other securities issued or reserved for
issuance pursuant to the Plan or pursuant to outstanding awards,
- the option exercise prices and/or
- any other affected terms of these awards.
In addition, except as otherwise provided in an award agreement, in the
event of a "change in control", the compensation committee in its sole
discretion and without liability to any person may take actions, if any, it
deems necessary or desirable with respect to any award, including, without
limitation,
- the acceleration of an award;
- the payment of an amount, made in cash or stock, in exchange for the
cancellation of an award;
- the termination of an award after a participant has been afforded a
period of time to exercise the award following the change in control;
and/or
- the requiring of the issuance of substitute awards that will
substantially preserve the value, rights and benefits of any affected
awards previously granted under the 1999 LTIP, as of the date of the
consummation of the change in control.
AMENDMENT AND TERMINATION. Our Board of Directors may amend, alter or
discontinue the 1999 LTIP at any time, without shareholder approval, unless
the 1999 LTIP amendment would increase the total number of shares reserved
for issuance under the 1999 LTIP, change the maximum number of shares for
which awards may granted to any participant. In addition, our Board of
Directors may not amend the 1999 LTIP in a manner that would impair the
rights or obligations under any award previously granted to any participant
without the participant's approval and may not amend, alter or discontinue
the adjustment provision of the 1999 LTIP pertaining to a change in control
after the occurrence of a change in control.
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INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Restated Certificate of Incorporation includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to AmericasDoctor.com or
its stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
The limitation of liability and indemnification provisions in our Restated
Certificate of Incorporation may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duty. They may also have the
effect of reducing the likelihood of derivative litigation against directors and
officers, even though this type of action, if successful, might otherwise
benefit us and our stockholders. Furthermore, a stockholder's investment may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these indemnification
provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
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CERTAIN TRANSACTIONS
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK TRANSACTION
On June 1, 1999, we sold 2,077,660 shares of Series B redeemable convertible
preferred stock at a purchase price of $3.31 per share, which was paid in cash.
Each share of Series B redeemable convertible preferred stock is initially
convertible into one share of common stock, subject to anti-dilution provisions.
If the Company has not effected a qualified initial public offering on or prior
to December 31, 1999, which would include this offering, then each share of
Series B redeemable convertible preferred stock will be convertible into
approximately 1.16 shares of common stock. The purchasers of the Series B
redeemable convertible preferred stock included the following holders, who hold
more than 5% of the common stock, assuming the conversion of outstanding
preferred shares:
<TABLE>
<S> <C>
1,511,040
- - GE Capital Equity Investments, Inc...................... shares
- - Tullis-Dickerson Capital Focus II, L.P.................. 566,620 shares
</TABLE>
Thomas P. Dickerson, a director of AmericasDoctor.com, is the Chairman of
Tullis-Dickerson & Co., Inc. and a principal of the venture capital partnerships
managed by the Tullis-Dickerson & Co., Inc. which include TD Origen Capital
Fund, L.P., TD Javelin Capital Fund, L.P. and Tullis-Dickerson Capital Focus II,
L.P. Mr. Dickerson was elected as a director of our Company as a condition to
the investment these entities. In addition, in connection with this transaction,
TD Origen Capital Fund, L.P. and TD Javelin Capital Fund, L.P. agreed to
purchase 188,880 shares of our Series B redeemable convertible preferred stock
on the same terms and conditions, in no event later than 60 days after June 1,
1999. On July 16, 1999, TD Origen and TD Javelin each purchased 94,440 shares of
Series B redeemable convertible preferred stock pursuant to this commitment.
In connection with its purchase of 1,511,040 shares of Series B redeemable
convertible preferred stock in June 1999, GE Capital Equity Investments, Inc.
obtained the right to elect one member to our Board of Directors which it has
not exercised. In connection with this transaction, we agreed to restrictive
covenants and representations, including among others, provisions regarding the
redemption, purchase or acquisition of our equity securities, the incurrence or
assumption of non-permitted debt, the declaration of dividends on any class of
stock or acquisition of any business or assets involving an aggregate
consideration of more than $7,500,000, upon the violation of which (1) we must
either increase the number of directors constituting the board of directors by
two, and the holders of the preferred stock will have the right to elect one
director, or (2) holders of preferred stock may require us to repurchase all,
but not less than all, of the holders, shares of preferred stock at a redemption
price equal to the liquidation value of each share plus all accrued and unpaid
dividends on the preferred stock. If any material breach has occurred and is
continuing more than 180 days after the occurrence, notwithstanding our election
of the remedy described in clause (1) above, each holder will, after 180 days,
have the option to exercise the rights prescribed in each of clauses (1) and (2)
above. The covenants and remedies described above will terminate following
conversion of the Series B redeemable convertible preferred stock into common
stock.
On June 1, 2005, the holders of the Series B redeemable convertible
preferred stock will have the option to require us to redeem their shares for
$3.31 per share. The current liquidation value is $3.31 per share. As a result
of this mandatory redemption provision, we have accounted for the Series B
redeemable convertible preferred stock outside of the stockholders' equity
section in our consolidated balance sheets.
In addition, in connection with this transaction, we entered into a common
stock warrant, an amended and restated registration rights agreement and a
shareholders agreement, each as described below.
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SERIES A CONVERTIBLE PREFERRED STOCK TRANSACTION
On February 1, 1999, we sold 2,666,660 shares of Series A convertible
preferred stock at a purchase price of $1.50 per share, which was paid in cash.
The purchasers of the Series A convertible preferred stock included the
following holders, including their affiliates, of more than 5% of the common
stock, assuming the conversion of outstanding preferred shares:
<TABLE>
<S> <C>
1,999,980
- - Tullis-Dickerson Capital Focus II, L.P.................. shares
- - TD Origen Capital Fund, L.P............................. 333,340 shares
- - TD Javelin Capital Fund, L.P............................ 333,340 shares
</TABLE>
In addition, in connection with this transaction, we entered into a common
stock warrant described below and, a registration rights agreement and a
shareholders agreement, substantially similar to the agreements described below.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
On June 1, 1999, we entered into the Second Amended and Restated
Registration Rights Agreement with Medical Advisory Systems, Premier Research,
Tullis-Dickerson Capital Focus II, L.P., TD Origen Capital Fund, L.P., TD
Javelin Capital Fund, L.P., Wyndhurst Capital and GE Capital Equity Investments,
Inc. Pursuant to the registration rights agreement, upon completion of this
offering, the holders of 9,337,040 shares of our common stock, or their
transferees, will be entitled to contractual rights with respect to the
registration of the shares under the Securities Act. After registration, these
shares would become freely tradeable without restriction under the Securities
Act. The holders of shares of common stock and options to purchase shares of
common stock (the "registrable securities") under the agreement are entitled to
have their shares registered by us under the Securities Act under the terms of
agreements between us and the holders of the registrable securities. Subject to
limitations specified in the agreement, these registration rights include the
following:
- The holders of at least 40% of the then outstanding registrable securities
or a majority of the registrable securities issued or issuable upon the
conversion of the Series A or Series B Preferred Stock may require that we
use our reasonable best efforts to register the registrable securities for
public resale provided the holders requesting registration propose to
dispose of shares of registered securities having an aggregate price to
the public of at least $5,000,000.
- If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities
are entitled to include their shares of common stock in the registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering in view of market conditions.
- Holders of the then outstanding registrable securities having an aggregate
fair market value of $2,500,000 may require us to register all or a
portion of their registrable securities on Form S-3 when use of the form
becomes available to us.
Under the registration rights agreements we also have agreed to indemnify
the holders of registration rights. We will bear all registration expenses other
than underwriting discounts and commissions. All registration rights terminate
on the date ten years following the closing of this offering, or, with respect
to each holder of registrable securities, at the time that the holder is
entitled to sell all of its shares in any three-month period under Rule 144 of
the Securities Act.
Registrations of any shares of common stock held by these shareholders would
result in these shares being freely tradable without restriction under the
Securities Act upon the effective date of the registration. Any sales of
registrable securities by these shareholders, after these shares have been
lawfully registered, could have a material adverse effect on the trading price
of our common stock.
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COMMON STOCK WARRANTS
On February 1, 1999, in connection with the sale of Series A convertible
preferred stock, we issued to Tullis-Dickerson Capital Focus II, L.P., TD
Javelin Capital Fund, L.P. and TD Origen Fund, L.P. warrants to purchase shares
of common stock at an exercise price of $0.01 per share. The number of shares
for which the warrants may be exercised will be fixed at the closing of this
offering or upon the occurence of applicable material transactions involving
AmericasDoctor.com. As a result of the terms of this offering, the number of
shares covered under this warrant will be zero. The warrant may be exercised at
any time on or before December 31, 2009.
On July 20, 1998, we issued to Venture Consultants a warrant to purchase
228,360 shares of common stock at an exercise price of par value in connection
with services rendered to the Company. The warrant was exercised for $11.48 on
April 30, 1999.
From July 2, 1998 to January 27, 1999, we issued to Balanced Capital LLC and
Balance Capital Passive, LP warrants to purchase 556,540 shares of common stock
at an exercise price of par value in connection with services rendered to the
Company. The warrants were exercised on March 30, 1999.
On January 27, 1999, we issued to 3 executive officers warrants to purchase
70,000 shares of common stock at an exercise price of par value in exchange for
guaranteeing a refinanced bridge loan in the amount of $500,000. On March 30,
1999, a warrant representing 14,000 shares of common stock was exercised.
On June 1, 1999 and July 16, 1999, in connection with the sale of Series B
redeemable convertable preferred stock, we issued to each of GE Capital Equity
Investments, Inc. and Tullis-Dickerson Capital Focus II, L.P., TD Origen and TD
Capital warrants to purchase common stock at an exercise price of par value. The
number of shares for which the warrants may be exercised will be fixed at the
closing of this offering or upon the occurence of applicable material
transactions involving AmericasDoctor.com. As a result of the terms of this
offering, the number of shares covered under this warrant will be zero. The
warrant provides that the number of shares will be determined upon, among other
events, consummation of an initial public offering meeting financial criteria to
assure the investors a minimum implied rate of return for their investment using
the public offering price. Based upon the mid-point range of the public offering
price described on the cover of this prospectus, this rate of return will be
exceeded without any additional shares being issued and, accordingly, the
warrant will be exercisable for zero shares.
PREFERRED STOCK WARRANTS
On June 1, 1999 and July 15, 1999, in connection with the sale of Series B
redeemable convertible preferred stock, we issued to GE Capital Equity
Investments, Inc. and Tullis-Dickerson Capital Focus II, L.P. warrants to
purchase 503,660 and 188,880, respectively, shares of Series B redeemable
convertible preferred stock at an exercise price of $3.31 per share. In
addition, on July 16, 1999, TD Javelin Capital Fund, L.P. and TD Origen Capital
Fund, L.P. were each issued warrants to purchase 31,480 shares of Series B
redeemable convertible preferred stock at an exercise price of $3.31 per share.
The preferred stock warrants become exercisable on October 16, 1999 and will
expire on April 15, 2000. The warrants will terminate if, on or prior to October
15, 1999, AmericasDoctor.com has
- effected an initial public offering;
- effected an additional equity financing at a price per share of common
stock in excess of $3.31 which has resulted in cash proceeds to
AmericasDoctor.com of at least $5,000,000; or
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<PAGE>
- entered into any contract for the sale of goods and services, excluding
sales of assets not in the ordinary course of business, which has resulted
in cash proceeds to AmericasDoctor.com of at least $5,000,000.
If this offering is completed prior to October 15, 1999, the preferred stock
warrant will terminate based on the first condition described above.
CONSULTING AGREEMENT WITH THE WYNDHURST CAPITAL GROUP, LLC.
In January 1999, we entered into a consulting agreement with The Wyndhurst
Capital Group, LLC. Our Board of Directors and officers consult Wyndhurst
Capital Group in several areas, including the negotiation of contracts,
financing, organization of our staff, developing our financial and accounting
policies and developing our technology and infrastructure. Lewis S. Goodman, a
director of AmericasDoctor.com, is the managing director of Wyndhurst Capital
Group. We are obligated to pay Wyndhurst Capital Group a fee of $10,000 per
month. In addition, our agreement with Wyndhurst Capital Group provides that
they be paid additional fees for assistance with various financings as follows:
1) For the sale of 2,800,000 shares of common stock at $1.25 per share,
Wyndhurst Capital Group received a cash fee equal to 8% of the funds
raised plus warrants with an exercise price of $0.01 per share for
202,480 shares of common stock.
2) For the sale of Series A convertible preferred stock, Wyndhurst Capital
Group received a cash fee equal to 6% of the funds raised plus warrants
with an exercise price of $0.01 per share for 210,340 shares of common
stock.
3) For the sale of $6,000,000 of Series B redeemable convertible preferred
stock, Wyndhurst Capital Group received a cash fee equal to 6% of the
funds raised plus warrants with an exercise price of $0.01 per share for
394,460 shares of common stock.
4) For any capital raised over and above the amounts contemplated above,
the amount of cash and warrant compensation is to be mutually agreed upon
by Wyndhurst Capital Group and us.
Our agreement with Wyndhurst Capital Group expires in November 1999 and may be
terminated by either party upon 30 days' written notice. The agreement generally
may be renewed for two successive six-month periods. During the six months ended
June 30, 1999, we paid Wyndhurst Capital Group $696,720 in fees under the
consulting agreement. On January 29, 1999, March 3, 1999, and May 26, 1999, we
issued warrants to purchase an aggregate of 1,182,620 shares of common stock to
Wyndhurst Capital Group exercisable at par value per share. Wyndhurst Capital
Group has exercised 467,960 of those warrants as of June 1, 1999. Prior to
January 1999, we had an oral agreement with Wyndhurst Capital Group under which
we were obligated to pay them a cash fee of 8% of amounts raised. During 1998,
we paid Wyndhurst Capital Group approximately $449,227 in fees under the oral
consulting agreement. We are not compensating Wyndhurst Capital Group in
connection with this offering.
TRANSACTION WITH MEDICAL ADVISORY SYSTEMS, INC. AND PREMIER RESEARCH WORLDWIDE,
LTD.
On July 2, 1998, we sold 1,000,000 shares of common stock to each of Medical
Advisory Systems and Premier Research at a purchase price of $1.00 per share.
The purchasers of the shares of common stock included the following holders of
more than 5% of the common stock, assuming the conversion of outstanding
preferred shares:
<TABLE>
<S> <C>
1,000,000
- - Medical Advisory Systems, Inc........................... shares
1,000,000
- - Premier Research WorldWide, Ltd......................... shares
</TABLE>
Ronald W. Pickett, a former director of AmericasDoctor.com, is the Chairman of
the Board of Directors and President of Medical Advisory Systems. Mr. Pickett
was elected as a director as a
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condition to the investment by Medical Advisory Systems. On July 7, 1999 Mr.
Pickett resigned as a director of AmericasDoctor.com. Joel Morganroth, M.D. is
the Chief Executive Officer of Premier Research. Dr. Morganroth was elected as a
Director as a condition to the investment by Premier Research. On June 8, 1999,
Dr. Morganroth resigned as a director of and was replaced on the Company's Board
of Directors by Joseph Esposito.
MEDICAL ADVISORY SYSTEMS, INC. In connection with the sale of 1,000,000
shares of common stock to Medical Advisory Systems for $1,000,000 in cash and
services of which $160,000 is currently outstanding, we entered into an
exclusive call center service agreement with Medical Advisory Systems. Pursuant
to our agreement, Medical Advisory Systems, or its affiliate recruits and hires
doctors and other healthcare professionals to operate our free 24-hour doctor
chat service subject to our authorization. Pursuant to our agreement with
Medical Advisory Systems, we pay Medical Advisory Systems a fee which includes
the costs of the healthcare professionals and other expenses related to our chat
center operations. Medical Advisory Systems provides 24-hour medical services,
medical assistance, telemedicine, medical equipment/pharmaceutical distribution,
training and occupational health services. On January 18, 1999, we consummated
the sale of 800,000 additional shares of common stock to Medical Advisory
Systems at a purchase price of $1.25 per share. Medical Advisory Systems also
purchased 199,160 shares of common stock on June 2, 1999, at a purchase price of
$3.31 per share; Medical Advisory Systems also received 276,660 additional
shares in October 5, 1998 because we failed to meet certain milestones agreed to
in connection with their initial investment in AmericasDoctor.com. On March 3,
1999 we consummated the sale to Medical Advisory Systems of 277,780 shares at a
purchase price of $1.80 per share. During 1998, we paid $822,918 to Medical
Advisory Systems as part of the Medical Advisory Systems agreement. The
agreement with Medical Advisory Systems has an initial term which runs through
July 2000, and provides for two additional renewal terms of one and two years,
respectively. The Company and Medical Advisory Systems currently disagree over
what rights the parties have not to renew the agreement for the renewal terms.
We cannot predict how this disagreement will be resolved. We believe that each
party has the right not to renew the agreement for the final two year renewal
term for any reason, while Medical Advisory Systems has informed us that it
believes that the agreement may only not be renewed for cause. We believe that
whenever our agreement with Medical Advisory Systems terminates, we will be able
to provide our chat center operations ourselves or through a third party at the
same or lower costs. We have no current intention to terminate the agreement and
are not aware that Medical Advisory Systems has any intention to terminate the
agreement.
PREMIER RESEARCH WORLDWIDE, LTD. In connection with the sale of 1,000,000
shares common stock to Premier Research for $1,000,000, we entered into a
Support and Service Agreement with Premier Research which was amended as of
March 18, 1999 by a Marketing Service Agreement. Under the marketing agreement,
Premier Research has agreed to provide marketing services in connection with the
development of our clinical research services business and consultation
regarding the recruitment, quantification and qualification of volunteers for
clinical studies. We have agreed to pay Premier Research $4.8 million in
connection with the marketing agreement. The marketing agreement expires on
December 31, 2000. Pursuant to the support and service agreement with Premier
Research, we will assist Premier Research on an exclusive basis in recruiting
volunteers from our site for Premier Research's clinical trials. The marketing
agreement removed the exclusivity provision from the support and service
agreement. Premier Research also received 276,660 shares in October 1998 because
we failed to meet applicable milestones in connection with their initial
investment in AmericasDoctor.com.
STOCKHOLDERS' VOTING AGREEMENT
On June 30, 1998, Scott M. Rifkin, M.D., our Chief Executive Officer, and a
group of our other stockholders, holding approximately 897,000 shares in
aggregate, entered into a voting agreement. In consideration for the common
stock issued to the stockholders, the stockholders granted to Dr. Rifkin
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the exclusive right to act in respect of, and to vote, the shares held by the
stockholders in any manner and for any purpose in Dr. Rifkin's sole discretion.
Dr. Rifkin's voting rights include, but are not limited to, voting on amendments
to our articles of incorporation and bylaws, increases or reductions of our
capital stock, agreements of consolidation, merger, share exchanges or the sale
of our assets, the liquidation, dissolution or winding up of our company and the
issuance of stock options or warrants for our common stock. Dr. Rifkin is not
entitled to compensation for his services in connection with this agreement,
unless authorized by a majority vote of the stockholders that are party to the
agreement. This agreement may be amended by a vote of two-thirds of the
stockholders that are party to the agreement. The Company expects that Dr.
Rifkin will sign a declaration terminating the Stockholders' Voting Agreement
upon consummation of this offering.
OTHER TRANSACTIONS
In August 1997, we issued 192,840 shares of common stock at a purchase price
of par value which was paid for in cash by Alan M. Rifkin, Dr. Rifkin's brother.
The law firm of Rifkin, Livingston, Levitan & Silver, LLC., of which Alan M.
Rifkin is Managing Member, has represented and continues to represent
AmericasDoctor.com, Inc.
SHAREHOLDERS' AGREEMENT
On June 1, 1999, we entered into a Second Amended and Restated Shareholders'
and Voting Agreement with Medical Advisory Systems, Premier Research,
Tullis-Dickerson Capital Focus II, L.P., TD Origen Capital Fund, L.P., TD
Javelin Capital Fund, L.P., GE Capital Equity Investments, Inc. Dr. Rifkin and
three other executive officers. The shareholders' agreement terminates upon
consummation of this offering. Pursuant to the shareholders' agreement, the
board will consist of:
- one director to be designated by Medical Advisory Systems, so long as
Medical Advisory Systems holds 2.0% or more of the common stock;
- one director to be designated by Premier Research, so long as Premier
Research holds 2.0% or more of the common stock;
- one director to be designated by TD Capital Focus II, L.P., TD Origen
Capital Fund, L.P. and TD Javelin Capital Fund, L.P., so long as they
collectively hold 2.0% or more of the common stock;
- one director to be designated by GE Capital Equity Investments, Inc., so
long as GE Capital Equity Investments, Inc. holds 2.0% or more of the
common stock;
- Dr. Rifkin as Chairman of the Board and four additional directors to be
designated by Dr. Rifkin which right expires on July 2, 2000. After July
2, 2000, Dr. Rifkin will have the right to designate one director, so long
as Dr. Rifkin holds 2.0% or more of the common stock.
If the employment of a management shareholder, other than Dr. Rifkin, is
terminated without cause or upon their death or disability, the remaining
management shareholders may have the option to purchase all of the stock. If all
of the management shareholders' stock is not purchased by the remaining
management shareholders, then, upon the terminated shareholders request, the
other parties to the agreement will have the option, pursuant to the option
described above to purchase the remaining stock. If all of the terminated
shareholders' stock is not purchased pursuant to the options described above
then, upon the management shareholders request, we will be required to purchase
all of the management shareholders' stock at fair market value as defined in the
agreement. In addition, if the employment of a management shareholder is
terminated due to expiration of the management shareholders' employment
agreement, AmericasDoctor.com will have the option to purchase, within 90 days
of termination, all of the terminated management shareholders' stock.
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<PAGE>
If Dr. Rifkin is terminated for cause, we have the option, for 90 days, to
purchase all of his stock. If Dr. Rifkin is terminated without cause, then Dr.
Rifkin may require us to purchase all or a portion of his stock. If Dr. Rifkin's
employment agreement expires, we will have the option to purchase, within 90
days, all of his stock. In addition, upon the death or disability of Dr. Rifkin,
the remaining management shareholders and the other parties to the agreement may
have the option to purchase Dr. Rifkin's stock. If all of the remaining shares
of stock are not purchased, we will be required to purchase all of Dr. Rifkin's
remaining shares at fair market value as defined in the agreement.
The purchase price for all purchases described above will be the price
determined between the parties involved. If the parties cannot reach an
agreement as to the price to be paid for the stock, then the price will be the
fair market value of the stock.
If the employment of a management shareholder, other than Dr. Rifkin, is
terminated without cause and a "change of control" occurs within the first 12
months following the date of a management shareholder's termination, the
purchasers of the management shareholder's stock will be required to pay the
management shareholder, in addition to the purchase price for the terminated
management shareholder's stock, the value the terminated management shareholder
would have received for his stock upon, and as a result of, the change in
control of AmericasDoctor.com. For the purpose of the shareholders' agreement, a
"change of control" means
- a liquidating distribution to the shareholders;
- a contribution, consolidation or merger where a majority of the members of
the Board of Directors after the event; were not members of the Board of
Directors prior to this event; and
- any sale, exchange or other disposition of all, or substantially all, of
AmericasDoctors.com's assets.
Pursuant to the shareholders' agreement, each party to the agreement, other
than AmericasDoctor.com, is restricted from transferring its shares of stock
unless the stock is first offered for purchase to AmericasDoctor.com and then to
other shareholders party to the agreement. Each shareholder shall have the right
to require that a pro rata amount of their shares be included in any transfer or
sale.
If a shareholder or a group of shareholders proposes to transfer their
shares, other than pursuant to a registration statement under the Securities
Act, and the transferred stock exceeds 33 1/3% of the outstanding stock of
AmericasDoctor.com, the remaining shareholders will have the right to
participate in the sale of common stock on the same terms and conditions as the
original shareholder or group of shareholders proposing the sale or transfer of
stock.
Upon any additional issuance of stock, each of Dr. Rifkin, Medical Advisory
Systems, the holders of preferred stock and Premier Research shall have the
right and option to purchase a portion of the newly issued shares in proportion
to their respective ownership of shares, at the purchase price and on the terms
being provided to the proposed buyers of the newly issued shares.
The Company has also agreed to covenants and provisions regarding furnishing
financial statements, the provision of other financial information, and
compliance with regulatory requirements.
EMPLOYMENT AGREEMENTS
We are a party to employment agreements with Scott M. Rifkin, M.D., Jeffrey
J. Lefko, Allan C. Sanders and Laura Gill, dated February 1, 1999. The term of
each employment agreement is five years and will be extended automatically for
successive one-year terms. The salary paid under each employment agreement will
be reviewed by our Board of Directors during each year and may be adjusted at
our Board's sole discretion. Each employee under these employment agreements is
eligible for an annual discretionary bonus.
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<PAGE>
In the event that an employee ceases his or her employment, each employee
has agreed not to compete with us for a period of 12 months following the
cessation of his or her employment. In the event we undertake an initial public
offering of our common stock at a before-the-money market capitalization of not
less than $75,000,000, each employee, in his or her sole discretion, may require
us to renegotiate the terms of his or her employment agreement. If renegotiation
occurs, the employee will be entitled to compensation and other benefits
consistent with the compensation and benefits of similarly situated officers of
similarly situated companies. As a result of this offering Scott M. Rifkin,
M.D., Jeffrey J. Lefko, Allan C. Sanders and Laura Gill will have the right to
renegotiate their employment agreements with the Company.
Pursuant to our employment agreement with Scott M. Rifkin, M.D., we are
obligated to pay Dr. Rifkin an initial annual salary of $225,000 plus
cost-of-living adjustments. In the event that Dr. Rifkin's employment is
terminated without cause, Dr. Rifkin may cause us to repurchase all or any
portion of his shares at a price equal to the fair market value of his stock.
This provision terminates upon consummation of this offering.
Pursuant to our employment agreements with Jeffrey J. Lefko, Allan C.
Sanders and Laura Gill, we are obligated to pay each employee an initial annual
salary of $120,000 plus cost-of-living adjustments. In the event that the
employment of Mr. Lefko, Mr. Sanders, or Ms. Gill is terminated without cause,
each would receive a severance payment in an amount equal to his or her salary
for a period of nine months.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of July 23, 1999, as adjusted to
reflect the sale of the common stock offered under this prospectus, by:
- our Chief Executive Officer and our four other highest compensated
executive officers;
- each director;
- all directors and executive officers as a group; and
- each stockholder known by us to own beneficially more than 5% of the
common stock.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
BENEFICIALLY OWNED(1)
NUMBER OF SHARES --------------------------------
BENEFICIALLY AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED BEFORE OFFERING OFFERING(2)
- ------------------------------------------------------------ ----------------- --------------- ---------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Scott M. Rifkin, M.D(3)..................................... 4,669,780 23.7% 14.0%
Allan C. Sanders(4)......................................... 100,620 * *
Laura Gill(5)............................................... 73,340 * *
Jeffrey J. Lefko(6)......................................... 92,620 * *
Alan L. Kimmel, M.D(7)...................................... 214,200 1.2% *
Lewis S. Goodman(8)......................................... 1,156,920 6.4% 4.6%
Thomas P. Dickerson(9)...................................... 3,422,160 19.4% 13.7%
Joseph Esposito(10)......................................... 1,276,660 7.2% 5.1%
Richard Miller.............................................. -- --
Fred L. Brown............................................... 30,000 * *
All executive officers and directors as a group (10
persons)(11).............................................. 11,006,300 54.4% 36.8%
5% STOCKHOLDERS
Tullis-Dickerson Capital Focus II, L.P...................... 3,422,160 19.4% 13.7%
One Greenwich Plaza
Greenwich, CT 06830
Joel Morganroth, M.D.(12)................................... 2,215,140 12.5% 8.9%
1040 Stony Lane
Gladwyne, PA 19035
Medical Advisory Systems, Inc............................... 2,553,600 14.4% 10.2%
8050 Southern Maryland Boulevard
Owings Mills, MD 20736
GE Capital Equity Investments, Inc.......................... 1,511,040 8.5% 6.1%
120 Long Ridge Road
Stamford, CT 06927
Premier Research Worldwide, Ltd............................. 1,276,660 7.2% 5.1%
30 South 17(th) Street
Philadelphia, PA 19103
Wyndhurst Capital Group, LLC(13)............................ 1,156,920 6.4% 4.6%
575 S. Charles Street
Suite 200
Baltimore, MD 21201
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership is based on
17,680,020 shares outstanding as of July 23, 1999. Shares of
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<PAGE>
common stock subject to options currently exercisable or exercisable within
60 days of July 20, 1999 are deemed outstanding for the purpose of computing
the percentage ownership of the person holding these options but are not
deemed outstanding for computing the percentage ownership of any other
person. Unless otherwise indicated below, the persons and entities named in
the table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes 14,000 shares issuable upon exercise of warrants, 2,000,000 shares
issuable upon exercise of options and 897,000 shares subject to a
shareholders voting agreement.
(4) Includes 33,340 shares issuable upon exercise of options.
(5) Includes 40,000 shares owned jointly with her husband and 33,340 shares
issuable upon exercise of options.
(6) Includes 20,000 shares issuable upon exercise of options.
(7) Includes 42,000 shares issuable upon exercise of warrants.
(8) Includes 1,156,920 shares beneficially owned by Wyndhurst Capital Group,
LLC. Mr. Goodman is Managing Director of the Wyndhurst Capital Group, LLC.
(9) Includes 427,780 shares, 427,780 shares and 2,566,600 shares beneficially
owned by TD Javelin Capital Fund, L.P., TD Origen Capital Fund, L.P. and
Tullis-Dickerson Capital Focus II, L.P., respectively. Director Dickerson is
a principal of Tullis-Dickerson Capital Focus II, L.P., Javelin Capital
Fund, L.P. and TD Origen Capital Fund, L.P. Mr. Dickerson disclaims
beneficial ownership of all shares of common stock owned by Tullis-Dickerson
Capital Focus L.P. and its affiliated funds.
(10) Includes 1,276,660 shares beneficially owned by Premier Research Worldwide,
Ltd. Mr. Esposito is an executive officer of Premier Research Worldwide,
Ltd.
(11) Includes 450,460 shares issuable upon exercise of warrants and 2,086,680
shares issuable upon exercise of options.
(12) Includes 1,276,660 shares beneficially owned by Premier Research Worldwide,
Ltd. Dr. Morganroth is Chief Executive Officer and a Director of Premier
Research Worldwide, Ltd. Also includes 120,000 shares held by members of his
immediate family. Dr. Morganroth disclaims beneficial ownership of all
shares of common stock owned by Premier Research. Dr. Morganroth was a
director until June 1999.
(13) Includes 394,460 shares issuable upon exercise of warrants.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Upon completion of this offering our authorized capital stock will consist
of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.
The following description is only a summary of the material provisions of our
common stock and preferred stock. You should refer to our Restated Certificate
of Incorporation and Bylaws, which is subject to approval by our Board of
Directors and shareholders, which are incorporated by reference and the
applicable provisions of Delaware law for additional details regarding our
capital stock.
COMMON STOCK
As of July 20, 1999 there were 12,705,400 shares of common stock
outstanding. Each outstanding shares of common stock is, and the shares of
common stock outstanding upon completion of this offering will be, fully paid
and nonassessable.
DIVIDENDS
Subject to any prior dividend rights of the holders of preferred stock,
dividends may be paid in cash, in property or in shares of the capital stock of
AmericasDoctor.com as determined by our Board of Directors out of funds legally
available for the payment of dividends.
VOTING
Holders of our common stock are entitled to vote on all matters to be voted
on by our stockholders, except to vote on any amendment to the Restated
Certificate of Incorporation that relates solely to the terms of an outstanding
series of preferred stock if the preferred stock holders are entitled to vote on
the matter and, except as otherwise required by law, by-law or provided in any
resolution adopted by our Board of Directors. Each share of our common stock is
entitled to one vote on all matters which stockholders generally entitled to
vote. Holders of our common stock do not have cumulative voting rights, which
means that the holders of a majority of the shares voted can elect all of the
directors then standing for election.
LIQUIDATION VALUE
After the satisfaction in full of any liquidation preferences of holders of
our preferred stock, holders of our common stock are entitled to ratable
distribution of the remaining assets available for distribution to stockholders
in the event of our liquidation, dissolution or winding up.
OTHER
Our common stock is not subject to redemption, whether by operation of a
sinking fund or otherwise. Holders of our common stock are not entitled to
preemptive rights under our Restated Certificate of Incorporation or under our
Amended and Restated Bylaws. The rights, preferences and privileges of holders
of our common stock are subject to, and may be adversely affected by, the rights
of holders of any shares of preferred stock which we may issue in the future.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American Securities
Transfer & Trust, Inc.
PREFERRED STOCK As of August 31, 1999 and adjusted on a pro forma basis for
the anticipated 20 to 1 stock split, we had designated 2,666,660 shares of
preferred stock as our Series A convertible
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preferred stock and 3,022,060 shares as our Series B redeemable convertible
preferred stock. As of July 23, 1999, there were 2,666,660 shares of Series A
convertible preferred stock and 2,266,540 shares of Series B redeemable
convertible preferred stock outstanding. The Series B redeemable convertible
preferred stock is redeemable at the holder's option, at any time within 180
days after June 1, 2005. Each share of Series A convertible preferred stock and
Series B redeemable convertible preferred stock is convertible, and mandatorily
upon consummation of this offering, at the option of the holder, into one share
of common stock, subject to anti-dilution protection. If the Company has not
effected a qualified initial public offering on or prior to December 31, 1999,
then each share of Series B redeemable convertible preferred stock will be
convertible into approximately 1.16 shares of common stock.
Upon completion of this offering, all outstanding shares of preferred stock
will be converted on a one-to-one basis into 4,933,200 shares of common stock.
However, following this conversion, under our Restated Certificate of
Incorporation, our Board of Directors will have the authority, without further
action by the stockholders, to issue up to 9,715,564 million shares of preferred
stock in one or more series. Our Board of Directors can fix the rights,
preferences and privileges of the shares of each series and any qualifications,
limitations or restrictions and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, as are
stated in the resolution adopted by our Board of Directors providing for the
issue of the series and as are permitted by the Delaware General Corporation
Law.
WARRANTS
As of June 30, 1999 there were warrants outstanding to purchase a total of
451,720 shares of common stock at a price of $0.01 per share. In addition, we
have issued warrants for an indeterminable amount of shares. As a result of the
terms of this offering, the number of shares covered under this warrant will be
zero. See "Certain Transactions."
NO WRITTEN CONSENT OF THE STOCKHOLDERS
After completion of this offering stockholders may take action only at a
regular or special meeting of stockholders, and not by express written consent
called by the Chairman of the Board of Directors.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:
- the Board of Directors approved the transaction in which the stockholder
became an interested stockholder prior to the date the interested
stockholder attained this status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to the date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders.
A "business combination" generally includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
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This statute could prohibit or delay the accomplishment of mergers or other
takeover or change in control attempts with respect to AmericasDoctor.com and,
accordingly, may discourage attempts to acquire us.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Restated Certificate of Incorporation will provide that, except to the
extent permitted by Delaware law, our directors shall not be personally liable
to us or our stockholders for monetary damages for any breach of fiduciary duty
as a director. Under Delaware law, the directors have a fiduciary duty to us
that is not eliminated by this provision of the certificate and, in appropriate
circumstances, equitable remedies including injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or that involve
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by the Delaware
law. This provision also does not affect the directors' responsibilities under
any other laws, including the federal securities laws.
Section 145 of the Delaware corporate law empowers a corporation to
indemnify its directors and officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising under Section 174 of the Delaware corporate law; or
- for any transaction from which the director derived an improper personal
benefit.
Delaware law provides further that the indemnification permitted by that law
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under a corporation's bylaws, any agreement, a vote of
stockholders or otherwise. Our Restated Certificate of Incorporation eliminates
the personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware corporate law and provides that we may fully indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that the person
is or was an employee, director or officer of AmericasDoctor.com or is or was
serving at our request as an employee, director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with this type of action, suit or proceeding.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock, and the effect, if any, that the sale or availability for sale of shares
of additional common stock will have on the trading price of the common stock
cannot be predicted. Nevertheless, sales of substantial amounts of these shares
in the public market, or the perception that public market sales could occur,
could adversely affect the trading price of the common stock and could impair
our future ability to raise capital through an offering of our equity
securities.
Upon completion of this offering, we will have outstanding an aggregate of
24,930,020 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options and warrants. We
also have 451,720 shares issuable under currently exercisable warrants. Of these
shares, all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless these
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act. The remaining 18,131,740 shares of our common stock held by
individual and institutional existing stockholders or issuable under outstanding
warrants are "restricted securities" as that term is defined in Rule 144 under
the Securities Act. Restricted securities may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rule
144 or 701 promulgated under the Securities Act, which rules are summarized
below.
Unless the contractual restrictions described below are waived, shares held
by our existing stockholders or issuable under outstanding options and warrants
are expected to be eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
At various times after 90 days from the date of this prospectus: ............................... 1,390,320
At various times after 180 days from the date of this prospectus: .............................. 16,741,420
</TABLE>
After this offering we also will have 6,000,440 shares issuable under
outstanding options, 2,090,660 of which are currently exercisable. Substantially
all of our currently exercisable options are owned by our directors and
executive officers. We intend to file a registration statement to register for
resale, subject to the terms of lock-up agreements, shares issuable upon
exercise of stock options as described below.
LOCK-UP AGREEMENTS
In connection with this offering, we expect that all of our officers,
directors and our stockholders who beneficially own more than 5% of our common
stock will sign lock-up agreements under which they will agree not to transfer
or dispose of, directly or indirectly, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for shares of our
common stock, for a period of 180 days after the date of this prospectus.
Transfers or dispositions can be made sooner with the prior written consent of
AmericasDoctor.com and Warburg Dillon Read. Our other shareholders have agreed
or are expected to agree that they will not, without the prior written consent
of Warburg Dillon Read LLC and us, offer, sell or otherwise dispose of any
shares of common stock, options or warrants to acquire shares of common stock
for a period of 180 days after the date of the underwriting agreement, except
these shareholders have the right to dispose of 25% of the shares of common
stock held by them on the date of the underwriting agreement at any time, or
from time to time, after the date that is 90 days after the date of the
underwriting agreement.
In addition, as described below, shareholders party to our registration
rights agreement have the right, subject to their agreements, to require
AmericasDoctor.com to register for sale to the public some or all of their
shares at any time after this offering.
83
<PAGE>
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately 249,300 shares immediately after this offering;
and
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to this type of sale.
Sales under Rule 144 are also subject to additional provisions regarding the
manner of sale and notice requirements and the availability of current public
information about us.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
RULE 701
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell these shares in reliance upon Rule 144 but without compliance
with specified restrictions. Rule 701 provides that affiliates may sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirement and that non-affiliates may sell these shares in reliance on Rule
144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 9,337,040 shares of common
stock, to be referred to as the "registrable securities", are entitled to have
their shares registered by us under the Securities Act after 180 days under the
terms of agreements between us and the holders of the registrable securities.
After registration, these shares would become freely tradeable without
restriction under the Securities Act. Subject to limitations specified in the
agreement, these registration rights include the following:
- The holders of at least 40% of the then outstanding registrable securities
may require that we use our reasonable best efforts to register the
registrable securities for public resale.
- If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities
are entitled to include their shares of common stock in the registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering in view of market conditions
- Holders of the then outstanding registrable securities having an aggregate
fair market value of $2,500,000 may require us to register all or a
portion of their registrable securities on Form S-3 when use of the form
becomes available to us.
84
<PAGE>
Under the registration rights agreements we also have agreed to indemnify
the holders of registration rights. We will bear all registration expenses other
than underwriting discounts and commissions. All registration rights terminate
on the date ten years following the closing of this offering, or, with respect
to each holder of registrable securities, at the time that the holder is
entitled to sell all of its shares in any three-month period under Rule 144 of
the Securities Act.
STOCK INCENTIVE PLAN
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 7,200,000 shares of our common stock reserved
for issuance under our 1999 Long-Term Incentive Plan and the shares reserved for
issuance upon exercise of outstanding non-plan options. As of June 30, 1999,
options to purchase 6,000,440 shares of our common stock were issued and
outstanding. Upon the expiration of the lock-up agreements described above, at
least 2,130,660 shares of our common stock will be subject to vested options,
based on options outstanding as of June 30, 1999. The registration statement is
expected to be filed and become effective as soon as practicable after the
effective date of this offering. Accordingly, shares registered under the
registration statement will, subject to vesting provisions and Rule 144 volume
limitations applicable to our affiliates, be available for sale in the open
market immediately after the 180-day lock-up agreements expire.
85
<PAGE>
UNDERWRITING
AmericasDoctor.com intends to enter into an underwriting agreement, with the
underwriters named below. Warburg Dillon Read LLC, William Blair & Company,
L.L.C. and Prudential Vector Healthcare Group, a unit of Prudential Securities
Incorporated, are acting as representatives for the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
a number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Warburg Dillon Read LLC..........................................................
William Blair & Company, L.L.C...................................................
Prudential Vector Healthcare Group...............................................
----------
Total ...................................................................... 7,250,000
----------
----------
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. The underwriting agreement provides that if an underwriter defaults
in its commitment to purchase shares, the commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated,
depending on the circumstances. The underwriting agreement provides that the
obligations of the several underwriters are subject to conditions precedent,
including, but not limited to:
- the absence of any material adverse change in AmericasDoctor.com's
business;
- the occurrence of any material adverse change in the domestic or
international financial markets;
- the suspension of trading of the shares on the Nasdaq National Market or
the suspension of trading generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market; and
- the receipt of one or more certificates, opinions and letters from
AmericasDoctor.com and its counsel.
The representatives have advised AmericasDoctor.com that the underwriters
propose to offer the shares of common stock directly to the public at the public
offering price set forth on the cover page of this prospectus, and to dealers,
at a price less a concession not in excess of $ per share. The underwriters
may allow, and the dealers may allow, a concession not in excess of $ per
share to other underwriters or to certain other dealers. After this offering of
shares of common stock, the price and other selling terms may be changed by the
underwriters. The underwriters have informed AmericasDoctor.com that the
underwriters do not intend to confirm discretionary sales of the shares of
common stock offered by this prospectus. The underwriters expect to deliver the
shares on or about , 1999.
AmericasDoctor.com has granted to the underwriters an option, exercisable no
later than 30 days after the date of this prospectus, to purchase up to a total
of additional shares of common stock to cover over-allotments, if any,
at the public offering price set forth on the cover page of this prospectus,
less the underwriting discounts and commissions. To the extent that the
underwriters
86
<PAGE>
exercise this option, each of the underwriters will become obligated, subject to
applicable conditions set forth in the underwriting agreement, to purchase
approximately the same percentage of additional shares as the number of shares
of common stock set forth next to the underwriter's name in the preceding table
bears to the total number of shares of common stock offered by this prospectus.
AmericasDoctor.com will be obligated, pursuant to the option, to sell these
shares to the underwriters to the extent the option is exercised.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by AmericasDoctor.com:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE TOTAL WITH FULL EXERCISE
OF OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
- ----------- ----------------------- ------------------------
<S> <C> <C>
$ $ $
</TABLE>
AmericasDoctor.com estimates that the total expenses of the offering,
excluding the underwriting discount, will be approximately .
AmericasDoctor.com has agreed to indemnify the underwriters against
liabilities incurred by them under the Securities Act, including with respect to
disclosure in this prospectus, other than with respect to information provided
by the underwriters expressly for inclusion in this prospectus, the laws and
regulations of foreign jurisdictions where shares are sold directly to
employees, directors and persons associated with AmericasDoctor.com pursuant to
a directed share program in connection with this offering and to contribute to
payments the underwriters may be required to make for these liabilities.
The executive officers and directors and shareholders who own beneficially
more than 5% of our common stock have agreed or are expected to agree that they
will not, without the prior written consent of Warburg Dillon Read LLC, offer,
sell or otherwise dispose of any shares of common stock, options or warrants to
acquire shares of common stock or securities exchangeable for or convertible
into shares of common stock for a period of 180 days after the date of the
underwriting agreement. Other shareholders of AmericasDoctor.com have agreed or
are expected to agree that they will not, without the prior written consent of
Warburg Dillon Read LLC and Company, offer, sell or otherwise dispose of any
shares of common stock, options or warrants to acquire shares of common stock
for a period of 180 days after the date of this prospectus, except the
shareholders have the right to dispose of 25% of the shares of common stock held
by them on the date of the underwriting agreement at any time, or from time to
time, after the date that is 90 days after the date of the underwriting
agreement. AmericasDoctor.com has agreed that it will not, without the prior
written consent of Warburg Dillon Read LLC, offer, sell or otherwise dispose of
any shares of common stock, options or warrants to acquire shares of common
stock or securities exchangeable for or convertible into shares of common stock
during the 180-day period following the date of this prospectus, except that
AmericasDoctor.com may issue shares upon the exercise of options granted prior
to the date of this prospectus and outstanding warrants, and may grant
additional options under its 1999 Long-Term Incentive Plan, provided that,
without the prior written consent of Warburg Dillon Read LLC, these additional
options shall not be exercisable during this period.
The underwriters have reserved for sale up to shares for
employees, directors and other persons associated with AmericasDoctor.com. These
reserved shares will be sold at the public offering price that appears on the
cover of this prospectus. The number of shares available for sale to the general
public in the offering will be reduced to the extent reserved shares are
purchased by these persons. The underwriters will offer to the general public,
on the same terms as other shares offered by this prospectus, any reserved
shares that are not purchased by these persons.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among
87
<PAGE>
representatives of the underwriters and AmericasDoctor.com. Among the factors to
be considered in determining the public offering price will be:
- prevailing market conditions;
- our results of operations in recent periods;
- our present stage of development;
- the market capitalizations and stages of development of other companies
which we and the representatives of the underwriters believe to be
comparable to us; and
- estimates of our business potential.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares,
so long as stabilizing bids do not exceed a specified maximum.
- Over-allotments and syndicate covering transactions -- The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
- Penalty bids -- If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of these transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither AmericasDoctor.com nor the underwriters makes any representation or
prediction as to the effect that the transactions described above may have on
the price of the shares. These transactions may occur on the Nasdaq National
Market or otherwise. If these transactions are commenced, they may be
discontinued without notice at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for AmericasDoctor.com by Simpson Thacher & Bartlett, New York,
New York and for the underwriters by Willkie Farr & Gallagher, New York, New
York.
EXPERTS
The financial statements of AmericasDoctor.com on December 31, 1998,
December 31, 1997, for the year ended December 31, 1998 and the period from
August 8, 1997 (inception) to December 31, 1997, appearing in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said report.
88
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT
AMERICASDOCTOR.COM
We have filed a registration statement on Form S-1, including amendments,
relating to the common stock offered by this prospectus with the Securities and
Exchange Commission. This prospectus contains all of the material information
relating to this offering. Additional information is provided in the exhibits
and schedules to the registration statement of which this prospectus is a part.
We believe statements and descriptions contained in this prospectus as to the
contents of contracts or other documents referred to in this prospectus are
complete in all material respects and, in each instance, reference is also made
to the copy of the contract or other document filed as an exhibit to the
registration statement. For further information about AmericasDoctor.com and
this offering, reference is made to our complete registration statement,
including exhibits and schedules.
A copy of the registration statement may be inspected by anyone without
charge at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Northwestern Atrium Center
Washington, D.C. 20549 13(th) Floor 500 West Madison Street
New York, New York 10048 Chicago, Illinois 60661
</TABLE>
You may also obtain copies of all or any part of the registration statement,
including any exhibit, from the SEC upon the payment of applicable fees
prescribed by the SEC. You may obtain information regarding the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
89
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999 (unaudited)................. F-3
Consolidated Statements of Operations for the Period from August 8, 1997 (Inception) Through December 31,
1997, the Year Ended December 31, 1998, and the Six Months Ended June 30, 1998 and 1999 (unaudited)...... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Period From August 8, 1997 (Inception)
Through December 31, 1997, the Year Ended December 31, 1998, and the Six Months Ended June 30, 1999
(unaudited).............................................................................................. F-5
Consolidated Statements of Cash Flows for the Period From August 8, 1997 (Inception) Through
December 31, 1997, the Year Ended December 31, 1998, and the Six Months Ended
June 30, 1998 and 1999 (unaudited)....................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
The accompanying financial statements reflect the completion of a 20 for 1
stock split that will take place on or prior to the effective date of an
offering of common stock to the public. The following report is in the form
which will be issued by us upon completion of the stock split described above,
which is described in Note 1 to the consolidated financial statements, and
assuming that from December 31, 1998 to the date of such completion no other
material events have occurred that would affect the accompanying consolidated
financial statements or require disclosure therein.
/s/ Arthur Andersen LLP
Baltimore, Maryland
July 26, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
AmericasDoctor.com, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheets of
AmericasDoctor.com, Inc. and subsidiary (a Delaware corporation) as of December
31, 1997 and 1998, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the period from August 8,
1997 (inception) through December 31, 1997, and for the year ended December 31,
1998. These consolidated 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
AmericasDoctor.com, Inc. and subsidiary, as of December 31, 1997 and 1998, and
the results of its operations and its cash flows for the period from August 8,
1997 (inception) through December 31, 1997, and the year ended December 31,
1998, in conformity with generally accepted accounting principles.
Baltimore, Maryland
1999
F-2
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1997 1998 1999
---------- -------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................... $ 67,035 $ 270,698 $ 5,287,714
Accounts receivable................................................ -- 61,500 90,049
Other receivables.................................................. 15,000 -- --
Prepaid expenses and other current assets.......................... 50,000 1,019,735 1,312,919
---------- -------------- --------------
Total current assets........................................... 132,035 1,351,933 6,690,682
PROPERTY AND EQUIPMENT, net.......................................... -- 445,226 1,125,676
OTHER ASSETS......................................................... 8,833 45,961 740,831
---------- -------------- --------------
Total assets................................................... $ 140,868 $ 1,843,120 $ 8,557,189
---------- -------------- --------------
---------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............................. $ 24,892 $ 619,474 $ 1,869,743
Deferred income.................................................... -- -- 99,470
Notes payable...................................................... -- 444,350 --
Convertible debt................................................... 24,091 -- --
Current portion of capital lease obligation........................ -- 2,436 16,221
---------- -------------- --------------
Total current liabilities...................................... 48,983 1,066,260 1,985,434
CAPITAL LEASE OBLIGATION, net of current portion..................... -- 5,769 26,471
---------- -------------- --------------
Total liabilities.............................................. 48,983 1,072,029 2,011,905
---------- -------------- --------------
COMMITMENTS AND CONTINGENCIES
COMMON STOCK, subject to put rights, par value $0.01 per share;
1,815,300, 2,059,480 and 2,119,080 shares issued and outstanding... 907 2,574,349 15,257,376
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK, par value $0.01 per
share; 3,022,060 shares authorized (split-adjusted); liquidation
value $3.31 per share; 0, 0 and 2,077,660 shares issued and
outstanding........................................................ -- -- 5,119,496
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value $0.01 per share;
2,666,660 shares authorized (split-adjusted); liquidation value
$1.50 per share; 0, 0, and 2,666,660 shares issued and
outstanding...................................................... -- -- 26,667
Common stock, par value $0.01 per share; 20,000,000, 20,000,000 and
50,000,000 shares authorized; 659,740, 8,328,900 and 10,615,060
shares issued and outstanding; 0, 1,128,740 and 210,867 shares
subscribed....................................................... 6,597 83,289 106,151
Warrants to purchase common stock.................................. -- 1,117,911 1,417,982
Additional paid-in capital......................................... 126,233 3,587,112 3,391,682
Stock subscription receivable...................................... (366) (1,127,204) (165,214)
Deferred compensation.............................................. -- (180,967) (414,016)
Accumulated deficit................................................ (41,486) (5,283,399) (18,194,840)
---------- -------------- --------------
Total stockholders' equity..................................... 90,978 (1,803,258) (13,831,588)
---------- -------------- --------------
Total liabilities and stockholders' equity..................... $ 140,868 $ 1,843,120 $ 8,557,189
---------- -------------- --------------
---------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8,
1997
(INCEPTION)
THROUGH YEAR ENDED SIX MONTHS ENDED
DECEMBER DECEMBER JUNE 30,
31, 31, -----------------------
1997 1998 1998 1999
----------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE.................................. $ -- $ 61,500 $ -- $ 545,865
----------- ---------- ---------- -----------
OPERATING EXPENSES:
Content, product and production
expenses............................. -- 1,500,667 230,770 1,689,127
Content, product and production
expenses incurred with related
parties.............................. -- 972,324 -- 3,260,136
----------- ---------- ---------- -----------
Total content, product and production
expense............................ -- 2,472,991 230,770 4,949,263
Product development.................... -- 973,803 465,216 565,461
Sales and marketing.................... -- 587,291 155,121 963,770
General and administrative expenses.... 11,812 595,815 282,752 6,814,220
General and administrative expenses
incurred with related parties........ -- -- -- 10,000
----------- ---------- ---------- -----------
Total general and administrative
expense............................ 11,812 595,815 282,752 6,824,220
Depreciation and amortization.......... -- 35,570 222 116,685
----------- ---------- ---------- -----------
Total operating expenses............. 11,812 4,665,470 1,134,081 13,419,399
----------- ---------- ---------- -----------
Operating loss..................... (11,812) (4,603,970) (1,134,081) (12,873,534)
----------- ---------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest income........................ -- 1,618 134 33,255
Interest expense....................... (29,674) (639,561) (259,111) (49,946)
----------- ---------- ---------- -----------
Total other expense.................. (29,674) (637,943) (258,977) (16,691)
----------- ---------- ---------- -----------
Net loss........................... (41,486) (5,241,913) (1,393,058) (12,890,225)
Accretion of common stock subject to put
rights................................. -- (2,409,752) (1,865,422) (12,619,427)
Accretion of redeemable preferred
stock.................................. -- -- -- (21,216)
----------- ---------- ---------- -----------
Net loss applicable to common
stockholders..................... $ (41,486) $(7,651,665) $(3,258,480) $(25,530,868)
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
BASIC AND DILUTED LOSS PER COMMON
SHARE.................................. $ (0.02) $ (1.63) $ (1.24) $ (1.27)
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
WEIGHTED-AVERAGE SHARES USED IN COMPUTING
BASIC AND DILUTED LOSS PER COMMON
SHARE.................................. 2,475,040 4,689,600 2,635,920 10,151,560
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
PRO FORMA BASIC AND DILUTED LOSS PER
COMMON SHARE........................... $ (1.12) $ (1.02)
---------- -----------
---------- -----------
WEIGHTED-AVERAGE SHARES USED IN COMPUTING
PRO FORMA BASIC AND DILUTED LOSS PER
COMMON SHARE........................... 4,689,600 12,579,620
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
--------------------------------------------------
PREFERRED STOCK COMMON STOCK
------------------ ------------------
NUMBER PAR NUMBER PAR
OF SHARES VALUE OF SHARES VALUE WARRANTS
--------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
Balance at August 8, 1997 (inception)... -- $ -- -- $ -- $ --
Issuance of common stock to
founders............................ -- -- 659,740 6,597 --
Conversion feature of convertible
debt................................ -- -- -- -- --
Net loss.............................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at December 31, 1997............ -- -- 659,740 6,597 --
Conversion feature of convertible
debt................................ -- -- -- -- --
Issuance of common stock.............. -- -- 6,850,240 68,503 1,030,445
Exchange of convertible debt for
common stock........................ -- -- 818,920 8,189 --
Issuance of warrants in connection
with debt refinancing............... -- -- -- -- 87,466
Payment of stock subscription
receivable.......................... -- -- -- -- --
Stock option grants................... -- -- -- -- --
Amortization of deferred
compensation........................ -- -- -- -- --
Accretion of common stock subject to
put rights to redemption value...... -- -- -- -- --
Net loss.............................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at December 31, 1998............ -- -- 8,328,900 83,289 1,117,911
Issuance of Series A Convertible
Preferred Stock (unaudited)......... 2,666,660 26,667 -- -- 315,410
Issuance of Series B Redeemable
Convertible Preferred Stock
(unaudited)......................... -- -- -- -- 1,380,108
Issuance of common stock
(unaudited)......................... -- -- 1,012,320 10,123 118,085
Stock option grants (unaudited)....... -- -- -- -- --
Accretion of common stock subject to
put rights to redemption value
(unaudited)......................... -- -- -- -- --
Exercise of warrants (unaudited)...... -- -- 1,273,840 12,739 (1,513,532)
Payment of stock subscription
receivable (unaudited).............. -- -- -- -- --
Amortization of deferred compensation
and other stock-based compensation
(unaudited)......................... -- -- -- -- --
Preferred stock accretion
(unaudited)......................... -- -- -- -- --
Net loss (unaudited).................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at June 30, 1999 (unaudited).... 2,666,660 $26,667 10,615,060 $106,151 $1,417,982
--------- ------ --------- ------ ----------
--------- ------ --------- ------ ----------
<CAPTION>
ADDITIONAL STOCK TOTAL
PAID-IN SUBSCRIPTION DEFERRED ACCUMULATED STOCKHOLDERS'
CAPITAL RECEIVABLE COMPENSATION DEFICIT EQUITY
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at August 8, 1997 (inception)... $ -- $ -- $ -- $ -- $ --
Issuance of common stock to
founders............................ (6,267) (366) -- -- (36)
Conversion feature of convertible
debt................................ 132,500 -- -- -- 132,500
Net loss.............................. -- -- -- (41,486) (41,486)
----------- ------------ ------------ ------------ -------------
Balance at December 31, 1997............ 126,233 (366) -- (41,486) 90,978
Conversion feature of convertible
debt................................ 287,500 -- -- -- 287,500
Issuance of common stock.............. 4,969,198 (1,127,204) -- -- 4,940,942
Exchange of convertible debt for
common stock........................ 401,356 -- -- -- 409,545
Issuance of warrants in connection
with debt refinancing............... -- -- -- -- 87,466
Payment of stock subscription
receivable.......................... -- 366 -- -- 366
Stock option grants................... 212,577 -- (212,577) -- --
Amortization of deferred
compensation........................ -- -- 31,610 -- 31,610
Accretion of common stock subject to
put rights to redemption value...... (2,409,752) -- -- -- (2,409,752)
Net loss.............................. -- -- -- (5,241,913) (5,241,913)
----------- ------------ ------------ ------------ -------------
Balance at December 31, 1998............ 3,587,112 (1,127,204) (180,967) (5,283,399) (1,803,258)
Issuance of Series A Convertible
Preferred Stock (unaudited)......... 3,336,351 -- -- -- 3,678,428
Issuance of Series B Redeemable
Convertible Preferred Stock
(unaudited)......................... -- -- -- -- 1,380,108
Issuance of common stock
(unaudited)......................... 1,701,907 -- -- -- 1,830,115
Stock option grants (unaudited)....... 277,462 -- (272,261) -- 5,201
Accretion of common stock subject to
put rights to redemption value
(unaudited)......................... (12,619,427) -- -- -- (12,619,427)
Exercise of warrants (unaudited)...... 1,490,277 -- -- -- (10,516)
Payment of stock subscription
receivable (unaudited).............. -- 961,990 -- -- 961,990
Amortization of deferred compensation
and other stock-based compensation
(unaudited)......................... 5,618,000 -- 39,212 -- 5,657,212
Preferred stock accretion
(unaudited)......................... -- -- -- (21,216) (21,216)
Net loss (unaudited).................. -- -- -- (12,890,225) (12,890,225)
----------- ------------ ------------ ------------ -------------
Balance at June 30, 1999 (unaudited).... $ 3,391,682 $ (165,214) $(414,016) $(18,194,840) ($13,831,588)
----------- ------------ ------------ ------------ -------------
----------- ------------ ------------ ------------ -------------
<CAPTION>
COMMON STOCK, SUBJECT REDEEMABLE
TO PUT RIGHTS PREFERRED STOCK
---------------------- ----------------------
NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT
--------- ---------- --------- ----------
Balance at August 8, 1997 (inception)... -- $ -- -- $ --
Issuance of common stock to
founders............................ 1,815,300 907 -- --
Conversion feature of convertible
debt................................ -- -- -- --
Net loss.............................. -- -- -- --
--------- ---------- --------- ----------
Balance at December 31, 1997............ 1,815,300 907 -- --
Conversion feature of convertible
debt................................ -- -- -- --
Issuance of common stock.............. 166,060 124,630 -- --
Exchange of convertible debt for
common stock........................ 78,120 39,060 -- --
Issuance of warrants in connection
with debt refinancing............... -- -- -- --
Payment of stock subscription
receivable.......................... -- -- -- --
Stock option grants................... -- -- -- --
Amortization of deferred
compensation........................ -- -- -- --
Accretion of common stock subject to
put rights to redemption value...... -- 2,409,752 -- --
Net loss.............................. -- -- -- --
--------- ---------- --------- ----------
Balance at December 31, 1998............ 2,059,480 2,574,349 -- --
Issuance of Series A Convertible
Preferred Stock (unaudited)......... -- -- -- --
Issuance of Series B Redeemable
Convertible Preferred Stock
(unaudited)......................... -- -- 2,077,660 5,098,280
Issuance of common stock
(unaudited)......................... 45,600 52,440 -- --
Stock option grants (unaudited)....... -- -- -- --
Accretion of common stock subject to
put rights to redemption value
(unaudited)......................... -- 12,619,427 -- --
Exercise of warrants (unaudited)...... 14,000 11,160 -- --
Payment of stock subscription
receivable (unaudited).............. -- -- -- --
Amortization of deferred compensation
and other stock-based compensation
(unaudited)......................... -- -- -- --
Preferred stock accretion
(unaudited)......................... -- -- -- 21,216
Net loss (unaudited).................. -- -- -- --
--------- ---------- --------- ----------
Balance at June 30, 1999 (unaudited).... 2,119,080 $15,257,376 2,077,660 $5,119,496
--------- ---------- --------- ----------
--------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8,
1997
(INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------------
1997 1998 1998 1999
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $ (41,486) $ (5,241,913) $ (1,393,058) $ (12,890,225)
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation and amortization.................. -- 35,570 222 116,685
Amortization of deferred financing costs....... 1,767 105,330 27,833 43,733
Amortization of deferred compensation.......... -- 31,610 -- 39,212
Stock-based compensation....................... -- -- -- 5,623,201
Non cash interest expense...................... 24,091 395,909 183,939 --
Changes in operating assets and liabilities--
Increase in accounts receivable................ -- (61,500) -- (28,549)
(Increase) decrease in other receivables....... (15,000) 15,000 15,000 --
Increase in prepaid expenses and other current
assets....................................... (50,000) (969,735) (1,194,035) (293,184)
Decrease (increase) in other assets............ -- 20,935 (27,650) (228,603)
Increase (decrease) in accounts payable and
accrued expenses............................. 24,892 623,187 836,323 740,269
Increase in deferred revenue................... -- -- -- 99,470
------------- ------------- -------------- ---------------
Net cash used in operating activities........ (55,736) (5,045,607) (1,551,426) (6,777,991)
------------- ------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................ -- (472,096) (29,737) (758,538)
------------- ------------- -------------- ---------------
Net cash used in investing activities........ -- (472,096) (29,737) (758,538)
------------- ------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable........................ 50,000 944,350 944,350 --
Proceeds from issuance of redeemable convertible
preferred stock.................................. -- -- -- 6,478,389
Proceeds from issuance of common stock............. 871 5,013,011 443,856 2,845,189
Proceeds from issuance of preferred stock.......... -- -- -- 3,678,428
Proceeds from convertible debt..................... 132,500 287,500 237,500 --
Repayments of note payable......................... (50,000) (500,000) -- (444,350)
Repayments of capital lease obligation............. -- (495) -- (4,111)
Payments of deferred financing costs............... (10,600) (23,000) (19,000) --
------------- ------------- -------------- ---------------
Net cash provided by financing activities.... 122,771 5,721,366 1,606,706 12,553,545
------------- ------------- -------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............ 67,035 203,663 25,543 5,017,016
CASH AND CASH EQUIVALENTS, beginning of period....... -- 67,035 67,035 270,698
------------- ------------- -------------- ---------------
CASH AND CASH EQUIVALENTS, end of period............. $ 67,035 $ 270,698 $ 92,578 $ 5,287,714
------------- ------------- -------------- ---------------
------------- ------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
AmericasDoctor.com, Inc., formerly America's Doctor, Inc. and Ask-A-Doctor,
Inc. (the "Company"), is a Delaware corporation that operates a site on America
Online and the World Wide Web. AmericasDoctor.com operates an interactive
Internet healthcare information destination for consumers. The Company offers
consumers free, real-time interaction with healthcare professionals and easy
access to relevant and reliable healthcare information. The Company's
destination features a free 24-hour doctor chat service that enables consumers
to have live on-line one-on-one chats with doctors and other healthcare
professionals and a variety of interactive healthcare content such as lectures
and live educational programs, a growing library of information on acute
ailments, chronic illnesses, nutrition, pharmacology and other topics, as well
as health and medical publications and news. The Company has designed their
doctor chat service to enable their users, through the assistance, expertise and
insight of doctors and healthcare professionals, to successfully find relevant
and reliable healthcare information on-line in response to their health
questions. The Company is also expanding their site to integrate community Web
pages that focus on the needs of people sharing specific health conditions and
interests. The Company offers hospitals the opportunity to be an exclusive
sponsor of their Internet services within a market defined by zip code, and also
provide sponsors with opportunities to feature their healthcare professionals on
their site. The Company generates revenue from hospital and commercial
sponsorships of educational programs in addition to access fees charged to
e-commerce partners.
The Company was formerly a development stage company and continues to have
uncertainties related to development stage enterprises including the expectation
that substantial time will occur before the company generates operating profits.
The Company has sustained losses and negative cash flows from operations since
its inception. The Company's ability to meet its obligations in the ordinary
course of business is dependent upon its ability to raise additional financing
through public or private equity financings, establish profitable operations,
enter into collaborative or other arrangements, or secure other sources of
financing to fund operations. In June 1999 the Company filed for an initial
public offering with the Securities and Exchange Commission. If the anticipated
initial public offering does not take place, management believes it has the
ability to delay or reduce expenditures so as to not require additional
resources if such resources were not available on terms acceptable to the
Company. As described in Note 11, in June 1999, the Company received
approximately $7.0 million, net of offering costs, through investment
transactions, which included the issuance of common stock and Series B
redeemable convertible preferred stock. Additionally, the Company has been
informed that it is the current intention of the investors to exercise the
warrants described in Note 11, aggregating $2.5 million, upon request by the
Company.
The Company has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in the
new and rapidly evolving markets for internet products and services. These risks
include the failure to develop and extend the Company's on-line service brands,
the rejection of the Company's services by Web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its on-line services, the ability to maintain current strategic
relationships and distribution partnerships and develop new ones, the need to
attract and retain healthcare sponsors, as well as other risks and
uncertainties. In the event the Company does not successfully implement its
business plan, certain assets may not be recoverable. The accompanying financial
statements do not include any adjustments which may result from the outcome of
these uncertainties.
F-7
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of June 30, 1999 and for the six months
ended June 30, 1998 and 1999 are unaudited. In the opinion of management, the
unaudited financial statements have been prepared by the Company pursuant to the
rules and regulations of the U.S. Securities and Exchange Commission. The
unaudited financial statements reflect, in the opinion of management, all
material adjustments, which include only normal recurring adjustments, necessary
to present fairly the Company's financial position, results of operations and
cash flows. The unaudited results of operations and the unaudited cash flows for
the six months ended June 30, 1999, are not necessarily indicative of the
results of operations or cash flows which may be expected for the remainder of
1999.
PROPOSED STOCK SPLIT
Concurrent with the Company's planned initial public offering, the Company
is going to effect a 20 for 1 stock split of its common stock. Concurrent with
the offering, the Company's then outstanding preferred stock will automatically
convert into common stock of the Company. The effect of the stock split of the
common stock has been recorded retroactively in the accompanying consolidated
financial statements. The number of shares of preferred stock have also been
retroactively restated to reflect the stock split since the preferred stock will
convert to common stock immediately prior to the common stock split.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, AmericasDoctor.com Medical Mall,
Inc., which was established in May 1999 to operate the Company's e-commerce
business. All significant intercompany accounts and transactions have been
eliminated in consolidation.
REVENUE RECOGNITION
To date, the Company's revenues have been derived primarily from hospital
and educational sponsorship fees. Revenues from sponsorship agreements are
recognized ratably over the terms of the related contracts, typically one year.
The Company will also recognize access fees from e-commerce partners ratably
over the terms of the respective agreements. The Company has also realized site
development fees related to the up front customized design and setup work for
e-commerce partners. These fees are recognized in the period in which the design
work is performed and collection is reasonably assured, as specified in the
contracts, typically within the first year of the contract term.
INCOME TAXES
The Company provides for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes,"
SFAS No. 109 requires an asset and liability-based approach in accounting for
income taxes. Deferred income tax assets and liabilities are recorded to reflect
the tax consequences on future years of temporary differences of
F-8
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
revenue and expense items for financial statement and income tax purposes.
Valuation allowances are provided against assets when it is determined that it
is more likely than not that the assets will not be realized prior to the
expiration of the respective carryforward periods.
LONG LIVED ASSETS
The Company has adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of." This statement establishes accounting
standards for the impairment of long-lived assets, certain indentifiable
intangibles, and goodwill related to those assets to be held and used, and for
long-lived assets and certain indentifiable intangibles to be disposed of. The
carrying value of existing assets are reviewed when events or changes in
circumstances indicate that an impairment test is necessary in order to
determine if an impairment has occurred. When factors indicate that such assets
should be evaluated for possible impairment, the Company estimates the future
cash flows expected to result from the use of the assets and their eventual
disposition, and compares the undiscounted amounts to the carrying value of the
assets to determine if an impairment loss has occurred. If an impairment is
indicated, an impairment loss is recognized for the difference between the
carrying amount of the asset and its fair value. In estimating future cash
flows, assets are grouped at the lowest level for which there are identifiable
cash flows that are largely independent of the cash flows of other groups of
assets.
PRODUCT DEVELOPMENT COSTS
Material software development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. Costs incurred subsequent to
the establishment of technological feasibility are capitalized. Based upon the
Company's product development process, technological feasibility is established
upon completion of a working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
use have been insignificant.
ORGANIZATION COSTS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5
("SOP 98-5"), "Reporting on the Costs of Start-Up Activities". This statement
requires costs of start-up activities, integration expenses and organization
costs to be expensed as incurred and is effective for fiscal years beginning
after December 15, 1998. In accordance with SOP 98-5, all costs associated with
start-up activities and organization have been expensed as incurred.
EARNINGS PER SHARE COMMON SHARE
SFAS No. 128, "Earnings per Share," became effective in the fourth quarter
of 1997 and requires two presentations of earnings per share--"basic" and
"diluted." Basic earnings per share is computed by dividing income (loss)
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Accretion to redemption value of preferred stock and
common stock subject to put rights has been added to the net loss to arrive at
net loss applicable to common stockholders. The computation of diluted earnings
per share is similar to basic earnings per share, except that the
weighted-average common shares outstanding are increased to include the
F-9
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
number of additional common shares that would have been outstanding if the
potentially dilutive stock options and warrants outstanding were exercised.
Shares subject to stock subscriptions were included as fully outstanding for all
periods presented for the computation of both basic and diluted earnings per
share. The outstanding stock options and warrants were not included in the
computation of diluted earnings per common share for any of the periods
presented since their effect would have been antidilutive.
PRO FORMA EARNINGS PER SHARE
Pro forma basic and diluted loss per share is computed using the weighted
average number of shares of common stock outstanding giving effect to the
conversion of 4,933,200 shares of convertible preferred stock that will
automatically convert to common stock upon completion of the Company's initial
public offering, using the if-converted method, from the original date of
issuance.
STOCK OPTION PLANS
As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
provides pro forma disclosures of net income and earnings per share as if the
fair value-based method prescribed by SFAS 123 had been applied in measuring
compensation expense. The Company uses the Black-Scholes option pricing model to
estimate the fair value of options and warrants granted. The Company accounts
for options granted to non-employees based upon the fair value at date of grant.
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.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash and accounts receivable. The Company maintains cash
with various major financial institutions. The Company limits the amount of
credit exposure with any one financial institution and believes that no
significant concentration of credit risks exists with respect to cash balances.
Trade receivables subject the Company to the potential for credit risk with
customers in the healthcare and pharmaceutical industries. Approximately 65% of
the Company's accounts receivable and revenue was represented by a single
pharmaceutical customer at December 31, 1998 which exposes the Company to a
concentration of credit risk.
F-10
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and notes payable approximate
their fair values.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8, 1997
(INCEPTION) SIX MONTHS ENDED
THROUGH YEAR ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
----------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH PAID FOR:
Interest...................................................... $ 454 $ 44,128 $ -- $ 6,213
----- ------------ --------- ---------
----- ------------ --------- ---------
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Capital lease obligation...................................... $ -- $ 8,700 $ -- $ 42,691
----- ------------ --------- ---------
----- ------------ --------- ---------
Exchange of convertible debt and accrued interest for common
stock....................................................... $ -- $ 448,605 $ -- $ --
----- ------------ --------- ---------
----- ------------ --------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Computer equipment and software............................................ 3-5 years
Office equipment........................................................... 5 years
</TABLE>
Equipment under capital leases and leasehold improvements are depreciated
and amortized over their useful lives or the term of the lease, whichever is
shorter.
Property and equipment consisted of the following as of December 31, 1998:
<TABLE>
<CAPTION>
1998 JUNE 30, 1999
--------- -------------
<S> <C> <C>
(UNAUDITED)
Computer equipment and software....................................... $ 229,819 $ 649,962
Office equipment...................................................... 242,277 576,596
Leased equipment...................................................... 8,700 51,373
--------- -------------
480,796 1,277,931
Less--Accumulated depreciation and amortization....................... (35,570) (152,255)
--------- -------------
Property and equipment, net........................................... $ 445,226 $ 1,125,676
--------- -------------
--------- -------------
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $35,570.
F-11
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The Company's accounts payable and accrued expenses as of December 31, 1997,
1998 and June 30, 1999, are composed of the following:
<TABLE>
<CAPTION>
1997 1998 JUNE 30, 1999
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Accounts payable.............................................................. $ 10,930 $ 163,110 $ 1,346,760
Accrued payroll............................................................... -- 58,476 141,793
Accrued professional fees..................................................... -- 24,378 174,673
Accrued interest.............................................................. 3,362 -- --
Other accrued expenses........................................................ 10,600 373,510 206,517
--------- --------- -------------
Total accounts payable and accrued expenses................................... $ 24,892 $ 619,474 $ 1,869,743
--------- --------- -------------
--------- --------- -------------
</TABLE>
5. NOTES PAYABLE
Notes payable consisted of the following obligations as of December 31, 1998
and June 30, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -------------
<S> <C> <C>
(UNAUDITED)
Note payable to a commercial bank, due on demand, interest at prime rate plus
1/2%. During the year ended December 31, 1998, the average rate was 8.85%.... $ 400,000 $ --
Demand notes payable to a stockholder; interest at prime rate plus 1/2%. During
the year ended December 31, 1998, the average rate was 8.85%.................. 44,350 --
-------- -------------
$ 444,350 --
-------- -------------
-------- -------------
</TABLE>
6. CONVERTIBLE DEBT
Beginning November 13, 1997 through July 1, 1998, the Company entered into
unsecured convertible promissory notes convertible into common shares of the
Company at 50% of the current market price on date of conversion for total cash
consideration of $420,000, bearing interest at 18%. On July 3, 1998, the
promissory notes were converted, including accrued interest, to 897,040 shares
of common stock of the Company at a per share price of $0.50.
The beneficial conversion feature was valued separately at issuance. The
intrinsic value of the beneficial conversion feature was calculated at the
issuance date as the difference between the conversion price and the fair value
of the Company's common stock into which the promissory notes were convertible,
multiplied by the number of shares into which the promissory notes were
convertible. The discount of $420,000, the difference between the fair market
value on the date of issuance and conversion price was accounted for as
additional interest expense and amortized using the effective interest method
from the date of issuance through the date the securities were first
convertible. Interest expense recorded under this method for the period from
August 8, 1997 (inception) through December 31, 1997, the year ended December
31, 1998 and for the six months ended June 30, 1998 (unaudited) was $24,091,
$395,909 and $183,939 respectively.
F-12
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
7. PREPAID EXPENSES
Under the terms of the Company's three-year contract with AOL, the Company
paid an up-front carriage fee of $1.2 million and is also committed to pay
$75,000 per month through April 2000 for total cash consideration of $3.0
million. The Company commenced full operation of its site on AOL in September
1998, and the contract runs through June 2001. The upfront carriage fee has been
recorded as a prepaid expense and the total carriage fee is being amortized over
the period through June 2000. Pricing terms have not been established for the
third year of the contract.
As of December 31, 1998 and June 30, 1999 (unaudited), the unamortized AOL
prepaid balance was approximately $952,000 and $710,000 respectively. The
remaining balance of prepaid expenses consists primarily of prepaid insurance,
maintenance and other.
The Company estimates that a significant portion of its traffic is derived
from AOL. There is no assurance that fees paid by the Company to AOL will remain
at current levels or at commercially reasonable levels beyond June 2000.
Further, if the financial condition and operations of AOL were to deteriorate
significantly, or if the traffic to the Company's site generated by AOL were to
substantially decrease, the Company's revenues could be adversely affected.
8. INCOME TAXES
The actual income tax expense for the period from August 8, 1997 (inception)
to December 31, 1997, and for the year ended December 31, 1998, is different
from the amount computed by applying the statutory federal income tax rate to
losses before income tax expense. The reconciliation of these differences is as
follows:
<TABLE>
<CAPTION>
1997 1998
--------- ------------
<S> <C> <C>
Tax benefit at federal statutory rate..................................................... $ 5,914 $ 1,790,346
State income taxes, net of federal income tax effect...................................... 870 261,816
Increase in valuation allowance........................................................... (6,784) (2,052,162)
--------- ------------
Income tax expense...................................................................... $ -- $ --
--------- ------------
--------- ------------
</TABLE>
F-13
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
8. INCOME TAXES (CONTINUED)
The tax effects of the temporary differences between amounts recorded as
assets and liabilities for financial reporting purposes and amounts reported for
income tax purposes as of December 31, 1997 and 1998 are as follows.
<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Deferred Tax Assets:
Start-up costs........................................................................... $ 4,607 $ 248,976
Depreciation............................................................................. -- 2,029
Net operating loss carryforward.......................................................... 2,177 1,816,465
Valuation allowance...................................................................... (6,784) (2,058,946)
--------- -----------
$ -- $ 8,524
--------- -----------
--------- -----------
Deferred Tax Liabilities:
Prepaid expenses......................................................................... $ -- $ 4,084
Software amortization.................................................................... -- 4,440
--------- -----------
$ -- $ 8,524
--------- -----------
--------- -----------
</TABLE>
As of December 31, 1997 and 1998, the Company has available for income tax
purposes, a net operating loss carryforward of approximately $0 and $4.6 million
respectively, which expires in various amounts through 2013. The utilization of
the carryforwards are dependent upon the ability of the Company to generate
sufficient taxable income during the carryforward periods. Utilization of the
net operating loss carryforward may be subject to an annual limitation, due to
the ownership change limitations provided by the Internal Revenue Code of 1986.
Due to the operating losses incurred by the Company, a valuation allowance has
been established to reduce the net deferred tax asset to its expected realizable
value.
9. COMMON STOCK SUBJECT TO PUT RIGHTS
During 1997, 1998 and the six months ended June 30, 1999, the Company issued
common stock to certain members of management which are subject to put rights.
Under the terms of the Second Amended and Restated Shareholders' and Voting
Agreement, the Company may be required to redeem the common stock if the holders
of the puttable common stock are terminated without cause, or upon their death
or disability. Upon these events, the shareholders or representatives of the
shareholders may cause the shares to be redeemed by the Company at the option of
the holder at the then fair market value of the shares, if other shareholders or
investors do not choose to exercise their purchase rights. At each balance sheet
date, the shares are being accreted to their current redemption value. If the
Company completes an initial public offering that meets certain requirements as
to minimum size and valuation, the put provisions contained in the Second
Amended and Restated Shareholders' and Voting Agreement will be terminated. As
of December 31, 1997, 1998 and for the six months ended June 30, 1999 the number
of shares outstanding, subject to put rights are 1,815,300, 2,059,480 and
2,119,080 shares respectively. For the period from August 8, 1997 (inception)
through December 31, 1997, the year ended December 31, 1998 and the six months
ended June 30, 1999, the Company recorded a reduction in additional paid-in
capital of $0, $2,409,752 and $12,619,427 respectively for the increases in
current redemption value.
F-14
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
10. SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
During June 1999, the Company authorized 3,022,060 shares (on a pro forma
split-adjusted basis) of Series B redeemable convertible preferred stock with a
par value of $0.01 per share and issued 2,077,660 shares at a price of $3.31 per
share. The preferred stock is convertible into an equal number of shares of
common stock at the option of the holder, with certain additional antidilutive
protection provided to the holder. Conversion is mandatory upon the closing of
an underwritten public offering that meets certain minimum conditions as to net
proceeds. On the sixth anniversary of the closing, the Series B holders have the
option to put their shares of preferred stock to the Company at their
liquidation preference of $3.31 per share. In connection with this financing, an
existing shareholder exercised preemptive rights to purchase 199,160 shares of
common stock for additional proceeds to the Company of approximately $659,000.
In connection with the issuance of the Series B redeemable convertible
preferred stock, there were warrants granted that will be exercisable contingent
upon the occurrence of certain events. A warrant to purchase shares of common
stock for $0.01 per share may become exercisable if there is a qualified
offering or sale of the Company and a certain rate of return has not been
achieved by the Series B shareholders. A warrant to purchase an additional
755,520 shares of Series B redeemable, convertible preferred stock for $3.31 per
share may become exercisable if by October 15, 1999 the Company has not
completed a qualified offering or executed any agreement that generates $5.0
million of proceeds to the Company. Management believes that the likelihood that
the contingencies related to the common stock warrants will be satisfied is
remote and that the number of common stock warrants which will likely become
exercisable is zero. The Company is not able to predict at this time whether the
preferred stock warrants will become exercisable. Since the exercisability of
these warrants is contingent upon the occurrence of certain events, no portion
of the proceeds has been allocated to these warrants. If the contingencies are
satisfied the common stock warrants and preferred stock warrants will be
recorded at fair value as a reduction of redeemable convertible preferred stock.
The contingent common stock warrants and preferred stock warrants have not been
reflected in the computation of net loss per share since their effect would be
antidilutive.
11. STOCKHOLDERS' EQUITY
COMMON STOCK AND WARRANTS
At the inception of the Company, 2,475,040 shares of common stock were
issued as founders stock at par value. As of December 31, 1997 the Company had a
stock subscription receivable of $366 related to 732,360 shares of common stock.
This receivable was fully paid during June 1998.
During 1998, indebtedness of the Company was refinanced, and in return for
their continued guarantee, certain officers received 70,000 warrants to purchase
additional shares of the Company's common stock at par value. The estimated fair
value of these warrants at the date issued was $1.25 per share using a
Black-Scholes option pricing model and assumptions similar to those used for
valuing the Company's stock options as described below resulting in recording
approximately $87,000 in deferred financing costs, these costs are being
amortized over the life of the related debt.
During 1998, 987,380 warrants to purchase common shares at par value were
issued to venture capital firms for their assistance in obtaining outside
financing. The estimated fair value of these warrants at the dates issued ranged
from $0.78 to $1.25 per share using a Black-Scholes option pricing model and
assumptions similar to those used for valuing the Company's stock options as
described below. The fair value of these warrants was recorded as a reduction in
paid-in capital of $1,030,446 from the associated equity transaction.
F-15
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
11. STOCKHOLDERS' EQUITY (CONTINUED)
Concurrent with the issuance of the Series A convertible preferred stock
described below, the number of authorized shares of common stock was increased
to 50,000,000.
CONVERTIBLE PREFERRED STOCK
During February 1999, the Company authorized and issued 2,666,660 shares of
Series A convertible preferred stock with a par value of $0.01 and a liquidation
value of $1.50 per share with net proceeds to the Company of $3,678,428. The
preferred stock is convertible into an equal number of shares of common stock at
the option of the holder, with certain additional antidilutive protection
provided to the holder. Conversion is mandatory upon the closing of an
underwritten public offering that meets certain minimum conditions as to net
proceeds.
Concurrent with the issuance of the Series A convertible preferred stock the
number of authorized shares of preferred stock was increased to 1,000,000
(20,000,000 on a split adjusted basis).
CEO OPTIONS
During 1998, the Company granted options for 2,000,000 shares to its chief
executive officer at an exercise price of $0.50 per share. The 2,000,000 options
vest upon the occurrence of certain events. These options are being accounted
for as variable plan options. Concurrent with the issuance of the Series B
redeemable convertible preferred stock, the 2,000,000 options vested 100%, which
resulted in a compensation charge in June 1999 of approximately $5.6 million.
In March 1999, the Company granted 800,000 options to its chief executive
officer at an exercise price of $11.25 per share.
SECOND AMENDED SHAREHOLDERS' RIGHTS AGREEMENT
The Second Amended and Restated Shareholders' and Voting Agreement contains
provisions relating to the voting of shares and appointment of Board of
Directors members. Certain significant shareholders have been given the right to
designate members of the Board of Directors. The agreement also contains
features related to a change of control, restrictions on transfer of stock,
preemptive rights and other restrictive covenants. In addition, as described in
Note 9, the agreement provides certain shareholders put rights under specified
conditions. The Second Amended and Restated Shareholders' and Voting Agreement
terminates upon the completion of an initial public offering that values the
Company at not less than $75 million before the effect of the money raised in
the offering and has an aggregate offering price of not less than $15 million.
STOCK OPTION PLANS
The Company has a stock option plan authorizing the grant of options to
employees, consultants and non-employee directors. Under the plan, the Company
may grant options to purchase up to 7,200,000 shares of common stock to its
employees, consultants and non-employee directors. Stock options expire ten
years from the date granted. During 1998, the Company granted options to
purchase 2,392,000 shares in accordance with the plan. Shares available for
future grants amounted to 3,408,000 as of December 31, 1998 and approximately
311,560 as of June 30, 1999.
The Company applies APB Opinion 25 and related interpretations in accounting
for the plans. During the year ended December 31, 1998, the Company granted
options with exercise prices below fair value. The Company has recorded deferred
compensation of $212,577 and $272,261 during 1998 and the six months ended June
30, 1999, respectively based upon the difference between the fair market value
on the grant date and the option exercise price. The deferred compensation is
being
F-16
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
11. STOCKHOLDERS' EQUITY (CONTINUED)
amortized over the option vesting periods of three years. Compensation expense
of $31,610 and $5,662,413 was recorded for the year ended December 31, 1998 and
for the six months ended June 30, 1999 related to stock options. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, the Company's net loss and
earnings per share would have been changed to the pro forma amounts indicated
below.
<TABLE>
<CAPTION>
1997 1998
--------- ------------
<S> <C> <C>
Net loss:
As reported........................................................ $ 41,486 $ 5,241,913
Pro forma.......................................................... 41,486 5,246,920
Loss per share:
As reported........................................................ (0.02) (1.12)
Pro forma.......................................................... (0.02) (1.12)
</TABLE>
A summary of options transactions during the year ended December 31, 1998 is
as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
---------- -----------
<S> <C> <C>
Outstanding December 31, 1997.......................................... -- $ --
1998 Activity:
Granted.............................................................. 2,392,000 0.50
---------- -----------
Outstanding December 31, 1998.......................................... 2,392,000 0.50
-----------
Granted.............................................................. 2,996,440 4.13
---------- -----------
Outstanding June 30, 1999.............................................. 5,388,440 $ 2.52
---------- -----------
---------- -----------
</TABLE>
As of December 31, 1998 there were no options exercisable. As of June 30,
1999, options for 2,070,000 shares, with a weighted-average exercise price of
$0.50 per share, were exercisable.
The weighted-average fair value of options granted during 1998 was $0.40 per
share. The weighted-average remaining contractual life of outstanding options at
December 31, 1998 was 9.5 years. The following table provides further
information on the options, which were granted with exercise prices below fair
value for the year, ended December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED WEIGHTED FAIR VALUE
AVERAGE AVERAGE OF COMMON
EXERCISE FAIR STOCK ON
SHARES PRICE VALUE GRANT DATE
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Options whose exercise price is less than the fair value of the
stock on the grant date.......................................... 2,392,000 $ 0.50 $ 0.40 $ 0.83
</TABLE>
F-17
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
11. STOCKHOLDERS' EQUITY (CONTINUED)
The Company has computed for pro forma disclosure purposes the value of all
options granted during 1998 using the Black-Scholes option pricing model as
prescribed by SFAS No. 123 and the following weighted-average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate...................................... 4.18%--5.61%
Expected life.............................................. 3 years
Volatility................................................. 0%
Dividend rate.............................................. 0%
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASE
During 1998, the Company entered into a capital lease to purchase equipment
for $8,700. Accumulated amortization for this equipment was $313 at December 31,
1998. Payments during the year ended December 31, 1998, totaled $620. Future
minimum lease payments as of December 31, 1998, are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999................................................................ $ 3,720
2000................................................................ 3,720
2001................................................................ 3,100
---------
Total minimum lease payments...................................... 10,540
Less--Amounts representing imputed interest......................... (2,335)
---------
Present value of net minimum payments............................... 8,205
Less--Current portion............................................... (2,436)
---------
Capital lease obligation, net of current portion.................... $ 5,769
---------
---------
</TABLE>
OPERATING LEASES
The Company has entered into various operating leases with varying terms
expiring through 2001. Payments made under these agreements totaled
approximately $0 and $58,191 for the years ended December 31, 1997 and 1998,
respectively.
As of December 31, 1998, future minimum lease payments under these leases
were as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 105,492
2000.............................................................. 79,641
2001.............................................................. 1,740
---------
$ 186,873
---------
---------
</TABLE>
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with certain officers, the
terms of which expire at various dates through February 2004. The employment
agreements provide for annual base salary, stock options, severance packages and
in some instances discretionary bonuses and payments in the event of termination
without cause.
F-18
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CALL CENTER AGREEMENT
During 1998, the Company entered into an agreement with Medical Advisory
Systems, a stockholder of the Company, whereby Medical Advisory Systems manages
the Company's call center. As part of the agreement, the Company pays a monthly
rental and management fee. The agreement provides for payments of cost plus 20%
plus additional costs such as rent and runs through the expiration of the
agreement. These costs are recorded as content, product and production expense
when incurred. This agreement can be terminated by Medical Advisory Systems at
any time.
The Company currently relies on its agreement with Medical Advisory Systems
to manage its chat center operations. A risk exists that Medical Advisory
Systems physicians could engage in conduct that could be considered the practice
of medicine. A determination by any state or federal regulatory agency that the
Company is practicing medicine in violation of applicable statutes could subject
the Company to allegations of malpractice and have a material adverse effect on
its business, financial condition and results of operations. Further, any
operational difficulties or other problems with the chat center operations or
the Company's relationship with Medical Advisory Systems could result in
consumer complaints and attrition or legal proceedings. The failure of Medical
Advisory Systems to deliver these services would require the Company to obtain
these services from another operator or provide them internally which could
interrupt the Company's services.
During 1998 and the six months ended June 30, 1999, the Company paid
$822,918 and $1.9 million, respectively to Medical Advisory Systems as part of
the call center agreement. During 1998, the Company sold stock on a subscription
basis to Medical Advisory Systems enabling Medical Advisory Systems to purchase
1,276,660 and 800,000 shares of common stock, par value $0.01 per share, for
$0.78 and $1.25 per share, respectively. As of December 31, 1998 and June 30,
1999, there were 1,128,740 and 210,867 shares issuable respectively under the
stock subscription agreement.
MARKETING SERVICE AGREEMENT
In March 1999, the Company entered into a $4.8 million consulting agreement
with Premier Research, a stockholder of the Company. The agreement calls for
Premier Research to help the Company in leveraging its place as an anchor tenant
on AOL's subscriber HealthChannel to recruit patients for clinical research
projects. The consulting agreement has a term of twenty-four months, with an
effective date of January 1, 1999. Under the terms of the agreement, the Company
is to pay Premier Research equal installments of $575,000 on the 15(th) day of
March, June, September and December of 1999 and 2000. The required installments
were paid on March 15 and June 15, 1999. The fee is being recorded as expense
ratably over the term of the agreement.
CONTENT DEVELOPMENT AGREEMENT
In June, 1999 we entered into a two-year agreement with CenterWatch, Inc., a
publishing company focused on the clinical trial industry, to license the use of
CenterWatch's databases of clinical trial studies and related information and
potential volunteers. Pursuant to the agreement, we will create a hyperlink from
our site to CenterWatch's databases of clinical trials and clinical trial
volunteers. CenterWatch has granted us an exclusive license to use the clinical
trial volunteers databases it is currently developing for recruiting, organizing
or screening clinical trial candidates for research companies. We have paid
CenterWatch an upfront fee of $100,000 and have agreed to pay CenterWatch a
quarterly fee of $50,000 and a percentage of the clinical trial recruitment fees
generated by our site. The agreement terminates in June 2001 and renews
automatically for successive one-year periods unless
F-19
<PAGE>
AMERICASDOCTOR.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
180 days' prior notice is given by either party. The total value of the amounts
to be paid to CenterWatch is being recorded ratably over the two-year term of
the agreement.
CONTINGENCIES
The Company's business and industry are subject to extensive government
regulation. Federal and state laws, regulations and statutes have been or may be
adopted with respect to healthcare, the internet and other on-line services
covering issue such as the practice of medicine, pharmacology and other
professions, the payment of health-related products and services by federal
healthcare programs, including regulation of patient referrals and copyright,
trademark and other intellectual property protection of domain names.
13. RELATED-PARTY TRANSACTIONS
As of December 31, 1998, notes payable include $44,350 due to a stockholder
to fund operating activities. The note was fully repaid on June 30, 1999.
Certain officers of the Company have personally guaranteed debt of the
Company. In exchange for their guarantee, they have received common stock or
warrants. The fair value of the stock and warrants granted of approximately
$87,000 was recorded as deferred financing costs and amortized as interest
expense over the term of the debt.
During 1998, Wyndhurst Capital assisted the Company in negotiating various
transactions and assisted the Company in obtaining equity investors and debt
financings. In return, the Company granted Wyndhurst Capital warrants to acquire
195,020 shares of the Company's common stock at an exercise price of par value
and aggregate fees of $449,227 which have been recorded as reductions to
additional paid in capital. The warrants have been recorded at their fair value
of approximately $153,000, and have been recorded as a cost of the related
financing. The Company also paid Wyndhurst Capital $33,600 in connection with
the issuance of convertible debt, which were capitalized as deferred financing
costs and amortized over the term of the debt. The managing director of
Wyndhurst Capital also serves as a Director and Vice-Chairman of the Company.
The Company is obligated to pay Wyndhurst Capital a fee of $10,000 per month
which is credited against monies owed to them related to specific financings or
expensed in the absence of specific financing transactions.
During the six months ended June 30, 1999, the Company granted warrants for
862,420 shares at an exercise price of $0.01 per share in connection with
various financing transactions. The warrants have been recorded at their fair
value of $1.8 million, and have been recorded as a cost of the related
financing.
The Company made payments to stockholders of the Company (Medical Advisory
Systems and Premier Research) during 1998 and 1999 respectively (See Note 12).
14. SUBSEQUENT EVENT
During July 1999, the Company received proceeds from the sale of an
additional 188,880 shares of Series B redeemable convertible preferred stock at
a price of $3.31 per share.
F-20
<PAGE>
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
- ---------------------
PROSPECTUS
- ---------------------
7,250,000 SHARES
AMERICASDOCTOR.COM
COMMON STOCK
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
WARBURG DILLON READ LLC
WILLIAM BLAIR & COMPANY
PRUDENTIAL VECTOR HEALTHCARE GROUP
A UNIT OF PRUDENTIAL SECURITIES
, 1999
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THE SECURITIES.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate, except for the Commission and Nasdaq
National Market fees, of the fees and expenses payable by the Registrant in
connection with the offering of the common stock:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration fee................ $ 23,179
Transfer agent and registrar fee................................... $ 5,000
Printing and engraving costs....................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
NASD filing fee.................................................... $ 6,500
Nasdaq National Market listing fee................................. $ 95,000
Blue Sky fees and expenses......................................... *
Miscellaneous expenses............................................. *
---------
Total........................................................ $ *
---------
---------
</TABLE>
- ------------------------
* to be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
law, which enables a corporation in its original certificate of incorporation or
an amendment to its certificate of incorporation to eliminate or limit the
personal liability of a director for monetary damages for violations of the
director's fiduciary duty, except (1) for any breach of a director's duty of
loyalty to the corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) pursuant to Section 174 of the DGCL, providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemption, or (4) for any transaction from which a director derived an improper
personal benefit.
Reference also is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of the fact that the person was an officer, director, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise.
The indemnity may include expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the person in
connection with the action, suit or proceeding, provided the officer, director,
employee or agent acted in good faith and in a manner he reasonably believed to
be in or not opposed to the corporation's best interests and, for criminal
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify officers and directors in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses,
including attorneys' fees, which the officer or director actually and reasonably
incurred.
The Amended and Restated Certificate of Incorporation and the Amended and
Restated Bylaws of AmericasDoctor.com provide for indemnification of officers
and directors to the fullest extent
II-1
<PAGE>
permitted by applicable law. In addition, we have entered into contracts with
each of our independent directors requiring us to indemnify them and to advance
litigation expenses to them to the fullest extent permitted by applicable law.
Delaware law presently permits a Delaware corporation
- to indemnify any officer or director in any third-party or governmental
actions against them for expenses, judgments, fines and amounts paid in
settlement and, in derivative actions, for expenses, if the indemnitee
acted in good faith and in the manner he believed to be in or not opposed
to the best interest of the corporation and
- to advance expenses in any action, provided that the officer or directors
agrees to reimburse the corporation if it is ultimately determined that he
was not entitled to indemnification.
The contracts also require us to
- indemnify the independent directors upon receipt of an opinion of counsel
in certain cases,
- pay indemnity demands pending a determination of entitlement to indemnity,
and
- demonstrate, in any action brought pursuant to the contracts, that the
director was not entitled to indemnification under applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following table lists the recent sales of unregistered securities and
includes the type of security, the person to whom the securities were sold, the
consideration and the exemption from registration. All consideration was paid in
the form of cash on the date of sale listed in the table below, except as noted
in the table below. All issuances set forth in the table below were issued
pursuant to Section 4(2) of the Securities Act. All transactions were private
placements and did not involve public solicitation. In connection with the
issuance of the Series A convertible preferred stock and the Series B redeemable
convertible preferred stock described below, the purchasers were issued warrants
to purchase an undetermined number of shares of common stock at an exercise
price of $0.01 per share and warrants to purchase 503,660 and 188,880,
respectively, shares of Series B redeemable convertible preferred stock at an
exercise price of $3.31 per share.
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
TITLE OF DATE OF OR PRINCIPAL ACT
SECURITY SALE PURCHASER(S) AMOUNT EXEMPTION CONSIDERATION
- ---------------------- ----------------- ---------------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
Common Stock.......... June 2, 1999 Medical Advisory 199,160 Section 4(2) $659,020
Systems, Inc.
February 25, 1999 A group of 21 277,780 Section 4(2) $500,004
accredited investors
February 15, 1999 Medical Advisory 277,780 Section 4(2) $500,004
Systems, Inc.
Subscribed on Medical Advisory 800,000 Section 4(2) $300,000 cash paid
October 30, 1998 Systems, Inc. upon subscription and
and issued as the balance paid over
consideration is 5 months ($140,000 per
paid month)
October 16, 1998 A group of 74 2,000,000 Section 4(2) $2,500,000 ($25,000 of
through accredited investors which was paid in the
January 27, 1999 form of a promissory
note, which was fully
paid on March 3, 1999)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
TITLE OF DATE OF OR PRINCIPAL ACT
SECURITY SALE PURCHASER(S) AMOUNT EXEMPTION CONSIDERATION
- ---------------------- ----------------- ---------------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
October 5, 1998 Premier Research 276,660 Section 4(2) Issued without
Worldwide, Ltd. additional
consideration for the
Company's failure to
meet financial
milestones
October 5, 1998 Medical Advisory 276,660 Section 4(2) Issued without
Systems, Inc. additional
consideration for the
Company's failure to
meet financial
milestones as
subscriptions are paid
for in connection with
the issuance on July
2, 1998 to Medical
Advisory Systems, Inc.
October 5, 1998 The group of 18 275,860 Section 4(2) Issued without
accredited investors additional
who previously consideration for the
purchased common stock Company's failure to
between June 1998 and meet financial
July 1998 milestones
September 24, A group of 7 investors 500,000 Section 4(2) $500,000
1998 through
October 18, 1998
July 2, 1998 Premier Research 1,000,000 Section 4(2) $1,000,000
Worldwide, Ltd.
Subscribed on Medical Advisory 1,000,000 Section 4(2) Services valued at
July 2, 1998 and Systems, Inc. $360,000 and $640,000
issued as payable monthly over a
consideration is 12 month period
paid commenced on October
1998 in cash (of which
$160,000 was unpaid as
of June 30, 1999).
June, 1998 A group of 18 997,000 Section 4(2) $997,000
through July, accredited investors
1998
June 30, 1998 2 executive officers 193,320 Section 4(2) In exchange for
and a group of 4 guaranteeing a bridge
investors loan in the amount of
$900,000 and a cash
advance of $500,000
Series B Redeemable
Convertible Preferred
Stock................ June 1, 1999 GE Capital Equity 2,266,540 Section 4(2) $6,874,977 on June 1,
Investments, Inc., TD 1999 and $625,000 paid
Capital Focus II, on July 16, 1999
L.P., TD Origen
Capital Fund, L.P., TD
Javelin Capital Fund,
L.P.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES SECURITIES
TITLE OF DATE OF OR PRINCIPAL ACT
SECURITY SALE PURCHASER(S) AMOUNT EXEMPTION CONSIDERATION
- ---------------------- ----------------- ---------------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
Series A Convertible Section 4(2)
Preferred Stock...... February 1, 1999 TD Capital Focus II, 2,666,660 $3,999,990
L.P., TD Origen
Capital Fund, L.P., TD
Javelin Capital Fund,
L.P.
Convertible unsecured
Notes................ Notes were issued A group of 34 $420,000 Section 4(2) $420,000
from November 4, investors, which
1997 to July 1, included 28 accredited
1998 investors
Common stock was A group of 34 897,040 Section 4(2)
issued upon investors, which
conversion of the included 28 accredited
notes on October investors
1, 1998
Warrants.............. Warrants were Wyndhurst Capital 895,580 Section 4(2) Consulting and
issued between Group, LLC Capital- raising
January 27, 1999 services; exercised at
to May 26, 1999 par value
and 467,960 were
exercised on
March 17, 1999
Warrants were 3 executive officers 70,000 Section 4(2) In exchange for
issued on January guaranteeing a
27, 1999 and refinanced bridge loan
14,000 were in the amount of
exercised on $500,000
March 30, 1999
Warrants were Balanced Capital LLC 556,540 Section 4(2) Services; exercised at
issued from and Balanced Capital par value
July 2, 1998 to Passive, LP
January 27, 1999
and all were
exercised on
March 30, 1999
Warrants were Venture Consultants 228,360 Section 4(2) Services; exercised at
issued on July par value
20, 1998 and all
were exercised on
April 30, 1999
</TABLE>
In addition, pursuant to Section 4(2) of the Securities Act in connection
with the formation of AmericasDoctor.com, 2,475,060 shares of founder's stock at
par value were issued to Scott M. Rifkin, Jeffrey Lefko, Wyndhurst Capital
Group, LLC, Assurenet, Ltd., Alan M. Rifkin and attorneys affiliated with
Rifkin, Livingston, Levitan & Silver, LLC.
The Board of Directors has authorized an Employee Stock Option. From
February 1, 1999 to June 11, 1999, pursuant to Rule 701, we have issued options
for 5,988,440 shares exercisable at a price ranging from $0.50 per share to
$11.25 per share.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.***
3.1 Form of Amended and Restated Bylaws.*
3.2 Form of Restated Certificate of Incorporation.**
4.1 Certificate of Designations of Series A Convertible Preferred Stock.*
4.2 Certificate of Designations of Series B Redeemable Convertible Preferred Stock.*
5.1 Opinion of Simpson Thacher & Bartlett.***
9.1 Form of Stockholders' Voting Agreement.*
10.1 Amended and Restated AmericasDoctor.com, Inc. 1999 Long-Term Incentive Plan.*
10.2 Employment Agreement with Scott M. Rifkin, M.D.*
10.3 Employment Agreement with Jeffrey Lefko.*
10.4 Employment Agreement with Allan C. Sanders.*
10.5 Employment Agreement with Laura Gill.*
10.6 Employment Agreement with Charles R. Bland.***
10.7 Interactive Services Agreement with America Online, Inc.*
10.8 Call Center Service Agreement, as amended, with Medical Advisory Systems, Inc.*
Addendum No. 1*
Addendum No. 2*
10.9 Support and Service Agreement with Premier Research Worldwide, Ltd.*
10.10 Marketing Service Agreement with Premier Research Worldwide, Ltd.*
10.11 Consulting Agreement with Wyndhurst Capital Group LLC.*
10.12 Warrant to Purchase Series A Common Stock issued to Tullis-Dickerson Capital Focus II, L.P., dated
February 1, 1999.*
10.13 Warrant to Purchase Series A Common Stock issued to TD Origen Capital Fund, L.P., dated February 1, 1999.*
10.14 Warrant to Purchase Series A Common Stock issued to Javelin Capital Fund, L.P., dated February 1, 1999.*
10.15 Securities Purchase Agreement, dated February 1, 1999.*
10.16 Common Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.*
10.17 Common Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.*
10.18 Preferred Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.*
10.19 Preferred Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.*
10.20 Securities Purchase Agreement, dated June 1, 1999.*
10.21 Common Stock Purchase Agreement, dated July 2, 1998.*
10.22 Second Amended and Restated Shareholders' and Voting Agreement, dated June 1, 1999.*
10.23 Second Amended and Restated Registration Rights Agreement, dated June 1, 1999.*
10.24 Agreement, dated February 12, 1999, between AmericasDoctor.com, Inc. and Smith & Nephew Inc.*
10.25 Content Development Agreement with CenterWatch, Inc.*
10.26 Lycos Network Advertising Contract with Lycos Corporation.**
10.27 License Agreement with Jaspin Interactive, Inc.**
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.28 Recruitment Services Agreement with ClinTrials Research, Inc.**
10.29 Recruitment Services Agreement with Covance Inc.**
10.30 Master Hosting and Network Services Agreement with Icon CMT Corp.**
21.1 List of Subsidiaries*
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).***
23.2 Consent of Arthur Andersen LLP, independent public accountants.**
24.1 Power of attorney*
27.1 Financial Data Schedule (EDGAR filed version only).**
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission indemnification for liabilities arising under
the Act is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against these
liabilities, other than the payment by a registrant of expenses incurred or paid
by a director, officer or controlling person of this registrant in the
successful defense of any action, suit or proceeding, is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of the
issue.
The undersigned Registrant undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to
be the initial BONA FIDE offering of the securities.
(3) To provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Owings Mills, State of Maryland, on the 9th day of September, 1999.
<TABLE>
<S> <C> <C>
AMERICASDOCTOR.COM, INC.
By: /s/ LEWIS S. GOODMAN
-----------------------------------------
Lewis S. Goodman
Vice Chairman of the Board of Directors
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Act, this Amendment No. 3 to this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
* Chief Executive Officer,
- ------------------------------ Chairman of the Board of September 9, 1999
Scott M. Rifkin, M.D. Directors
* Executive Vice-President
- ------------------------------ of Sales and Marketing, September 9, 1999
Jeffrey J. Lefko Director
- ------------------------------ Vice Chairman of the Board September 9, 1999
Lewis S. Goodman of Directors
*
- ------------------------------ Director September 9, 1999
Thomas P. Dickerson
*
- ------------------------------ President September 9, 1999
Charles R. Bland
Chief Financial Officer,
* Principal Accounting
- ------------------------------ Officer, Secretary and September 9, 1999
Allan C. Sanders Treasurer
*
- ------------------------------ Director September 9, 1999
Richard Miller
*
- ------------------------------ Director September 9, 1999
Joseph Esposito
*By: /s/ LEWIS S. GOODMAN
-------------------------
Lewis S. Goodman
Vice Chairman of the
Board of Directors
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.***
3.1 Form of Amended and Restated Bylaws.*
3.2 Form of Restated Certificate of Incorporation.**
4.1 Certificate of Designations of Series A Convertible Preferred Stock.*
4.2 Certificate of Designations of Series B Redeemable Convertible Preferred Stock.*
5.1 Opinion of Simpson Thacher & Bartlett.***
9.1 Form of Stockholders' Voting Agreement.*
10.1 Amended and Restated AmericasDoctor.com, Inc. 1999 Long-Term Incentive Plan.*
10.2 Employment Agreement with Scott M. Rifkin, M.D.*
10.3 Employment Agreement with Jeffrey Lefko.*
10.4 Employment Agreement with Allan C. Sanders.*
10.5 Employment Agreement with Laura Gill.*
10.6 Employment Agreement with Charles R. Bland.***
10.7 Interactive Services Agreement with America Online, Inc.*
10.8 Call Center Service Agreement, as amended, with Medical Advisory Systems, Inc.*
Addendum No. 1*
Addendum No. 2*
10.9 Support and Service Agreement with Premier Research Worldwide, Ltd.*
10.10 Marketing Service Agreement with Premier Research Worldwide, Ltd.*
10.11 Consulting Agreement with Wyndhurst Capital Group LLC.*
10.12 Warrant to Purchase Series A Common Stock issued to Tullis-Dickerson Capital Focus II, L.P., dated
February 1, 1999.*
10.13 Warrant to Purchase Series A Common Stock issued to TD Origen Capital Fund, L.P., dated February 1, 1999.*
10.14 Warrant to Purchase Series A Common Stock issued to Javelin Capital Fund, L.P., dated February 1, 1999.*
10.15 Securities Purchase Agreement, dated February 1, 1999.*
10.16 Common Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.*
10.17 Common Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.*
10.18 Preferred Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.*
10.19 Preferred Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.*
10.20 Securities Purchase Agreement, dated June 1, 1999.*
10.21 Common Stock Purchase Agreement, dated July 2, 1998.*
10.22 Second Amended and Restated Shareholders' and Voting Agreement, dated June 1, 1999.*
10.23 Second Amended and Restated Registration Rights Agreement, dated June 1, 1999.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.24 Agreement, dated February 12, 1999, between AmericasDoctor.com, Inc. and Smith & Nephew Inc.*
10.25 Content Development Agreement, dated June 15, 1999, between AmericasDoctor.com, Inc. and CenterWatch,
Inc.*
10.26 Lycos Network Advertising Contract with Lycos Corporation.**
10.27 License Agreement with Jaspin Interactive, Inc.**
10.28 Recruitment Services Agreement with ClinTrials Research, Inc.**
10.29 Recruitment Services Agreement with Covance Inc.**
10.30 Master Hosting and Network Services Agreement with Icon CMT Corp.**
21.1 List of Subsidiaries*
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).***
23.2 Consent of Arthur Andersen LLP, independent public accountants.**
24.1 Power of attorney (included on signature page to this Amendment No. 3 Registration Statement).**
27.1 Financial Data Schedule (EDGAR filed version only).**
</TABLE>
- ------------------------
* Previously filed
** Filed herewith.
*** To be filed by amendment.
(b) Financial Statement Schedules
<PAGE>
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICASDOCTOR.COM, INC.
The original name of the corporation was Ask-A-Doctor, Inc. pursuant
to the certificate of incorporation of the corporation, which was first filed
with the Secretary of the State of Delaware on August 8, 1997. The name of the
corporation was changed to America's Doctor, Inc. pursuant to the Certificate of
Amendment of the Certificate of Incorporation filed with the Secretary of State
on May 21, 1998. The name of the corporation was changed to AmericasDoctor.com,
Inc., pursuant to the Certificate of Amendment of the Certificate of
Incorporation filed with the Secretary of State on March 18, 1999.
AmericasDoctor.com, Inc. does hereby certify that this Amended and Restated
Certificate of Incorporation (the "Restated Certificate of Incorporation") was
duly adopted by the Board of Directors and by written consent of the
stockholders in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law"). The Certificate of Incorporation of the corporation is hereby
amended and restated to read in its entirety as follows:
FIRST: Name of Corporation. The name of the corporation is
AmericasDoctor.com, Inc. (the "Corporation").
SECOND: Registered Office and Registered Agent. The registered
office of the Corporation in the State of Delaware is located at 1013
Centre Road, Wilmington, DE 19805 and the name of its registered agent at
such address is Corporation Service Company. The registered office is
located in New Castle County.
THIRD: Purpose. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Delaware General Corporation Law as the same exists or may hereafter be
amended.
FOURTH: Capital Stock. (1) The total number of shares of all
classes of stock which the Corporation shall have authority to issue is
110,000,000, consisting of (1) 100,000,000 shares of Common Stock, par
value $.01 per share ("Common Stock") and (2) 10,000,000 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"). The
number of authorized shares of any class or classes of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority in
voting power of the stock of the Corporation entitled to vote thereon
irrespective of the provisions of Section 242(b)(2) of the Delaware
General Corporation Law (or any successor provision thereto), and no
vote of the holders of any class or classes of stock voting separately
as a class shall be required therefor.
(2) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of
Preferred Stock, for one or more series of Preferred Stock and, with
respect to each such series, to fix the number of shares constituting such
series and the designation of such series, the voting powers (if any) of
such
<PAGE>
2
series, and the preferences and relative, participating, optional or other
special rights, and any qualifications, limitations or restrictions
thereof, of shares of such series. The powers, preferences and relative,
participating, optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other series at any
time outstanding.
(3) The powers, preferences and relative, participating, optional
and other special rights of each series of the Corporation's Series A
Convertible Preferred Stock and Series B Redeemable Convertible Preferred
Stock shall be as set forth in the Certificates of Designation relating to
such series adopted by the Board of Directors on February 1, 1999 and June
2, 1999, respectively.
(4)(a) Each holder of Common Stock, as such, shall be entitled to
one vote for each share of Common Stock held of record by such holder on
all matters on which stockholders generally are entitled to vote;
provided, however, that, except as otherwise required by law, holders of
Common Stock, as such, shall not be entitled to vote on any amendment to
this Restated Certificate of Incorporation (including any certificate of
designations relating to any series of Preferred Stock) that relates
solely to the terms of one or more outstanding series of Preferred Stock
if the holders of such affected series are entitled, either separately or
together with the holders of one or more other such series, to vote
thereon pursuant to this Restated Certificate of Incorporation (including
any certificate of designations relating to any series of Preferred Stock)
or pursuant to the Delaware General Corporation Law. No holder of Common
Stock or Preferred Stock shall be entitled to exercise any right of
cumulative voting.
(b) Except as otherwise required by law, holders of a series of
Preferred Stock, as such, shall be entitled only to such voting rights, if
any, as shall expressly be granted thereto by this Restated Certificate of
Incorporation (including any certificate of designations relating to such
series).
(c) Subject to applicable law and the rights, if any, of the holders
of any outstanding series of Preferred Stock or any class or series of
stock having a preference over or the right to participate with the Common
Stock with respect to the payment of dividends, dividends may be declared
and paid on the Common Stock at such times and in such amounts as the
Board of Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the
corporation, subject to the rights, if any, of the holders of any
outstanding series of Preferred Stock or any class or series of stock
having a preference over or the right to participate with the Common Stock
with respect to the distribution of assets of the Corporation upon such
dissolution, liquidation or winding up of the Corporation, the holders of
the Common Stock, as such, shall be entitled to receive the assets of the
Corporation available for distribution to its stockholders ratably in
proportion to the number of shares held by them.
<PAGE>
3
FIFTH: By-Laws. The Board of Directors shall be authorized to make,
amend, alter, change, add to or repeal the By-Laws of the Corporation in
any manner not inconsistent with the laws of the State of Delaware,
subject to the power of the stockholders to amend, alter, change, add to
or repeal the By-Laws made by the Board of Directors.
SIXTH: Indemnification and Limitation Liability. (1) To the fullest
extent permitted by the laws of the State of Delaware:
(a) The Corporation shall indemnify any person (and such person's
heirs, executors or administrators) who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding (brought in the right of the Corporation or otherwise), whether
civil, criminal, administrative or investigative, and whether formal or
informal, including appeals, by reason of the fact that such person is or
was a director or officer of the Corporation or, while a director or
officer of the corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, limited liability
company or other enterprise, for and against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person or such heirs, executors or
administrators in connection with such action, suit or proceeding,
including appeals. Notwithstanding the preceding sentence, the Corporation
shall be required to indemnify a person described in such sentence in
connection with any action, suit or proceeding (or part thereof) commenced
by such person only if the commencement of such action, suit or proceeding
(or part thereof) by such person was authorized by the Board of Directors
of the corporation. The Corporation may indemnify any person (and such
person's heirs, executors or administrators) who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (brought in the right of the Corporation or
otherwise), whether civil, criminal, administrative or investigative, and
whether formal or informal, including appeals, by reason of the fact that
such person is or was an employee or agent of the Corporation or while an
employee or agent of the Corporation is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, limited
liability company or other enterprise, for and against all expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person or such heirs,
executors or administrators in connection with such action, suit or
proceeding, including appeals.
(b) The Corporation shall promptly pay expenses incurred by any
person described in the first sentence of subsection (a) of this Article
Sixth, Section (1), and may, to the extent authorized by the Board of
Directors, promptly pay expenses incurred by any person described in the
last sentence of subsection (a) of the Article Sixth, Section 1 in
defending any action, suit or proceeding described therein in advance of
the final disposition of such action, suit or proceeding, including
appeals, upon presentation of appropriate documentation.
<PAGE>
4
(c) The Corporation may purchase and maintain insurance on behalf of
any person described in subsection (a) of this Article Sixth, Section (1)
against any liability asserted against such person, whether or not the
Corporation would have the power to indemnify such person against such
liability under the provisions of the Delaware General Corporation Law or
otherwise.
(d) The provisions of this Article Sixth, Section (1) shall be
applicable to all actions, claims, suits or proceedings made or commenced
after the adoption hereof, whether arising from acts or omissions to act
occurring before or after its adoption. The provisions of this Article
Sixth, Section (1) shall be deemed to be a contract between the
Corporation and each director or officer who serves in such capacity at
any time while this Article Sixth, Section (1) and the relevant provisions
of the laws of the State of Delaware and other applicable law, if any, are
in effect, and any repeal or modification hereof shall not affect any
rights or obligations then existing with respect to any state of facts or
any action, suit or proceeding then or theretofore existing, or any
action, suit or proceeding thereafter brought or threatened based in whole
or in part on any such state of facts. If any provision of this Article
Sixth, Section (1) shall be found to be invalid or limited in application
by reason of any law or regulation, it shall not affect the validity of
the remaining provisions hereof. The rights of indemnification provided in
this Article Sixth, Section (1) shall neither be exclusive of, nor be
deemed in limitation of, any rights to which an officer, director,
employee or agent may otherwise be entitled or permitted by contract, this
Restated Certificate of Incorporation, vote of stockholders or directors
or otherwise, or as a matter of law, both as to actions in such person's
official capacity and actions in any other capacity while holding such
office, it being the policy of the Corporation that indemnification of any
person whom the Corporation is obligated to indemnify pursuant to the
first sentence of subsection (a) of this Article Sixth, Section (1) shall
be made to the fullest extent permitted by law.
(e) For purposes of this Article Sixth, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries.
(2) A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (b)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under Section 174 of the
Delaware General Corporation Law, or (d) for any transaction from which
the director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after the filing of the Restated Certificate of
Incorporation of which this article is a part to authorize corporate
action further eliminating or limiting the personal liability of
directors, the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation law, as so amended. Any repeal or modification of the
<PAGE>
5
foregoing paragraph by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
SEVENTH: Meetings and Consents. Any corporate action required to be
taken at any annual or special meeting of stockholders of the Corporation,
or any corporate action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting
forth the corporate action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in
Delaware (either by hand or by certified or registered mail, return
receipt requested), its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded; provided, however, that on and
after the date on which the Corporation completes an initial public
offering of the Common Stock of the Corporation pursuant to the Securities
Act of 1933, as amended, any corporate action required to be taken at any
annual or special meeting of the stockholders, or any corporate action
which may be taken at any annual or special meeting of the stockholders,
may be taken only at a duly called annual or special meeting of
stockholders and may not be taken by written consent of the stockholders
in lieu of such meeting. Except as otherwise required by law and subject
to the rights of the holders of any series of Preferred Stock, special
meetings of stockholders of the Corporation may be called only by the
Chief Executive Officer or the President of the Corporation or by the
Board of Directors pursuant to a resolution approved by the Board of
Directors.
EIGHTH: Amendments. Notwithstanding anything contained in this
Restated Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 75% in voting power of all the shares of
the Corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required to alter, amend or
repeal Article Fifth, Article Seventh or this Article Eighth or to adopt
any provision inconsistent therewith.
<PAGE>
6
IN WITNESS WHEREOF, AmericasDoctor.com, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Scott M. Rifkin, its Chief Executive Officer this __ day of
_________,1999.
AMERICASDOCTOR.COM, INC.
By:________________________
Name: Scott M. Rifkin
Title:
<PAGE>
EXHIBIT 10.26
LYCOS NETWORK ADVERTISING CONTRACT
Terms and Conditions
1. GENERAL. A signed contract must be submitted to Lycos five days in
advance of initial publication date. By submitting advertising for
inclusion or a Lycos site, advertiser/agency agrees to be bound by
the terms of this contract. No conditions other than those set
further herein shall be binding on Lycos unless specifically agreed
to in writing by Lycos. Lycos will not be bound by conditions
printed or appearing on order blanks or copy instructions submitted
by or on behalf of the advertiser/agency. This contract supersedes
all terms and conditions on Lycos' rate cards and any previous
agreements between Lycos and advertiser/agency.
2. CHANGES AND CANCELLATIONS. All artwork must be received at least five
days in advance of publication date. Cancellations or copy changes will
not be accepted after the published closing date of the update to the
Lycos site. Changes to artwork must be received by Lycos at least five
days in advance of requested change date. Lycos' ad banner
specifications are accessible through the URL
adreporting.lycos.com/specs.html; Lycos reserves the right to change any
of its ad banner specifications at any time. Any cancellations or change
orders must be made in writing and acknowledged by Lycos. Change orders
cannot be submitted any more frequently than once every fourteen days.
This contract may be canceled or changed by Lycos or advertiser/agency
on 30 days written notice to the other party. Lycos may immediately
terminate this contract if any change occurs in any applicable laws or
regulations that would, in Lycos' reasonable opinion, render Lycos'
performance hereunder illegal or otherwise subject to legal challenge.
3. PAYMENT. Unless otherwise agreed in writing, the first month's fees are
due upon the execution of this contract by the advertiser/agency and
thereafter, pro rata monthly in advance. If payment is not made timely,
Lycos at its option, may immediately terminate the contract. In
addition, advertiser/agency shall be liable to Lycos for all attorney's
fees and other costs of collection. Interest will accrue on any past due
amounts at the rate of one and one-half (1 1/2%) percent per month, but
not in excess of the lawful maximum. Lycos shall have the right to hold
the advertiser and/or its agency or agent jointly and severally liable
for all amounts due.
4. FREQUENCY AND DISCOUNTS. If Lycos fails to provide the guaranteed number
of impressions, Lycos will make good on this contract by providing
advertiser with additional impressions. Lycos will not make good for
under-delivery due to delays caused by advertiser/agency.
advertiser/agency understands that all frequency discounts are based on
the advertiser's/agency's commitment to fulfilling the frequency
indicated in the contract. If, for any reason, this frequency is not met
by the time of expiration or cancellation of the contract,
advertiser/agency agrees to pay a short rate charge on all ads run. This
charge will be equal to the difference between the rate shown in the
contract and the rate earned based on the applicable rate card for the
actual frequency completed.
5. GROWTH AND RENEWAL. (a) Per Impression Contracts. At the expiration of a
contract for a guaranteed number of impressions, provided the contract
is for a length of time 180 days or longer, advertiser/agency has the
right to enter into a then-standard Lycos Network Advertising Contract
for the same number of impressions for a second contract period
identical in duration to the first. The purchase price for a second
contract period will be determined by Lycos' then-current rate card.
(b) Exclusive Key Word/Phrase Contracts. The estimated number of
impressions and the per impression charge for a contract for the
exclusive right to a key word/phrase will be determined at the time the
contract is signed. Advertiser/agency agrees to pay, on a per impression
basis, for any increase in impressions (calculated on a monthly basis)
up to and including twice the number of impressions estimated at the
time the contract is signed. At the termination of a key word/phrase
contract, provided the contract is for a length of time 180 days or
longer, advertiser/agency has the right to enter into a then-standard
Lycos Network Advertising Contract for the same key word/phrase for a
second contract period identical in duration to the first. The purchase
price for the second contract period will be determined by Lycos'
then-current rate card. (c) Notice of Renewal. In order to exercise the
right to enter into a second contract, advertiser/agency must notify
Lycos in writing 30 days before the termination date of this contract
that the advertiser/agency is purchasing the same number of impressions
or the same exclusive keyword/phrase for the second contract period.
Failure to give timely notice will result in forfeiture of the right to
renew.
7. LICENSES AND INDEMNIFICATION. The advertiser/agency represents that the
advertiser is the owner or is licensed to use the entire contents and
subject matter contained in its advertising and collateral information,
including, without limitation, (a) the names and/or pictures of persons;
(b) any copyrighted material, trademarks, service marks, logos, and/or
depictions of trademarked or service marked goods or services; and (c)
any testimonials or endorsements contained in any advertisement
submitted to Lycos. In consideration of Lycos' acceptance of such
advertisements and information for publication, the advertiser and
agency will jointly and severally indemnify and hold Lycos harmless
against all loss, liability, damage and expenses of any nature (including
attorney's fees) arising out of Lycos' performance under this contract
or the copying, printing, distributing or publishing of
advertiser's/agency's advertisements. If advertiser possesses any
preexisting copyright interests in the advertisements, advertiser grants
Lycos the right to use, reproduce, and distribute the advertisements.
8. KEY WORDS AND PHRASES. Each advertiser may be given a "first right" to
its exact company name and trademarks for keyword/phrase advertising. Lycos
may pre-empt an existing key word/phrase advertiser by submitting a three-
month advertising contract. The existing contract-holder for the key
word/phrase will be provided with a two-week notification of preemption and
will receive a pro-rated refund for any unfulfilled number of guaranteed
impressions. If two or more advertisers have the same name or trademark,
the allocation will be on a first-come basis and the existing contract will
take precedence.
9. REJECTIONS. Lycos reserves the right, without liability, to reject, omit
or exclude any advertisement or to reject or terminate any links for any
reason at any time, with or without notice to the advertiser/agency, and
whether or not such advertisement or link was previously acknowledged,
accepted, or published.
10. LIMITATION OF LIABILITY. Lycos shall not be liable for any errors in
content or omissions. Should an error appear in an advertisement, Lycos'
liability will be limited to the cost of the advertisement (prorated for
the publishing completed). Lycos will not be liable for any delays in
delivery and/or non-delivery in the event of an act of God, action by
any government entity, transportation, strike, network difficulties,
electronic malfunction, etc., or any feasibility, reliability, or
effectiveness related to the Lycos site. Lycos does not represent or
warrant that the Lycos site will meet the objectives or needs of
advertiser/agency or any third party. In no event will Lycos be liable
for any failure, disruption, downtime, interruption, miscalculation,
delay, inaccuracy, or any other nonperformance related to the Lycos site.
UNDER NO CIRCUMSTANCES WILL LYCOS BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION,
FOR LOST INCOME OR PROFITS, IN ANY WAY ARISING OUT OF OR RELATED TO
THIS AGREEMENT, EVEN IF LYCOS HAS BEEN ADVISED AS TO THE POSSIBILITY
OF SUCH DAMAGES.
11. CHOICE OF LAW AND FORUM. This contract shall be interpreted and
construed in accordance with the laws of the Commonwealth of
Massachusetts, without regard to its conflicts of laws provision, and
with the same force and effect as if fully executed and performed
therein. Each party hereby consents to the personal jurisdiction of the
Commonwealth of Massachusetts, acknowledges that venue is proper in any
stat or Federal court in the Commonwealth or any objection that may
exist, now or in the future, with respect to any of the foregoing.
12. CREDIT CARDS. In the event that advertiser/agency pays any amounts due
hereunder with a credit card and the issuer of the credit card fails to
pay the amounts authorized by advertiser/agency, advertiser/agency shall
immediately remit full payment to Lycos plus any interest due on the
outstanding amounts. In addition, if advertiser/agency pays any amounts
due hereunder with a credit card and the issuer of the credit card seeks
to recover from Lycos any amounts received by Lycos from the issuer,
advertiser/agency shall immediately remit to Lycos all amounts necessary
to comply with the issuer's request and any costs and expenses incurred
by Lycos.
13. MISCELLANEOUS. No public statements concerning the existence or terms
of this contract will be made or released to any medium except with the
prior approval of both parties or as required by law. This contract
cannot be sold, assigned or transferred by advertiser/agency to any
party. If any portion of the contact is found unenforceable for any
reason, the remainder will remain in full force and effect. No waiver by
Lycos shall operate as a waiver of any other provision or any subsequent
default. This document represents the entire agreement of the parties;
Lycos will not be bound by the representations of any agents, brokers,
or other third parties. Any modifications must be in writing and signed
by an authorized representative of Lycos.
The undersigned is legally empowered with due corporate authority to enter
into this Contract and agrees to be bound by the Terms and Conditions of this
contract.
Advertiser or Agent Lycos, Inc.
---------------------------------- ----------------------------
Signature: /s/ Chief Financial Officer /s/
------------------------------------- ----------------------------
Date: 5/5/99 5/5/99
---------------------------------- ----------------------------
Addendum: Payment divided into 12 equal monthly payments beginning June 1,
1999 - net 30.
<PAGE>
Exhibit 10.27
LICENSE AGREEMENT
This License Agreement (this "Agreement") is entered into as of February
8th, 1999 by and between America's Doctor, Inc. (the "Licensee or the
"Company") and Jaspin Interactive, Inc. (the "Licensor"), for the purpose of
granting the Licensee an in perpetuity license to use certain software which
has been developed by the Licensor, and fully-paid for by the Licensee.
RECITALS:
WHEREAS, the Licensee is an on-line company which provides medical
information and image marketing services through America Online and other
sites on the Internet, which sites may change from time to time (the
"Websites");
WHEREAS, the Licensee hired the Licensor as an independent contractor to
build chat-related Source Code, Executable Code, and software (the "AD
Chatware") for the Company's site and to integrate the code(s) into the
Company's site(s) in order to assist the Company in providing on-line chat to
its consumers;
WHEREAS, the Licensee fully and completely paid for the development of
the AD Chatware in exchange for an in perpetuity and partially-exclusive
license to utilize the Licensed Software in its Websites and as otherwise
described in this Agreement;
WHEREAS, the Licensor has developed the AD Chatware and has agreed to
furnish the Licensee with the in perpetuity right to use the Licensed
Software in any manner connected with the Licensee's business, and has agreed
to provide the Licensee exclusive rights to the use of the Licensed Software
in connection with any medical or health-related company, venture entity or
enterprise;
WHEREAS, the Licensor has agreed to perform maintenance and services for
the Licensee including maintenance and support for the Licensed Software and
the Websites; wherefore, in connection with this Agreement, the parties intend
to execute a maintenance agreement for the Licensor's continued maintenance
of and assistance with the Licensed Software and the Websites;
WHEREAS, in connection with this Agreement, the parties intend to
execute a marketing agreement for the marketing and sale of the Licensed
Software to other non-medical or health-related companies;
WHEREAS, the Licensor and the Licensee desire to memorialize this
Agreement in writing;
<PAGE>
NOW THEREFORE, in consideration of the above-stated recitals, which are
incorporated herein as a material part of this Agreement, and for other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement:
"Affiliates" means, with respect to a party, any person or entity that
controls, is controlled by, or is under common control with such party.
"Confidential Information" means: (1) any information relating to either
party's product plans, design, costs, prices and names, finances, marketing
plans, business opportunities, personnel, research development or know-how;
and (ii) the terms and conditions of this Agreement. "Confidential
Information" shall not include information that: (i) is or becomes generally
known or available by publication, commercial use or otherwise through no
fault of the receiving party; (ii) is independently developed or learned by
the receiving party; (iii) is lawfully obtained from a third party that has
the right to make such disclosure; or (iv) is made generally available by the
disclosing party without restriction on disclosure.
"Documentation" means any user manual, technical documentation regarding
the design and structure or other explanatory document provided to the
Licensee along with the Licensed Software.
"Executable Code" means the fully compiled version of a software program
that can be executed by a computer and used by an end user without further
compilation.
"Intellectual Property Rights" means all copyrights, trademarks, service
marks, trade secrets, patents, patent applications, moral rights, contract
rights, and other proprietary rights.
"Licensed Software" means the software program or programs described as
the AD Chatware and any modified, updated or enhanced versions of such
program(s) the Licensor may provide to the Licensee pursuant to this
Agreement or pursuant to a separate maintenance agreement.
"Source Code" means the human-readable version of a software program
that can be compiled into Executable Code.
2. LICENSE GRANT. Subject to the terms and conditions of this Agreement,
the Licensor grants to the Licensee and its Affiliates a partially-exclusive
(as defined in Section 3), worldwide, perpetual and irrevocable fully-paid
and royalty-free license under all of the Licensor's worldwide Intellectual
Property Rights to use the Licensed Software and to make unlimited copies of
the Licensed Software for backup and archival purposes.
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3. PARTIALLY EXCLUSIVE GRANT. Subject to the terms and conditions of
this Agreement, the Licensor grants to the Licensee and its Affiliates the
EXCLUSIVE, worldwide, perpetual and irrevocable fully-paid and royalty-free
license under all of the Licensor's worldwide Intellectual Property Rights
to use the Licensed Software in connection with any medical or health-related
purpose, business, company, venture, entity, or individual. The Licensor
represents and warrants that it will not allow any use of the Licensed
Software or programs created by the Licensor that perform the same or similar
function as the Licensed Software in connection with any medical or
health-related purpose, business, company, venture, entity, or individual,
nor will the Licensor assist any business, company, venture, entity or
individual develop such software. Subject to the terms and conditions of this
Agreement, the Licensor grants to the Licensee and its Affiliates the
NON-EXCLUSIVE, worldwide, perpetual and irrevocable fully-paid and
royalty-free license under all of the Licensor's worldwide Intellectual
Property Rights to use the Licensed Software in connection with any
business, company, venture or entity which is not medical or health-related.
4. RESTRICTIONS ON USE. The Licensee acknowledges the Licensor's claim
that the Licensed Software and its structure or organization constitute
valuable secrets of the Licensor. Accordingly, the Licensee agrees not to use
or copy the Licensed Software except as allowed under Sections 2 or 3. The
Licensee agrees not to sublicense, lease, rent or sell (except in connection
with an assignment of the Licensee's rights permitted under Section 12.3 or
as otherwise provided in a marketing agreement between the Licenses and
Licensor to be executed in connection with this Agreement) the Licensed
Software to any third party (other than the Licensee's Affiliates). The
Licensee further agrees not to disassemble, reverse engineer or decompile the
Licensed Software, except as otherwise permitted in this Agreement.
5. DELIVERY, INSTALLATION AND ACCEPTANCE. The Licensee acknowledges that
the Licensor has delivered and installed the Licensed Software and the
Documentation to the Licensee, and the Licensee has accepted the Licensed
Software and Documentation subject to the warranties contained in Section 7.
6. LICENSE FEES AND PAYMENTS. The Licensor acknowledges that the
Licensee has made all payments for the License of the Licensed Software
hereunder, and that no further fee, duty, royalty or payment is due or owing
to the Licensor from the Licensee.
7. WARRANTIES
7.1 METHOD OF TRANSFER. The Licensor warrants that the method in
which the Licensed Software (and any modified, updated, or enhanced versions
of the Licensed Software) is provided to the Licensee, shall be free of
defects in material and workmanship, and the Licensed Software will arrive at
the transfer destination in an undamaged and fully-functioning state. This
warranty does not apply to damage resulting from misuse, abuse or neglect by
the Licensee.
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7.2 PERFORMANCE. For a period of 180 days from the commencement of the
Term of this Agreement (the "Warranty Period"), the Licensor warrants that
the Licensed Software, when used as permitted under this Agreement, will
operate substantially as described in the Documentation and as anticipated by
the Licensee. The Licensor acknowledges that the Licensed Software is
mission critical and warrants that the Licensee's use of the initial Licensed
Software will be error-free and uninterrupted during the Warranty Period, and
the Licensor will undertake all commercially reasonable efforts to ensure
error-free and uninterrupted operation of the Licensed Software following any
upgrades or modifications of the Licensed Software. Notwithstanding the
foregoing, the Licensor shall not be responsible for any error or
interruption caused by the Licensee, such as: defects in the Licensee's
hardware or operating system software; or breakdowns in the Licensee's
communications equipment or service. The Licensor will, at its own expense
for any breach of this warranty, use commercially reasonable efforts to
correct any reproducible error in the Licensed Software reported to the
Licensor by the Licensee during the Warranty Period. Any such error
correction provided to the Licensee will not extend the original Warranty
Period.
The warranty under this Section 7.2 will not apply to output, results,
errors, or abnormal terminations caused in whole or part by:
(a) any functionality of the Licensed Software not created or integrated
by the Licensor or use of the Licensed Software in combination with any other
product not created or integrated by the Licensor; or
(b) any modifications of the Licensed Software made by a party other
than the Licensor.
7.3 VIRUSES. The term "Virus" means any computer code designed to (a)
disrupt, disable, harm, or otherwise impede in any manner the operation of a
computer program or computer system or (b) damage or destroy any data files
residing on a computer system without the users' consent. Licensor
represents and warrants that the Licensed Software (and any modifications,
upgrades or enhancements thereto) and the media on which the Licensed
Software is furnished to the Licensee, when delivered to the Licensee, will
not contain any reasonably detectable Viruses.
7.4 YEAR 2000 COMPLIANCE. The Licensor warrants that the Licensed
Software is Year 2000 Compliant with respect to any functionality of the
Licensed Software. For purposes of this section, "Year 2000 Compliant" means:
(a) all data receivable by the Licensed Software, as well as the
functions, calculations, output, results, and other computing processes of
the Licensed Software (collectively, "Processes") perform in a consistent
manner regardless of the date in time on which the Processes are actually
performed and regardless of the date input to the system, whether before, on,
or after January 1, 2000 and whether or not the dates are affected by leap
years;
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(b) the Licensed Software accepts, calculates, compares, sorts,
extracts, sequences, and otherwise processes date inputs and date values, and
returns and displays date values in a consistent manner regardless of the
dates used, whether before, on, or after January 1, 2000;
(c) the Licensed Software will function without interruptions caused by
the date in time on which the Processes are actually performed or by the date
input to the system, whether before, on or after January 1, 2000;
(d) the Licensed Software accepts and responds to year input in a manner
that resolves any ambiguities as to century in a defined and predetermined
and appropriate manner; and
(e) the Licensed Software stores and displays date information in ways
that are unambiguous as to the determination of the century.
The warranty under this Section 7.4 will not apply to output, results,
errors, or abnormal terminations caused in whole or part by:
(a) any functionality of the Licensed Software not created or integrated
by the Licensor or use of the Licensed Software in combination with any other
product not created or integrated by the Licensor; or
(b) any modifications of the Licensed Software made by a party other
than the Licensor.
During the Warranty Period, the Licensor will, at its own expense for
any breach of this warranty, use commercially reasonable efforts, time being
of the essence, to correct any reproducible error in the Licensed Software
reported to the Licensor by the Licensee within 24 hours of the Licensee's
notice to the Licensor of the error.
7.5 DISCLAIMERS. THE EXPRESS WARRANTIES IN THIS SECTION 7 ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, REGARDING THE LICENSED
SOFTWARE, INCLUDING ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT OF THIRD PARTY RIGHTS.
LICENSEE ACKNOWLEDGES THAT IT HAS RELIED ON NO WARRANTIES OTHER THAN THE
EXPRESS WARRANTIES IN THIS AGREEMENT.
8. INTELLECTUAL PROPERTY RIGHTS; INFRINGEMENT. The Licensor shall take
all reasonable action to obtain any patent, Intellectual Property Rights,
worldwide intellectual property rights, copyright, or Berne Convention
copyrights which may be obtained for the Licensed Software, and which the
Licensor, in its sole discretion, determines to seek. Notwithstanding the
foregoing, within thirty (30) days of the execution of this Agreement, the
Licensor shall apply for copyright registration. The Licensor shall take all
reasonable action to prevent infringement of any patent, Intellectual
Property Rights, worldwide intellectual property rights, copyright, or Berne
Convention copyrights obtained for the Licensed Software, and shall
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<PAGE>
promptly take all reasonable action to halt any such infringement discovered.
The cost of enforcing any patent, Intellectual Property Rights, worldwide
intellectual property rights, copyright or Berne Convention copyrights of the
Licensed Software shall be borne by the Licensor, provided however, that if
the infringement is with respect to the use of the Licensed Software in
connection with any medical or health-related purpose, business, company,
venture, entity or individual, the Licensor and the Licensee shall jointly
cooperate to enforce and prosecute any infringement, each bearing one-half
(1/2) of such costs and each receiving one-half (1/2) of any settlement or
award; provided however, that if the Licensee has terminated this Agreement,
the Licensee shall not be responsible for any portion of such costs. In the
event that the Licensor fails to take all reasonable actions to prevent
infringement of the Licensed Software, the Licensee may, after giving written
notice to the Licensor, take such appropriate action at the Licensor's cost
and expense.
The Licensor will indemnify and defend at its own expense any action
against the Licensee brought by a third party to the extent that the action
is based upon a claim that the Licensed Software infringes any patents or
other Intellectual Property Rights, worldwide intellectual property right,
copyrights or Berne Convention copyrights, and the Licensor shall pay those
costs and damages incurred as a result of a settlement or final
non-appealable judgment against the Licensee from a court of competent
jurisdiction, and any consequential, indirect, exemplary, special or
incidental damages arising from or relating to, any such action, settlement
or judgment. The foregoing obligations are conditioned on the Licensee
notifying the Licensor promptly in writing of such known action, and Licensee
cooperating and, at Licensor's request and expense, assisting in such
defense. Notwithstanding the foregoing, the Licensor will have no obligation
under this Section 8 with respect to any infringement claim based upon (i)
any use by the Licensee of the Licensed Software for a purpose outside the
scope of this Agreement, (ii) any use by the Licensee of the Licensed
Software in combination with other products, equipment, software, or data not
supplied by the Licensor, if without such use the Licensed Software would not
have been infringing, or (iii) any modification by the Licensee of the
Licensed Software by any person other than the Licensor or its authorized
agents or subcontractors, if without such use the Licensed Software would not
have been infringing.
9. TERM AND TERMINATION.
9.1 TERM. The term of this Agreement begins on September 16, 1998,
and will continue indefinitely unless terminated pursuant to Section 9.2.
9.2 TERMINATION. The Licensee may terminate this Agreement at any
time, with or without cause, upon written notice to the Licensor. The
Licensor may terminate this Agreement, upon written notice to the Licensee,
if (a) the Licensee materially breaches any provision in Section 4 and fails
to cure the breach within thirty (30) days after receiving written notice
thereof from the Licensor, or (b) the Licensee materially breaches any other
provision of this Agreement and fails to cure the breach within sixty (60)
days after receiving written notice thereof from the Licensor.
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9.3 SURVIVAL. Section 1 ("Definitions"), Section 2 ("License
Grant"), Section 3 ("Partially Exclusive Use"), Section 4 ("Restrictions on
Use"), Section 6 ("License Fees and Payments"), Section 7 ("Warranties"),
Section 8 ("Intellectual Property Rights: Infringement"), Section 9.3
("Survival"), Section 10 ("Confidentiality"), and Section 12 ("General") will
survive the termination of this Agreement.
10. CONFIDENTIALITY. Each party shall protect the other's Confidential
Information from unauthorized dissemination and use with the same degree of
care that such party uses to protect its own like information. Neither party
will use the other's Confidential Information for purposes other than those
necessary to directly further the purposes of this Agreement. Neither party
will disclose to third parties the other's Confidential Information without
the prior written consent of the other party. Except as expressly provided
in this Agreement, no ownership or license rights is granted in any
Confidential Information.
11. ESCROW AGREEMENT: RIGHTS UPON DEFAULT. Within thirty (30) days after
the execution of this Agreement, the Licensor will deposit two (2) copies of
the Source Code and Executable Code for the Licensed Software, and all
associated flowcharts, decision tables, schematics, Documentation and other
technical documentation and information necessary for a reasonably skilled
programmer to understand the structure of, correct errors in, and make
modifications to such Source Code and Executable Code (the "Escrowed
Materials") into escrow with a mutually acceptable third party escrow agent
(the "Escrow Agent"). The Licensor must update the Escrowed Materials each
time a generally applicable modification, revision, upgrade or enhancement to
the Licensed Software is made, which update shall be within thirty (30) days
of each such modification, revision, upgrade or enhancement. The cost of
maintaining the Escrowed Materials with the Escrow Agent during the term of
this Agreement shall be borne equally by the Licensor and the Licensee. In
the event that the Licensor fails or refuses to escrow the Escrowed Materials
in accordance with this Agreement, the Licensee shall be entitled to
injunctive and other equitable relief for such breach or threatened breach of
this Section 11 and the Licensor shall be responsible for any and all
expenses incurred by the Licensee in enforcing its rights including court
costs and reasonable attorneys fees. The Licensee shall be entitled to
receive a copy of the Escrowed Materials upon the occurrence of any of the
following events: (i) any material failure of the Licensor to perform in
accordance with the terms of a maintenance agreement to be entered into
between the Licensor and the Licensee for the maintenance of the Licensed
Software; (ii) the Licensor: ceases to do business in the normal course;
becomes a debtor under any proceeding pursuant to the U.S. Bankruptcy Code; is
subject of any state insolvency proceeding such as an assignment for the
benefit of creditors; or seeks to sell substantially all of its assets in a
bulk sale transaction. In the event of a dispute between the Licensor and
the Licensee as to whether the Escrow Agent shall release the Escrowed
Materials from escrow, the dispute shall be resolved in accordance with
Section 12.10. During the pendency of such dispute, the Escrowed Materials
shall be released to a third party mutually agreed upon by the Licensor and
the Licensee for the Licensee's use and benefit of the Escrowed Materials
(the "Third Party"). In the event the Licensor and the Licensee are unable to
mutually agree upon the selection of the Third Party, the Licensor and the
Licensee shall each designate a
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<PAGE>
third party (the "Designee"), and the Licensor's Designee and the Licensee's
Designee shall jointly select the Third Party. In the event the dispute
between the Licensor and the Licensee is resolved in favor of the Licensor,
the Third Party shall immediately return all copies of the Escrowed Materials
to the Escrow Agent, and shall retain no copies of the Escrowed Materials in
its files.
12. GENERAL.
12.1 PROPRIETARY RIGHTS. The Licensed Software and Documentation,
and all worldwide Intellectual Property Rights therein, are the exclusive
property of the Licensor. All rights in and to the Licensed Software not
expressly granted to the Licensee in this Agreement are reserved by the
Licensor.
12.2 MAINTENANCE AND SUPPORT. The Licensor has agreed to perform
maintenance and support for the Licensed Software for a minimum of one (1)
year from the date of execution of a Maintenance Agreement, contemplated by
the parties to be executed simultaneously with this Agreement, which will
contain the terms of the Licensor's maintenance obligations. The licensor
agrees it will not charge in excess of those customarily charged by
developers who provide similar services for the maintenance and support
(including modifications, upgrades, and enhancements) of the Licensed
Software.
12.3 ASSIGNMENT. The Licensee may not assign or transfer, by
operation of law or otherwise, any of its rights under this Agreement to any
third party other than the Licensee's Affiliates without the Licensor's prior
written consent except pursuant to a transfer of all or substantially all of
the Licensee's business and assets, whether by merger, sale of assets, sale
of stock or otherwise. Any attempted assignment or transfer in violation of
the foregoing will be void.
12.4 NOTICES. All notices, consents and approvals under this
Agreement must be delivered in writing by courier or by certified or
registered mail, postage prepaid and return receipt requested, to the other
party at the address set forth beneath such party's signature, and will be
effective upon receipt or three(3) business days after being deposited in the
mail as required above, whichever occurs sooner. Either party may change its
address by giving notice of the new address to the other party in accordance
with this provision.
12.5 GOVERNING LAW. The Agreement will be governed by the laws of
the State of Maryland without regard to its conflict of laws principles. Any
action or proceeding arising from or relating to this Agreement must be
brought in Maryland, and each party irrevocably submits to the jurisdiction
and venue of a Maryland forum in any such action or proceeding.
12.6 WAIVERS. All waivers must be in writing. Any waiver or
failure to enforce any provision of this Agreement on one occasion will not
be deemed a waiver of any other provision or of such provision on any other
occasion.
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12.7 SEVERABILITY. If any provision of this Agreement is
determined to be unenforceable, such provision will be changed and interpreted
to accomplish the objectives of such provision to the greatest extent possible
under applicable law and the remaining provisions will continue in full force
and effect.
12.8 CONSTRUCTION. The headings of Sections of this Agreement
are for convenience only and are not to be used in interpreting this
Agreement. As used in this Agreement, the word "including" means "including
but not limited to." Unless the context otherwise requires, whenever used in
this Agreement, the singular shall include the plural, the plural shall
include the singular, and the masculine gender shall include the neuter and
feminine genders, and vice versa. Where the context requires the words "and"
and "or" means "and/or." and the word "any" means "all" where context
requires.
12.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties regarding the subject hereof and supersedes all
prior or contemporaneous agreements, understandings, and communications,
whether written or oral. This Agreement may be amended only by a written
document signed by both parties.
12.10 ARBITRATION. Any dispute between the Licensor and the
Licensee under or in connection with this Agreement, unless otherwise
provided in this Agreement, shall be submitted up and settled by binding
arbitration under and pursuant to the Maryland Uniform Arbitration Act and
the rules and regulations of the American Arbitration Association, and the
decision in such arbitration shall be final, conclusive and binding upon each
of the parties and judgment may be entered thereon in any court of competent
jurisdiction.
12.11 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall be one and the same instrument.
(CONTINUED NEXT PAGE)
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first hereinabove written.
LICENSOR
JASPIN INTERACTIVE, INC.
By: /s/ GREG FONTAINE
- --------------------------
Name: Greg Fontaine
lts
Address:
46859 Harry Byrd Highway
Suite 301
Sterling, VA 20164
Phone: 703-421-7800
LICENSEE
AMERICA'S DOCTOR, INC.
By: /s/ SCOTT RIFKIN
- ------------------------
lts:
Address:
11403 Cronridge Drive, Suite 200
Owings Mills, MD 21117
Phone: 410-581-1189
Fax: 410-581-1571
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Schedule 3.11: Intellectual Property Rights
The following is a complete list of the Intellectual Property Rights of the
Corporation and except as listed below, there are not Intellectual Property
Rights necessary or required to enable the Corporation to carry on its
respective business as now conducted and as presently proposed to be
conducted.
1. A fully-paid, partially-exclusive, in perpetuity license with Jaspin
Interactive, the terms of which have been agreed to. The written agreement in
draft form is attached to Schedule 3.10.
2. The Corporation has filed for various trademark protections. Attached as
an exhibit is the client status report from the Corporation's trademark
counsel detailing the filings of various names, phrases, etc. for trademark
protection by the Corporation.
3. The Corporation is currently using the registered domain names of
www.americasdoctor.com., wwwamericasdoctors.org and www.americasdoctors.net.
4. On or about November 4, 1998, the Corporation received one telephone call
from a representative of Empower Health Corporation, the owners of a
health-related web site affiliated with Dr. C. Everett Koop to inquire about
the corporate name. The representative stated that Dr. Koop has used the term
"America's Doctor" when referring to himself. The Corporation informed this
representative of the trademark filings and the absence of Dr. Koop's "common
law usage" in any of various trademark searches. The Corporation has not been
contacted again from this or any other individual affiliated with Dr. Koop
regarding this matter. There was no reference to "America's Doctor" at that
time on the Empower Health Corporation web site. Subsequent to that
conversation, the Corporation's outside counsel hired an investigator to
investigate the claims of Dr. Koop and Dr. Dean Edell, respectively (see
below).
5. Attached hereto is an investigative report dated November 20, 1998,
written at the request of the Corporation upon learning of the alleged use of
"America's Doctor" by Dr. Koop and the appearance of "America's Doctor" on
Dr. Edell's web site in connection with the sale of eyeglasses and regarding
any potential infringement of intellectual property rights by use of the name
"America's Doctor."
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Exhibit 10.28
RECRUITMENT SERVICES AGREEMENT
THIS RECRUITMENT SERVICES AGREEMENT ("Agreement") is entered into as of
the ___ day of July, 1999, by and between ClinTrials Research, Inc., a Delaware
corporation ("CTR") and AmericasDoctor.com, Inc. ("AD"), a Delaware corporation.
AD and CTR are sometimes referred to herein as the "Parties" and individually as
a "Party." Capitalized terms shall have the meanings set forth for such terms in
Article XII hereof or as otherwise defined in this Agreement.
WHEREAS, AD is engaged in the business of operating an Internet site
located at the URL http://www.americasdoctor.com (the "AD Site");
WHEREAS, CTR is engaged in the business of clinical recruitment and
testing of pharmaceutical products and devices;
WHEREAS, AD and Centerwatch, Inc. ("CW") have agreed to gather certain
data concerning clinical trial volunteers through the use of a trials volunteer
questionnaire ("Trials Volunteer Questionnaire") and store such data in a trials
volunteer questionnaire database ("Trials Volunteer Questionnaire Database").
NOW, THEREFORE, in contemplation of the foregoing recitals and in
consideration of the mutual covenants and promises contained herein, the Parties
hereby agree as follows:
Article I
Development of Database; Promotion
1.1 Development of Database. AD shall cause to be developed on or prior to
August 15, 1999, the Trials Volunteer Questionnaire for those Users who
are interested in participating in a clinical trial. The Trials Volunteer
Questionnaire shall include: (i) the User granting permission to AD, its
agents and Affiliates to contact research organizations ("CROs"), site
management organizations ("SMOs") and pharmaceutical companies on the
User's behalf, (ii) a description of the relationship between AD, CW,
CROs, SMOs and pharmaceutical companies and (iii) the User granting
permission to AD, its agents and Affiliates to use the information from
the Trials Volunteer Questionnaire for purposes of marketing and selling
other AD content, products and services.
1.2 Promotion of Clinical Trial Recruitment. AD shall use commercially
reasonable efforts to promote the Recruitment Services (as defined herein)
and to encourage Users to provide information for the Trials Volunteer
Questionnaire Database. During the 24 month period from the date hereof,
AD shall cause to be provided in excess of $10,000,000 in promotional,
marketing and advertising services for the sale of Recruitment Services
and for the attraction of Users to provide information for the Trials
Volunteer Questionnaire Database. Such promotion and advertising may
include television, radio, Internet and print advertising and may be part
of other AD promotions.
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Article II
Use of Recruitment Services by CTR
2.1 Recruitment Services. AD shall provide Internet clinical trial recruitment
services to CTR ("Recruitment Services"), consisting of contact
information of Qualified Applicants (as defined herein) from the Trials
Volunteer Questionnaire Database and, to the extent that the Trials
Volunteer Questionnaire Database does not contain such contact
information, the gathering of such contact information through the use of
the AD Site and other relationships that AD has with third Persons.
2.2 Pricing. CTR and AD shall negotiate in good faith the pricing terms for
Recruitment Services for each clinical trial managed or conducted by CTR.
The price for Recruitment Services shall be based on the number of
Qualified Applicants identified to CTR for such trial. The pricing for
each Qualified Applicant shall depend on a number of factors including the
rarity of the screening conditions for the trial, length of time for
recruiting a candidate and other factors agreed to by the Parties.
"Qualified Applicant" means an applicant who (i) meets all selection
criteria specified by CTR to AD on the date that AD was retained to
provide Recruitment Services for a given clinical trial and (ii) appears
for an initial screening at a time and location as shall be reasonably
requested of such applicant by CTR.
2.3 Use of Service. Subject to this Section 2.3 and Section 2.4, in the event
that CTR or any of its clients elects to recruit clinical trial candidates
through the Internet, CTR shall use exclusively the Recruitment Services
for the benefit of its clients; provided, however, that CTR may obtain
services similar to the Recruitment Services from any other Person with
respect to a clinical trial if the CTR client for such trial requires CTR
in writing to use such other services, and CTR promptly discloses such
written requirement to AD. CTR shall use commercially reasonable efforts
to promote the Recruitment Services to CTR clients. AD recognizes and
acknowledges that CTR cannot obligate or bind a CTR client to use the
Recruitment Services.
2.4 Use of Other Providers. In the event that AD is unable to fulfill its
volunteer quota for such trial (as agreed to by the Parties prior to the
commencement of the recruitment for such trial) within 45 days from the
date that AD was retained to provide Recruitment Services for such trial,
CTR shall have the right to use Persons other than AD to recruit clinical
trial candidates through the Internet for the benefit of CTR with respect
to a particular clinical trial.
2.5 Marketing Assistance. AD shall assist CTR in obtaining contracts with CTR
clients by presenting to such clients, at CTR's reasonable request,
information concerning the Recruitment Services.
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Article III
CTR Acknowledgements
3.1 AD Site. CTR agrees and acknowledges that:
(i) AD does not investigate, monitor, operate or control the material,
information, products, services, opinions or recommendations on the
AD Site, nor does it make any warranties, representations or
endorsements in connection with any material, information, products,
services, opinions or recommendation contained or available in
conferences, special programs, disease communities on the AD Site
and other programs or websites linked to the AD Site;
(ii) WITH RESPECT TO THE AD SITE, AD DOES NOT WARRANT, REPRESENT OR
GUARANTEE THAT IT WILL RESPOND TO ALL USER INQUIRIES, COMMENTS OR
REQUESTS FOR INFORMATION AND DOES NOT MAKE ANY REPRESENTATION OR
WARRANTY CONCERNING USEFULNESS OR FITNESS FOR A PARTICULAR PURPOSE
OF THE INFORMATION SUPPLIED TO USERS, OR THAT ITS FILES ARE FREE OF
VIRUSES, WORMS, TROJAN HORSES OR OTHER CODES THAT INCLUDE OR.
MANIFEST CONTAMINATING OR DESTRUCTIVE CHARACTERISTICS; and
(iii) WITH RESPECT TO THE AD SITE, AD MAKES NO REPRESENTATIONS OR
WARRANTIES CONCERNING THE OPERATION OF THE AD SITE WILL BE
UNINTERRUPTED OR ERROR FREE, AND AD SHALL NOT BE LIABLE FOR THE
CONSEQUENCES OF ANY INTERRUPTIONS OR ERRORS. AD SHALL NOT BE
RESPONSIBLE FOR INTERRUPTIONS OR ERRORS IN THE OPERATION OF THE
INTERNET, THE AD SITE OR ANY OTHER ENTITY WHICH IMPACTS THE
OPERATION OF THE AD SITE OR ANY OTHER SITE ON THE INTERNET.
Article IV
Representations, Warranties and Covenants
4.1 CTR Representations and Warranties. CTR represents and warrants to AD as
of the date hereof that the execution and delivery of this Agreement does
not conflict with or result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or
cancellation of, or accelerate the performance required by or maturity of,
or result in the creation of any security interest, lien, charge or
encumbrance on any of CTR's assets pursuant to any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, permit,
license, franchise, lease, contract, or other instrument or obligation to
which CTR is a party or by which any of its assets are bound or affected.
4.2 CTR Covenants. CTR covenants to AD that on and after the date of this
Agreement, CTR shall materially comply with all applicable laws, rules,
regulations and standards
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promulgated by governmental and non-governmental organizations governing
the advertising, marketing and promotion of clinical trial services and
the conduct of such trials.
4.3 AD Representations and Warranties. AD represents and warrants to CTR as of
the date hereof that the execution and delivery of this Agreement does not
conflict with or result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or
accelerate the performance required by or maturity of, or result in the
creation of any security interest, lien, charge or encumbrance on any of
AD's assets pursuant to any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise, lease,
contract, or other instrument or obligation to which AD is a party or by
which any of its assets are bound or affected.
4.4 AD Covenants. AD covenants to CTR that on and after the date of this
Agreement, AD shall materially comply with all applicable laws, rules,
regulations and standards promulgated by governmental and non-governmental
organizations governing the advertising, marketing and promotion of
clinical trial services.
4.5 Mutual Representations. Each Party represents to the other Party that:
(i) it has the full power and authority to enter into, execute, deliver,
and perform this Agreement;
(ii) the execution, delivery and performance of this Agreement and the
consummation of all transactions contemplated herein, have been duly
authorized by all necessary corporate and other actions of such
Party; and
(iii) this Agreement, when executed and delivered by such Party, shall be
a valid and binding obligation of such Party, enforceable against it
in accordance with the terms hereof, subject to bankruptcy,
insolvency and other similar laws affecting the rights of creditors
generally and except that the remedies of specific performance,
injunction and other forms of mandatory equitable relief may not be
available.
Article V
Relationship of Parties
5.1 No Joint Venture. Nothing contained in this Agreement shall be construed
as providing for a joint venture or partnership or for the sharing of
profits or losses arising out of the efforts of either or both of the
Parties, except as otherwise specifically provided for herein.
5.2 Independent Contractors. The Parties are and shall conduct themselves as
independent contractors in the performance of this Agreement. Each Party
shall have the right to determine the manner in which such Party conducts
its business operations or provides
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any services or materials to the other Party pursuant to this Agreement.
Neither Party shall have any right or authority to bind or commit the
other Party to any agreement, undertaking or obligation without the prior
written consent of the other Party.
5.3 Confidential Information.
(i) As used in this Agreement, the term "Confidential Information" shall
mean any information of a proprietary, technical or scientific
nature disclosed by one Party to the other Party unless specifically
designated not to be confidential, and shall include the identities
of suppliers, customers and strategic partners of either Party and
the terms of any agreements, contracts, understandings or
relationships of either Party.
(ii) Each Party shall treat as confidential all Confidential Information
of the other Party, shall not use such Confidential Information
except for the purposes of this Agreement or as otherwise authorized
by the other Party in writing, shall implement reasonable procedures
to prohibit the disclosure, duplication, misuse, or removal of the
other Party's Confidential Information, and shall not disclose such
Confidential Information to any third party except (a) as may be
necessary and required in connection with the rights and obligations
of such Party under this Agreement and subject to confidentiality
obligations at least as protective as those set forth in this
Agreement or (b) as required by law or legal process. Without
limiting the foregoing, each of the Parties shall use at least the
same procedures and degree of care which it uses to prevent the
disclosure of its own Confidential Information of like importance to
prevent the disclosure of Confidential Information disclosed to it
by the other party under this Agreement, but in no event less than
reasonable care.
(iii) The foregoing restrictions as to Confidential Information shall not
apply to information that;
(1) is known to the receiving Party at the time of the
communication to the receiving Party;
(2) has become publicly known through no wrongful act of the
receiving Party;
(3) has been rightfully received from a third party authorized to
make such communication without restriction;
(4) has been independently developed by the receiving Party, or
(5) has been approved for release by the written authorization of
the communicating Party.
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Article VI
Indemnification and Limitation on Liability
6.1 Indemnities.
(i) Each Party agrees to indemnify and hold the other Party harmless
from, and to reimburse such other Party for, any loss, cost,
expense, damage, liability or claim (including, without limitation,
any attorneys' fees and costs of investigation and defense) arising
out of, based upon or resulting from (a) the inaccuracy of any
representation or warranty of the indemnifying Party which is
contained in this Agreement, or (b) the breach of or failure to
perform any warranty or covenant made by the indemnifying Party
which is contained in this Agreement.
(ii) CTR agrees to indemnify and hold AD harmless from, and to reimburse
AD for, any loss, cost, expense, damage, liability or claim
(including, without limitation, any attorneys' fees and costs of
investigation and defense) arising out of, based upon or resulting
from any claim by a User relating to a clinical trial for which
Recruitment Services are provided to CTR hereunder.
6.2 Limitation on Damages. In no event, whether through arbitration or
judicial proceeding, shall any Party be liable to the other Party for
special, incidental, indirect or consequential damages of any kind or
nature, on claims made directly by the other Party (without limitation of
third party claims and claims of contribution) even if advised of the
possibility of such damages in advance. Notwithstanding the preceding
sentence, in the event of a third party claim which gives rise to a right
of indemnification pursuant to Section 6.1, a Party shall be obligated to
fully indemnify the other Party pursuant to the terms and conditions of
Section 6.1.
Article VII
Term and Termination
7.1 Term. The term of this Agreement shall be for 24 months from the date
hereof. Either Party shall have the right to terminate this Agreement
within 45 days prior written notice on or after nine months from the date
hereof.
7.2 Survival of Certain Terms. The provisions contained in Articles III, IV,
V, VI, IX and X shall survive termination, expiration, or cancellation of
this Agreement.
7.3 Termination. Upon the occurrence of any one of the following events,
either Party may elect to terminate this Agreement by notice to the other
Parties, such termination to take effect on the date of the notice unless
otherwise advised by the Party giving the notice:
(i) If the other Party fails to comply with any material provision of
this Agreement, and such failure is not cured or discharged within
30 days written notice thereof.
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(ii) Upon the insolvency or bankruptcy of, or the filing of a petition
for reorganization or liquidation under applicable bankruptcy or
insolvency laws by or against, or an assignment for the benefit of
creditors of, or the appointment of administrator, liquidator,
trustee or receiver of, or any similar protective proceeding or act
or event of bankruptcy with respect to one of the other Parties.
(iii) Upon the breach by the other Party of any representation, warranty
or covenant contained herein.
Article VIII
Notices
Any notice, demand, request, statement, or other writing required or permitted
by this Agreement shall be deemed to have been sufficiently provided when
personally delivered, sent by telecopy transmission, or dispatched by air
courier, addressed as follows:
To AD: AmericasDoctor.com, Inc.
Attention: Dr. Scott Rifkin
10065 Red Run Boulevard
Suite 200
Owings Mills, MD 21117
Tel: (443) 394-1301
Fax: (443) 581-1571
with a copy to;
AmericasDoctor.com, Inc.
Attention: Jacob Wyatt
10065 Red Run Boulevard
Suite 200
Owings Mills, MD 21117
Tel: (443) 394-1308
Fax: (443) 581-1571
To CTR: ClinTrials Research Inc.
Attn: Jeffrey J. Collins
P.O. Box 13991
Research Triangle Park, NC 27709
Tel: (919) 460-9005
Fax: (919) 462-2400
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Article IX
Applicable Law
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware, United States of America, regardless of its place of
negotiation, execution, or performance and regardless of any principles of
conflict of laws or choice of law which would require the application of the
laws of another jurisdiction
Article X
Dispute Resolution
10.1 Forum. The Parties agree, expressly renouncing any other forum for the
resolution of disputes, that except as provided in Section 10.2, any
disputes arising out of; relating to, or arising in connection with this
Agreement shall be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association,
except as modified by this Section. The arbitration panel shall consist of
three arbitrators, one to be appointed by AD, one to be appointed by CTR
and the third to be selected by the two arbitrators so appointed. The
arbitration will be held in the State of Delaware; and it shall be held
as promptly as possible at such time as the arbitration tribunal may
determine. The arbitration will be held in the English language. The
arbitrators shall state the reasons upon which the award is based.
Judgment upon the arbitration award may be entered in any court of
competent jurisdiction (including without limitation the courts of the
United States and the respective political subdivisions thereof), or
application may be made to any such court for a judicial acceptance of the
award and an order of enforcement, as the case may be. If either Party
employs an attorney or commences legal or arbitral proceedings to enforce
the provisions of this Agreement, the prevailing Party shall be entitled
(unless the relevant tribunal decides otherwise) to recover from the
other, reasonable costs incurred in connection with such enforcement,
including but not limited to, attorneys' fees and costs of investigation
and litigation/arbitration. Except as otherwise specifically provided in
this Article, no Party shall institute any action or proceeding against
the other Party in any court with respect to any dispute which is or could
be the subject of a claim or proceeding pursuant to this Article.
10.2 Injunctive Relief. The Parties acknowledge that breaches of this Agreement
may result in material irreparable injury for which there is no adequate
remedy at law, that it will not be possible to measure damages for such
breaches, and that in the event of such a breach or threat thereof the
each Party shall be entitled (notwithstanding the provisions of Section
10.1) to seek and obtain a temporary restraining order, a preliminary
injunction, a permanent injunction or other equitable relief restraining
such Party from engaging in activities prohibited by this Agreement. Each
Party further acknowledges that in the event of such a breach or threat
thereof the other Party shall be entitled to obtain such other or further
relief as may be required to specifically enforce any of the covenants of
this Agreement.
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Article XI
Miscellaneous
11.1 Successors. Except as otherwise provided in this Agreement, every
covenant, term, and provision of this Agreement shall be binding upon and
inure to the benefit of the Parties and their respective legal
representatives, and successors, permitted transferees, and permitted
assignees.
11.2 Third Party Beneficiaries. This Agreement is for the sole benefit of the
Parties and their permitted assignees and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the
Parties and such assignees, any legal or equitable rights hereunder,
11.3 Assurances. Each Party agrees to perform all further acts and to execute,
acknowledge, and deliver any documents which may be reasonably necessary,
appropriate, or desirable to carry out the provisions of this Agreement.
11.4 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be an original, and such counterparts shall together
constitute but one and the same instrument.
11.5 Assignment. No Party shall assign or delegate this Agreement or any of its
rights or obligations hereunder, other than to an Affiliate thereof,
without the prior written consent of the other Party; provided, however,
that the assigning Party shall remain liable for the performance of its
duties hereunder.
11.6 Unenforceable Terms. If any term, provision, covenant, or condition of
this Agreement is held invalid or unenforceable for any reason, the
remainder of the provisions shall continue in full force and effect as if
this Agreement had been executed with the invalid portion thereof
eliminated. Furthermore, upon the request of either Party, the Parties
shall add, in lieu of such invalid or unenforceable provisions, provisions
as similar in terms to such invalid or unenforceable provisions as may be
possible and legal, valid and enforceable.
11.7 Interpretation. Where the context requires, words in the singular shall be
construed as including the plural and words in the plural shall be
construed as including the singular.
11.8 Headings. Headings are intended only for reference purposes and shall not
be used to construe or limit any provision of this Agreements.
11.9 Entire Agreement. This Agreement constitutes the entire understanding of
and agreement between the Parties and supersedes all prior
representations, understandings, and agreements between the Parties and
their Affiliates with respect to the subject matter hereof.
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11.10 Amendments. This Agreement shall be subject at any time to amendment upon
the agreement of the Parties. Such amendments shall be in writing, shall
identify the provisions of this Agreement that are to be amended, and
shall be signed by the Parties.
11.11 Press Release. The Parties shall cooperate in preparing a press release
concerning the transactions contemplated herein, wherein CTR will be
described as exclusively using AD's Recruitment Services. The Parties
shall make all reasonable efforts to finalize such press release within
three (3) days of the date hereof.
Article XII
Definitions
12.1 Definitions. In this Agreement, the following terms shall have the
meanings set forth below:
(i) "Affiliate" means, with respect to any specified Person, any other
Person (a) which owns (directly or indirectly) individually or as
part of a group (as this term is defined under the Securities
Exchange Act of 1934) greater than 50% of such specified Person or
(b) of which greater than 50% of' the voting stock or other capital
interest is owned by (directly or indirectly), individually or as
part of a group (as this term is defined under the Securities
Exchange Act of 1934) by such specified Person.
(ii) "Person" means an individual, partnership, company, corporation or
other legal entity, as the context requires.
(iv) "User" shall mean any Person that views the AD Site.
SIGNATURES FOLLOW ON NEXT PAGE
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly-authorized representatives as of the date first above written.
ClinTrials Research, Inc.: AmericasDoctor.com, Inc.:
By: /s/ Jeffrey J. Collins By: /s/ Scott M. Rifkin
--------------------------------------- ---------------------------
Name: Jeffrey J. Collins, PhD Name: Scott M. Rifkin, M.D.
------------------------------------- -------------------------
Title: Vice President, Product Development Title: Chief Executive Officer
------------------------------------ ------------------------
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Exhibit 10.29
RECRUITMENT SERVICES AGREEMENT
THIS RECRUITMENT SERVICES AGREEMENT ("Agreement") is entered into as of
the 26 day of August, 1999 by and between Covance Inc., a Delaware corporation
("Covance") and AmericasDoctor.com, Inc. ("AD"), a Delaware corporation. AD and
Covance are sometimes referred to herein as the "Parties" and individually as a
"Party."
WHEREAS, AD is engaged in the business of operating an Internet site
located at the URL HTTP://WWW.AMERICASDOCTOR.COM and of the recruitment of
patients for clinical trials;
WHEREAS, Covance is engaged in the business of conducting clinical
trials of biopharmaceutical products, among other things;
WHEREAS, AD and Centerwatch, Inc. ("CW") shall gather certain data
concerning clinical trial volunteers through the use of a trials volunteer
questionnaire and shall store such data in a trials volunteer questionnaire
database ("Trials Volunteer Questionnaire Database"); and
WHEREAS, Covance desires to contract with AD for the recruitment of
clinical trial candidates for Phase I through Phase IV clinical trials conducted
by Covance on behalf of Covance's clients.
NOW, THEREFORE, in contemplation of the foregoing recitals and in
consideration of the mutual covenants and promises contained herein, the Parties
hereby agree as follows:
ARTICLE I
USE OF RECRUITMENT SERVICES BY COVANCE
1.1 RECRUITMENT SERVICES. AD shall provide a proactive Internet clinical trial
recruitment campaign, pursuant to the terms herein, with respect to Phase I
through Phase IV clinical development trials ("Recruitment Services")
conducted by Covance with the goal of providing Covance with patients who
meet the applicable inclusion/exclusion criteria for Covered Clinical
Trials (as defined in Section 1.3 below), such criteria to be determined by
Covance prior to the commencement of Recruitment Services and provided to
AD in writing. Recruitment Services shall include, without limitation, the
following: (a) actively searching the Trials Volunteer Questionnaire
Database and other Internet databases for patients meeting the
inclusion/exclusion criteria of the Covered Clinical Trials, to the extent
AD has the right to search such other databases; (b) providing Covance with
contact information for patients meeting the inclusion/exclusion criteria
for participation in such Covered Clinical Trials or directly soliciting
such patients' enrollment in such Covered Clinical Trials; (c) conducting
active Internet patient recruiting campaigns to identify such patients
including, with the prior written consent of Covance in each case and
subject to Institutional Review Board approval, utilizing advertising
including Internet banner ads on the AD site, and as AD deems appropriate,
television, radio and other media to locate qualified patients; (d)
identifying and targeting noncompetitive websites, including disease
specific websites, as AD deems appropriate, which may be frequented by
potential eligible patients and actively soliciting such individuals; and
(e) as AD deems appropriate, utilizing other web-based means to locate and
recruit eligible patients for such clinical trials. AD shall consult in
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with Covance with respect to activities undertaken in connection with
subparagraphs (c), (d) and (e) above.
1.2 PRICING. Covance and AD shall negotiate in good faith the pricing terms for
Recruitment Services for each Covered Clinical Trial. The price for
Recruitment Services shall be on a per Enrolled Patient basis. For purposes
of this Agreement, Enrolled Patient shall mean a patient who has been
assigned to a treatment or control group in a Covered Clinical Trial as a
direct result of AD's Recruitment Services which shall be demonstrated to
the reasonable satisfaction of Covance. In the event that AD shall present
a name and contact information to Covance of a candidate derived from the
Recruitment Services, or in the event that AD or its agents shall contact
such candidate on behalf of Covance or its clients and, in each case, such
candidate shall enroll in a Covered Clinical Trial, then such candidate
shall be deemed to be enrolled as a result of AD's recruitment services,
provided that such candidate shall not earlier have been made known to
Covance through its own efforts or from a source other than AD. Covance
shall provide reasonable assistance in confirming which individuals
referred or solicited by AD hereunder have enrolled in a Covered Clinical
Trial. The price for each Enrolled Patient shall depend on a number of
factors including the rarity of the screening conditions for the trial, and
other factors agreed to by the Parties. In the event the Parties are unable
to agree on pricing with respect to a Covered Clinical Trial within five
days of the initiation of pricing discussions, notwithstanding the
provisions of Section 1.3 hereof, Covance shall have the right to allow
persons other than AD to recruit clinical trial candidates through the
Internet for the benefit of Covance or its client. Within 30 days after the
commencement of any Covered Clinical Trial and every 30 days thereafter, AD
shall provide Covance with a detailed statement setting forth each Enrolled
Patient for each Covered Clinical Trial together with supporting
documentation or verification, to the reasonable satisfaction of Covance,
that such patient was enrolled as a direct result of AD's Recruitment
Services. Covance shall pay AD within 30 days from receipt of such invoice.
1.3 USE OF SERVICE. Covance agrees that when appropriate in its sole
discretion, it shall recommend to its clients that AD's services be used to
recruit clinical trial candidates through the Internet; provided, however,
Covance shall not recommend to its clients any other Internet recruitment
services, other than that described in the last sentence of this Section.
In the event Covance's client agrees to use such services for Phase I
through Phase IV clinical trials conducted and managed by Covance (each
such trial where such agreement is obtained shall be referred to herein as
a "Covered Clinical Trial"), Covance shall use the Recruitment Services
with respect to such Covered Clinical Trial to the exclusion of Internet
recruitment services provided by other third parties for a period of 30
days after agreement of the Parties on the pricing terms. Nothing herein
shall be construed to prohibit Covance from using its own website or
database, on its own or through license to third parties, for the
recruitment of patients or from developing, distributing and marketing a
patient recruitment or clinical trials database either on its own or in
conjunction with a third party.
1.4 EXCLUSIVITY AD agrees that it will not provide Recruitment Services to, or
contract for the provision of Recruitment Services with, PAREXEL
International Corp. or Quintiles Transnational Corp. during the term of
this Agreement. In the event AD does provide or
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contract for the provision of such services to either of such companies,
then, notwithstanding any other provision of this Agreement, Covance shall
have the right to terminate this Agreement at any time, which shall be
Covance's sole remedy for breach of this Section 1.4.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 AD REPRESENTATIONS AND WARRANTIES. AD represents and warrants to Covance as
of the date hereof that the execution and delivery of this Agreement does
not conflict with or result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or
accelerate the performance required by or maturity of, or result in the
creation of any security interest, lien, charge or encumbrance on any of
AD's assets pursuant to any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise, lease,
contract, or other instrument or obligation to which AD is a party or by
which any of its assets are bound or affected.
2.2 DATABASE RIGHTS. AD represents and warrants to Covance that AD has the
exclusive rights to use CW's patient registration database for clinical
trial recruitment and has the right to use such database for the benefit of
Covance as contemplated in this Agreement.
2.3 AD COVENANTS.
(a) AD covenants to Covance that on and after the date of this Agreement,
AD shall materially comply with all applicable laws, rules, regulations and
standards promulgated by governmental and non-governmental organizations
governing its activities under this Agreement including the rules and
regulations of the U.S. Food and Drug Administration relating to patient
recruitment and laws relating to data privacy.
(b) AD shall provide to Covance glossy brochures describing AD's Internet
patient recruitment services for circulation to Covance's clients, as
reasonably requested by Covance.
2.4 MUTUAL REPRESENTATIONS. Each Party represents to the other Party that:
(a) it has the full power and authority to enter into, execute, deliver,
and perform this Agreement;
(b) the execution, delivery and performance of this Agreement and the
consummation of all transactions contemplated herein, have been duly
authorized by all necessary corporate and other actions of such Party; and
(c) this Agreement, when executed and delivered by such Party, shall be the
valid and binding obligations of such Party, enforceable against it in
accordance with the Agreement's terms, subject to bankruptcy, insolvency
and other similar laws affecting the rights of creditors generally and
except that the remedies of specific performance, injunction and other
forms of mandatory equitable relief may not be available.
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ARTICLE III
RELATIONSHIP OF PARTIES
3.1 NO JOINT VENTURE. Nothing contained in this Agreement shall be construed as
providing for a joint venture or partnership or for the sharing of profits
or losses arising out of the efforts of either or both of the Parties,
except as otherwise specifically provided for herein.
3.2 INDEPENDENT CONTRACTORS. The Parties are and shall conduct themselves as
independent contractors in the performance of this Agreement. Neither Party
shall have any right or authority to bind or commit the other Party to any
agreement, undertaking or obligation without the prior written consent of
the other Party.
3.3 CONFIDENTIAL INFORMATION.
(a) As used in this Agreement, the term "Confidential Information" shall
mean any information of a proprietary, technical or scientific nature in
connection with a Covered Clinical Trial disclosed by Covance to AD unless
specifically designated not to be confidential. It shall also include the
identities of suppliers, customers and strategic partners of Covance and
the terms of any agreements, contracts, understandings or relationships of
Covance. Both Parties agree to keep the terms of this Agreement
confidential.
(b) AD shall treat as confidential all Confidential Information of Covance,
shall not use such Confidential Information except for the purposes of this
Agreement or as otherwise authorized in writing, shall implement reasonable
procedures to prohibit the disclosure, duplication, misuse, or removal of
Covance's Confidential Information, and shall not disclose such
Confidential Information to any third party except as may be necessary and
required under this Agreement and subject to confidentiality obligations at
least as protective as those set forth in this Agreement. Without limiting
the foregoing, AD shall use at least the same procedures and degree of care
which it uses to prevent the disclosure of its own Confidential Information
to prevent the disclosure of Confidential Information disclosed to it by
Covance under this Agreement, but in no event less than reasonable care.
(c) The foregoing restrictions as to Confidential Information shall not
apply to information that:
(i) is known to AD prior to the communication to AD;
(ii) has become publicly known through no wrongful act of AD;
(iii) has been rightfully received from a third party authorized to
make such communication without restriction;
(iv) has been approved for release by the written authorization of
Covance;
(v) must be disclosed pursuant to an applicable law, statute,
regulation or court order, in which event AD shall notify Covance
promptly so that Covance may seek a protective order or other
appropriate remedy. AD shall furnish only
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that portion of the Confidential Information as is legally
required to be disclosed and will use all reasonable efforts to
obtain reliable assurance that confidential treatment will be
accorded such information.
3.4 INJUNCTIVE RELIEF. The Parties acknowledge that breach of Section 3.3 of
this Agreement may result in material irreparable injury for which there is
no adequate remedy at law, that it will not be possible to measure damages
for such breaches, and that in the event of such a breach or threat thereof
Covance shall be entitled (notwithstanding the provisions of Section 8.1)
to seek and obtain a temporary restraining order, a preliminary injunction,
a permanent injunction or other equitable relief restraining AD from
engaging in activities prohibited by this Agreement. AD further
acknowledges that in the event of such a breach or threat thereof Covance
shall be entitled to obtain such other or further relief as may be required
to specifically enforce any of the covenants of this Agreement. AD hereby
agrees and consents that such injunctive or other relief may be sought in
any court of competent jurisdiction in the State of New Jersey. AD agrees
to and hereby does submit to IN PERSONAM jurisdiction before each and every
such court for that purpose.
ARTICLE IV
INDEMNIFICATION AND LIMITATION ON LIABILITY
4.1 INDEMNIFICATION. (a) COVANCE INDEMNIFICATION. Covance shall indemnify,
defend and hold harmless AD and its subsidiaries and their respective
officers, directors, employees and agents from, against and in respect of
any and all losses, damages, costs or expenses (including reasonable
attorneys' fees) (a "Loss") arising from any claim, action, suit,
assessment, proceeding or demand (a "Claim") resulting from, relating to or
arising out of (i) any breach of its representations, warranties, covenants
or agreements in or under this Agreement, (ii) the negligence, gross
negligence or intentional misconduct or inaction of Covance in the
performance of its obligations under this Agreement, or (iii) its
materials, trademarks or logos infringing upon or violating any patent,
copyright, trademark or other property right or privacy right of any third
party; provided, that if such Loss or Claim arises in whole or in part from
the negligence, gross negligence or intentional misconduct or inaction of
AD, then the amount of the Loss or Claim that Covance shall indemnify AD
for pursuant to this Section 4.1 shall be reduced by an amount in
proportion to the percentage of ADs' responsibility for such Loss or Claim
as determined by a court of competent jurisdiction in a final and
non-appealable decision or, if available, pursuant to the arbitration
provisions of Article VIII of this Agreement, or in a binding settlement
between the Parties. Covance further agrees that in the event it has
contractual indemnification rights from a sponsor of a Covered Clinical
Trial which rights by their terms apply to Covance's vendors, Covance shall
use all reasonable efforts to assist AD in enforcing such rights for and on
behalf of AD with respect to any Losses arising from any Claim resulting
from such Covered Clinical Trial. Nothing herein shall limit Covance's
discretion with respect to the negotiation and execution of contracts with
sponsors of clinical trials.
(b) AD INDEMNIFICATION. AD shall indemnify, defend and hold harmless
Covance and its subsidiaries and their respective officers, directors,
employees and agents from, against and in respect of any and all Losses
arising from any Claim resulting from, relating to or arising out of (i)
any breach of its representations, warranties, covenants or agreements in
or under this Agreement, (ii) the negligence, gross negligence or
intentional misconduct
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or inaction of AD in the performance of its obligations under this
Agreement, or (iii) its materials, trademarks or logos infringing upon or
violating any patent, copyright, trademark or other property right or
privacy right of any third party; provided, that if such Loss or Claim
arises in whole or in part from the negligence, gross negligence or
intentional misconduct or inaction of Covance, then the amount of the Loss
or Claim that AD shall indemnify Covance for pursuant to this Section 4.1
shall be reduced by an amount in proportion to the percentage of Covance's
responsibility for such Loss or Claim as determined by a court of competent
jurisdiction in a final and non-appealable decision or, if available,
pursuant to the arbitration provisions of Article VIII of this Agreement,
or in a binding settlement between the Parties.
(c) THIRD PARTY CLAIMS. Upon receipt of notice of any Claim brought or
asserted against any party hereto by any third party which may give rise to
a right of indemnity from the other party or Parties hereto, the party
seeking indemnification (the "Indemnified Party") shall give written notice
thereof within fifteen (15) days of receipt of notice of any such Claim to
the other party or Parties (the "Indemnifying Party") with a Claim for
indemnity; provided, that failure to give notification within such
timeframe shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such Claim for indemnity shall indicate the nature
of the Claim and the basis therefore. The Indemnifying Party shall have ten
(10) days from its receipt of the notice of the Claim to notify the
Indemnified Party whether or not the Indemnifying Party elects, at its sole
cost and expense, to defend the Indemnified Party hereunder against such
Claim; PROVIDED, that, if the Indemnified Party has provided written notice
of a third party Claim to the Indemnifying Party within fifteen (15) days
of the Indemnified Party's receipt of notice of such Claim, the Indemnified
Party is authorized, but not obligated, prior to notification from the
Indemnifying Party of its desire to defend the Claim, to file any motion,
answer or other pleading that it shall deem necessary or appropriate to
protect its interest.
The Indemnifying Party shall be permitted to defend the Claim if it so
elects, provided that (i) the Indemnified Party is given the right to
participate in the defense of such Claim at its own cost and expense and
(ii) the Indemnifying Party will, prior to making any settlement, consult
with the Indemnified Party as to the terms of such settlement. The
Indemnified Party shall have the right, at its election, to release and
hold harmless the Indemnifying Party from its indemnification obligations
hereunder with respect to such Claim and assume the complete defense of the
same in return for payment by the Indemnifying Party to the Indemnified
Party of the amount of any settlement offer by the Indemnifying Party. The
Indemnifying Party will not, in defense of any such Claim, except with the
consent of the Indemnified Party, consent to the entry of any judgment or
enter into any settlement which (i) does not include, as an unconditional
term thereof, the giving by the third party to the Indemnified Party of a
release from all liability in respect thereof or (ii) imposes any
obligation on the Indemnified Party. After notice to the Indemnified Party
of the Indemnifying Party's election to assume the defense of such Claim,
the Indemnifying Party shall be liable to the Indemnified Party for such
legal or other expenses subsequently incurred by the Indemnified Party at
the request of the Indemnifying Party in connection with the defense
thereof. As to those Claims with respect to which the Indemnifying Party
does not elect to assume control of the defense, the Indemnified Party will
afford the Indemnifying Party an opportunity to participate in
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such defense, at the Indemnifying Party's own cost and expense, and will
not settle or otherwise dispose of any of the same without the consent of
the Indemnifying Party.
(d) DIRECT CLAIMS. If an Indemnified Party shall have a Claim against an
Indemnifying Party that does not involve a Claim being brought or asserted
by a third party, then the Indemnified Party shall promptly send written
notice thereof to the Indemnified Party with respect to such Claim;
PROVIDED, that failure to give prompt notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying
Party shall have been actually prejudiced as a result of such failure. If
the Indemnifying Party does not notify the Indemnified Party in writing
within thirty (30) days from its receipt of the notice of the Claim that it
disputes such Claim, then the amount of such Claim shall be conclusively
deemed an indemnity obligation of the Indemnifying Party hereunder.
(e) PAYMENT OF INDEMNIFICATION OBLIGATIONS. If an Indemnifying Party is
required to make any payment under this Section, the Indemnifying Party
shall promptly pay the Indemnified Party the amount so determined. If there
should be a dispute as to the amount of any indemnity obligation owed under
this Section, the Indemnifying Party shall nevertheless pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
difference, if any, between the amount of the obligation ultimately
determined as properly payable under this Section and the portion, if any,
previously paid shall bear interest as provided in subsection (f) below.
(f) FAILURE TO PAY. If all or part of any indemnification obligation under
this Agreement is not paid when due, then the Indemnifying Party shall pay
the Indemnified Party interest on the unpaid amount of the obligation for
each day from the date the amount became due through the date on which
payment in full is made, payable on demand, at the fluctuating rate per
annum publicly announced on the date of the Claim for indemnification under
this Agreement by First Union National Bank, N.A. (or its successors) as
its so-called "prime rate."
(g) BREACH BY INDEMNIFIED PARTY. A breach by the Indemnified Party of its
obligations under this Agreement shall not relieve the Indemnifying Party
of its obligations under this Section unless such breach was solely
responsible for the Loss or Claim as determined by a court of competent
jurisdiction in a final and non-appealable decision, or, if available,
pursuant to the arbitration provisions of Section 8.1 of this Agreement, or
in a binding agreement between the Parties.
ARTICLE V
TERM AND TERMINATION
5.1 TERM. The term of this Agreement shall be for six months from the date
hereof. Notwithstanding the foregoing, Covance may terminate this Agreement
at any time upon 30 days written notice, provided, however, that any
termination by Covance pursuant to this sentence shall not apply to any
Covered Clinical Trial for which AD has commenced Recruitment Services for
a Covered Clinical Trial pursuant to the terms herein.
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5.2 SURVIVAL OF CERTAIN TERMS. The provisions contained in Articles III, IV, V,
VI, VII, VIII and IX shall survive termination, expiration, or cancellation
of this Agreement.
5.3 TERMINATION. Upon the occurrence of any one of the following events, either
Party may elect to terminate this Agreement by notice to the other Party,
such termination to take effect on the date of the notice unless otherwise
advised by the Party giving the notice:
(a) If the other Party fails to comply with any material provision of this
Agreement, and such failure is not cured or discharged within 30 days
written notice thereof.
(b) Upon the insolvency or bankruptcy of, or the filing of a petition for
reorganization or liquidation under applicable bankruptcy or insolvency
laws by or against, or an assignment for the benefit of creditors of, or
the appointment of administrator, liquidator, trustee or receiver of, or
any similar protective proceeding or act or event of bankruptcy with
respect to one of the other Parties.
ARTICLE VI
NOTICES
Any notice, demand, request, statement, or other writing required or permitted
by this Agreement shall be deemed to have been sufficiently provided when
personally delivered, sent by telecopy transmission, or dispatched by air
courier, addressed as follows:
To AD: AmericasDoctor.com, Inc.
Attention: Dr. Scott Rifkin
10065 Red Run Boulevard
Suite 200
Owings Mills, MD 21117
Fax No.: 410-581-1571
With a Jamie Eisenberg, Esq
Copy to: Rifkin, Livingston, Levitan & Silver, LLC
575 South Charles St.
Suite 200
Baltimore, MD 21201
Fax No.: 410-837-9716
To Covance: Covance Inc.
Attention: Mark Eisenach
210 Carnegie Center
Princeton, NJ 08540
Fax No.: (609) 452-9865
With a Covance Inc.
Copy to: Attention: Jeffrey S. Hurwitz
210 Carnegie Center
Princeton, NJ 08540
Fax No.: (609) 452-9865
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ARTICLE VII
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of New Jersey, United States of America, regardless of its place of
negotiation, execution, or performance and regardless of any principles of
conflict of laws or choice of law which would require the application of the
laws of another jurisdiction
ARTICLE VIII
DISPUTE RESOLUTION
The Parties agree, expressly renouncing any other forum for the resolution of
disputes, that except as provided in Section 9.2, any disputes arising out of,
relating to, or arising in connection with this Agreement shall be finally
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, except as modified by this Section. The
arbitration panel shall consist of three arbitrators, one to be appointed by AD,
one to be appointed by Covance and the third to be selected by the two
arbitrators so appointed. The arbitration will be held in the City of New York,
New York; and it shall be held as promptly as possible at such time as the
arbitration tribunal may determine. The arbitration will be held in the English
language. The arbitrator(s) shall state the reasons upon which the award is
based. Judgment upon the arbitration award may be entered in any court of
competent jurisdiction (including without limitation the courts of the United
States, or application may be made to any such court for a judicial acceptance
of the award and an order of enforcement, as the case may be. Except as
otherwise specifically provided in this Article, no Party shall institute any
action or proceeding against any other Party in any court with respect to any
dispute which is or could be the subject of a claim or proceeding pursuant to
this Article.
ARTICLE IX
MISCELLANEOUS
9.1 SUCCESSORS. Except as otherwise provided in this Agreement, every covenant,
term, and provision of this Agreement shall be binding upon and inure to
the benefit of the Parties and their respective legal representatives, and
successors, permitted transferees, and permitted assignees.
9.2 THIRD PARTY BENEFICIARIES. This Agreement is for the sole benefit of the
Parties and their permitted assignees and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the
Parties and such assignees, any legal or equitable rights hereunder.
9.3 COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be an original, and such counterparts shall together
constitute but one and the same instrument.
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9.4 ASSIGNMENT. No Party shall assign or delegate this Agreement or any of its
rights or obligations hereunder, other than to an Affiliate thereof which
is capable of performing such Party's obligation hereunder, without the
prior written consent of the other Party. Affiliate shall mean, with
respect to any specified Person, (a) any other Person which owns (directly
or indirectly) individually or as part of a group (as this term is defined
under the Securities Exchange Act of 1934) greater than 50% of such
specified Person or (b) any other Person of whom greater than 50% of the
voting stock or other capital interest is owned by (directly or
indirectly), individually or as part of a group (as this term is defined
under the Securities Exchange Act of 1934) by such specified Person.
9.5 UNENFORCEABLE TERMS. If any term, provision, covenant, or condition of this
Agreement is held invalid or unenforceable for any reason, the remainder of
the provisions shall continue in full force and effect as if this Agreement
had been executed with the invalid portion thereof eliminated. Furthermore,
upon the request of any Party, the Parties shall add, in lieu of such
invalid or unenforceable provisions, provisions as similar in terms to such
invalid or unenforceable provisions as may be possible and legal, valid and
enforceable.
9.6 INTERPRETATION. Where the context requires, words in the singular shall be
construed as including the plural and words in the plural shall be
construed as including the singular.
9.7 HEADINGS. Headings are intended only for reference purposes and shall not
be used to construe or limit any provision of this Agreement.
9.8 ENTIRE AGREEMENT. This Agreement constitutes the entire understanding of
and agreement between the Parties and supersedes all prior representations,
understandings, and agreements between the Parties and their Affiliates
with respect to the subject matter hereof.
9.9 AMENDMENTS. This Agreement shall be subject at any time to amendment upon
the agreement of the Parties. Such amendments must be in writing, identify
the provisions of this Agreement that are to be amended, and be signed by
the Parties.
9.10 PRESS RELEASE AND COMMUNICATIONS. The Parties shall cooperate in preparing
a press release concerning the transaction contemplated herein. Neither
Party shall issue any such press release without the prior written approval
of the other Party. AD shall not use the name of Covance or its clients in
any advertising, media or any other forum without the prior written consent
of Covance in each instance.
SIGNATURES FOLLOW ON NEXT PAGE
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly-authorized representatives as of the date first above
written.
Covance Inc.: AmericasDoctor.com, Inc.:
By: /s/ Mark Eisenach By: /s/ Charles Bland
------------------------------ ---------------------------
Name: Mark Eisenach Name: Charles Bland
------------------------------ ---------------------------
Title: Corporate Vice President Title: President
------------------------------ ---------------------------
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ICON CMT CORP.
MASTER HOSTING AND NETWORK SERVICES AGREEMENT
AGREEMENT, made as of the 1 day of MARCH, 1994, by and between icon CMT
Corp., a Delaware corporation, with an address at 1200 Harbor Boulevard, 8th
Floor, Weehawken, New Jersey 07087 ("Icon CMT"), and AMERICA'S DOCTOR(TM), a
corporation with an address at 11403 CRINRIDGE DR. SUITE, OWINGS MILLS, MD
21117 ("Customer").
WHEREAS, Icon CMT is in the business of providing certain web site
design, software development, hosting and maintenance services, and certain
other communications, technology and media-related products and services;
WHEREAS, Customer is desirous or retaining Icon CMT to host a site or
sites (each a "Site", and collectively the "Sites") on a network using TCP/IP
protocols, and to provide certain other products and services; and
WHEREAS, Icon CMT is willing to provide such products and services to
Customer, all upon the terms and conditions set forth in the Agreement;
NOW THEREFORE, in consideration of the premises set forth above and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. ORDERING.
1.1 ORDERING SERVICES. Customer may obtain service from Icon CMT under
this Agreement pursuant to a Hosted Systems Order Form (each an "Order Form" and
collectively the "Order Forms"). A copy of a sample Order Form is attached
hereto as Exhibit A. by signing an Order Form, Customer agrees that any services
obtained pursuant to such Order Form shall be subject solely to the provisions
of the Agreement and such Order Form.
1.2 ORDERING PROCEDURE. The procedure for ordering services shall be as
follows: Icon CMT will prepare an Order Form or an amendment to an Order Form,
as the case may be, for review by Customer. An Order Form shall document the
services to be provided by Icon CMT and shall at a minimum specify the fees and
charges applicable to such services. Upon mutual agreement of the parties,
Customer will sign and return the Order Form to Icon CMT, whereupon the
provisions of this Agreement shall govern such Order Form. In the event of any
conflict between the terms of this agreement and any Order Form, the terms of
this Agreement shall prevail.
2. EQUIPMENT.
2.1 DELIVERY OF EQUIPMENT BY CUSTOMER. Upon execution of an Order Form,
Customer will deliver to Icon CMT's Network Operations Center ("NOC") the
equipment (the "Equipment") listed on such Order Form, and Icon CMT will install
such Equipment in Icon CMT's NOC at Icon CMT's premises.
2.2 ACCESS TO EQUIPMENT. Customer's access to the Equipment and the
Site shall at all times be subject to Customer's adherence to Icon CMT's
standards for facility security and rules of conduct as established and modified
from time to time by Icon CMT for its premises. A copy of Icon CMT's current
standards is attached hereto as Exhibit B.
3. INSURANCE.
3.1 LOSS OR DAMAGE TO EQUIPMENT. During the Term (as defined below)
Customer shall insure the Equipment against loss or damage while on Icon CMT's
premises, and Icon CMT shall have no responsibility except for loss or damage
proximately caused by its gross negligence or willful misconduct.
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3.2 OTHER INSURANCE. During the Term, each of the parties shall
maintain, at its sole cost and expense, comprehensive general liability (CGL)
insurance and Professional Liability insurance (in the amount of $1,000,000 per
occurrence and $3,000,000 in (the aggregate), property and equipment insurance,
and such other insurance as is reasonable and customary, and in such amount
which are appropriate and as are generally maintained with respect to equipment
similar to the Equipment on Icon CMT's premises. Upon request, each party shall
furnish the other with certificates issued by the relevant insurance company or
companies evidencing the policies required hereunder. Upon request, each party's
certificates shall name the other party as an additional insured, and will
afford at least thirty (30) days prior written notice to such other party of
cancellation or material change.
4. REMOVAL OF SITE. Upon the expiration or termination of this Agreement, and
provided Icon CMT has been paid in full for its services, Icon CMT shall, at the
Customer's expense (a) remove the Equipment from Icon CMT's premises and deliver
it, F.O.B. Icon CMT's premises, as directed by Customer, and (b) cooperate with
Customer to move the Site from Icon CMT's server to another server designated by
Customer. If no delivery instructions are received by Icon CMT, Icon CMT shall
make provision to store the Equipment at Customer's sole cost and expense, and
without any liability therefor on the part of Icon CMT.
5. WEB SITE HOSTING.
5.1 DESCRIPTION OF THE SITE. A brief description of the Site shall be
provided on the applicable Order form.
5.2 HOSTING SERVICES AND CONTENT DELIVERY. Icon CMT will, during the
term of each Order Form, install and host the Equipment, the Site and perform
the associated hosting services stated on the applicable Order Form (the
"Hosting Services") at Icon CMT's premises. In connection with the Hosting
Services, Icon CMT will, on Customer's behalf use commercially reasonable
efforts to make available and accessible on the World Wide Web, and reproduce
the Customer Content (as defined below) on or from the Site. Customer shall
deliver the Customer Content to Icon CMT in electronic, digital form, or such
other form as may be reasonably requested by Icon CMT, in the manner and meeting
the specifications and delivery schedule which may be set forth in the
applicable Order Form. Customer will at all times retain complete copies of the
Customer Content and redeliver the same if lost or damaged. For the purposes of
the Agreement "Customer Content" shall mean the text, data, images, photographs,
illustrations, graphics, and other material delivered by Customer to Icon CMT
that comprise the Site as described in the Order Form. Customer shall be solely
responsible for the editorial supervision of the Customer Content so that the
Customer Content is suitable to be made available on the Site. Customer shall be
responsible for reviewing the Customer Content prior to it being made available
in order to confirm, among other things, that it complies with customer's
representations and warranties contained in this Agreement.
5.3 COOPERATION. Customer acknowledges that the successful provision of
the Hosting Services and the Network Services (as defined below) hereunder will
require the good faith cooperation of Customer. Accordingly, Customer will fully
cooperate with Icon CMT, including without limitation (a) providing Icon CMT
with all information reasonably requested by Icon CMT concerning the content and
operation of the Site (the "Site Information"), and (b) designating at least one
employee or consultant of Customer to act as Project Manager in connection with
the performance of this Agreement, which designee shall be reasonably acceptable
to Icon CMT and shall have substantial relevant experience.
5.4 CREDIT. The Site shall bear the credit "Network Services and
Hosting by Icon CMT Corp," or such other credit as may be reasonably acceptable
to Icon CMT.
6. NETWORK SERVICES.
6.1 SERVICES. During the term of each Order Form, Icon CMT shall
provide Customer with the installation and operation of network services as
stated in the applicable Order Form (the "Network Services"). The Network
Services shall be rendered in a commercially reasonable manner, and in
connection therewith Icon CMT shall monitor its network and its interconnections
to other networks and
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use commercially reasonable efforts to maintain its data network, including
interconnections, in an operational state at all times, other than for scheduled
maintenance. Icon CMT shall have no responsibility for failures due to third
party suppliers of goods or services. Unless otherwise set forth in the
applicable Order Form, in the event of a failure due solely to Icon, Icon shall
issue a credit to Customer.
6.2 ACKNOWLEDGEMENT OF CUSTOMER. Customer acknowledges that (a) it is
solely responsible for assessing its own computer and transmission network needs
and the results to be obtained therefrom, and (b) Icon CMT does not exercise any
control over the content of the information passing through the Internet in
connection with the Network Services it provides, nor does it take any
responsibility for the accuracy, quality or nature of the information obtained
through the Network Services it provides.
7. REPRESENTATION, WARRANTIES AND COVENANTS.
7.1 AUTHORITY CONFLICTS. Each of the parties represents and warrants
that it has all necessary rights and authority to execute and deliver this
Agreement and perform its obligations hereunder, and that its execution,
delivery and performance of this Agreement will not conflict with or constitute
a default under any other contract or obligation to which it is a party.
7.2 COVENANTS OF CUSTOMER. Customer covenants and agrees that (a) it
will not use the Network Services provided under this Agreement in any manner
which is in violation of any law or governmental regulation, or Icon CMT's
Acceptable Use Policy as posted on Icon CMT's web site (www.icon.com) from time
to time, (b) the Customer Content will not violate or infringe the rights of
others, including, without limitation, any copyright, trademark, trade dress,
trade secret, privacy, publicity, or other personal or proprietary right, and
(c) the Customer content will not include indecent or obscene material or in any
way constitute a defamation or libel of Icon CMT or any third party.
8. PAYMENT TERMS.
8.1 GENERAL. A description of the services and the prices applicable
thereto shall be set forth in each Order Form and Icon CMT shall provided and
Customer shall pay for, all of the services set forth in each Order Form at the
prices set forth therein; provided, however, that unless otherwise agreed in
writing, the prices applicable to any renewal of the term of an Order Form shall
be Icon CMT's then prevailing prices as of the date so such renewal. Icon CMT
shall invoice Customer at the beginning of each calendar month for all fees and
charges accrued during the previous month, and Customer shall pay the invoiced
amount net thirty (30) days from the invoice date. Any amount not paid within
thirty (30) days after the invoice date shall bear interest from the invoice
date to the date of payment in full at the lesser of (a) one and one half
percent (1 1/2%) per month, or (b) the highest rate allowed by applicable law.
8.2 TAXES. There shall be added to the fees and charges due under this
Agreement amounts equal to all taxes, however designated, levied, or based on
such fees and charges, or on the equipment supplied, services rendered or parts
supplied pursuant to the Agreement, including without limitation any state and
local privilege, sales, use or excise taxes based on gross revenue, and any
taxes or amounts in lieu thereof paid or payable by Icon CMT in respect of the
foregoing, exclusive, however, of taxes based on Icon CMT's net income.
8.3 CHANGES. Icon CMT reserves the right to change the prices for the
Network Services upon not less than forty-five (45) days advance written notice
to Customer. In the event of such a price change, Customer may terminate the
applicable Order Form(s), without penalty, on or before the effective date of
such price change upon at least thirty (30) days advance written notice to Icon
CMT.
9. OWNERSHIP AND LICENSE. Any and all artwork, logos, graphics, video, text,
data and other materials supplied by Customer to Icon CMT in connection with
this Agreement, as well as the domain name or names assigned to the Site, shall
remain the sole and exclusive property of Customer. It is also expressly
understood and agreed that no rights are transferred from Customer to Icon CMT
with respect to any of the Customer Content or any other proprietary
information, trademark, or logo of Customer provided
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hereunder, except as necessary for Icon CMT to perform the Hosting Services and
Network Services and to maintain a complete and accurate list of its customers.
10. TERM AND TERMINATION.
10.1 AGREEMENT TERM. The Term of this Agreement (the "Term") shall
commence on the date hereof and expire on the later of (a) the second
anniversary of the date hereof, and (b) the expiration or termination of all
outstanding Order Forms issued pursuant hereto.
10.2 ORDER FORM TERM. Unless otherwise set forth in the Order Form, the
term with respect to each Order Form shall commence on the earlier of (a) the
date of first availability of the Site on the Icon CMT Network, or (b) ten days
after installation of the Equipment, and continue in full force and effect for a
period of one (1) year.
10.3 TERMINATION AT END OF TERM. Each order form may be terminated
by either party at the end of its applicable term by giving written notice to
the other party at least sixty (60) days prior thereto, but in default of
such notice, such Order Form shall automatically renew under the same terms
and conditions for successive periods of one year each.
10.4 TERMINATION FOR BREACH. Either party may terminate an Order
Form if the other party is in material breach of its obligations with respect
to such Order Form and such party fails to cure such breach within thirty
(30) days (or five (5) days in the case of breach due to non-payment of money
due) after written notice thereof is given by the non-breaching party.
10.5 OTHER TERMINATION. Either party may terminate this Agreement and
each outstanding Order Form immediately upon the occurrence of any of the
following events with respect to the other party: (a) a receiver is appointed
for such party or its material assets; (b) such party becomes insolvent,
generally unable to pay its debts as they become due, makes an assignment for
the benefit of its creditors or seeks relief under any bankruptcy, insolvency or
debtor's relief law; (c) proceedings are commenced against such party under any
bankruptcy, insolvency or debtor's relief law, and such proceedings have not
been vacated or set aside within 60 days from the date of commencement thereof;
(d) such party is liquidated, dissolved or otherwise ceases to do business; or
(e) such party fails to deliver adequate assurances of due performance on
request.
10.6 RETURN OF CONFIDENTIAL INFORMATION. Upon any termination of this
Agreement, each party shall immediately return, or if so requested destroy, all
Confidential Information (as defined below) and other property belonging to the
requesting party.
10.7 EFFECT OF TERMINATION. Termination of any Order Form shall not
limit either party from pursuing any other remedies available to it, including
injunctive relief, nor shall termination relieve Customer of its obligation to
pay all charges that accrued prior to such termination.
11. CONFIDENTIALITY.
11.1 GENERAL. During the Term, each party hereto (the "Disclosing
Party") may disclose to the other party (the "Receiving Party") information in
connection with the performance of this Agreement, including without limitation
information concerning the Disclosing Party's business, products, services,
content, technical data, trade secrets, plans for products or services, customer
or supplier lists, marketing plans, software, source code for software,
financial documents or data, inventions, processes, technology, and designs,
which when provided hereunder in documentary or other tangible form shall be
marked or stamped "Confidential," and which if disclosed orally or visually
shall be identified in a writing marked "Confidential" by the Disclosing party
and submitted to the Receiving party within thirty (30) days after disclosure.
All such information about the Disclosing party shall be deemed "Confidential
Information." The parties shall use the Confidential Information of the other
party solely to perform this Agreement, and all Confidential Information shall
remain the sole property of the Disclosing Party. The Receiving Party
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<PAGE>
shall hold the Confidential Information in strict confidence and shall not make
any disclosure of the Confidential Information (including methods or concepts
utilized in the Confidential Information) to anyone during the Term and for a
period of two (2) years thereafter without the express written consent of the
Disclosing Party, except to employees, consultants or agents to whom disclosure
is necessary to the performance of this Agreement and who have executed a
confidentiality agreement with the Receiving Party, or are otherwise bound by a
duty of confidentiality, pursuant to which such persons are required to maintain
the confidentiality of the Confidential Information. Each of the parties shall
use the same care as it uses to maintain the confidentiality of its most
confidential information, which shall in no event be less than reasonable care.
Consultant and Customer acknowledge that the remedy at law for any breach or
threatened breach of the provisions of this Section shall be inadequate, and
that the non-breaching party, in addition to any other remedy available to it,
shall be entitled to obtain injunctive relief without proof of irreparable
injury and without posting bond.
11.2. EXCLUSIONS. Notwithstanding the foregoing, the Receiving Party
shall have no obligation under this Agreement with respect to any Confidential
Information disclosed to it which: (a) the Receiving Party can demonstrate was
already known to it at the time of its receipt hereunder and does so within a
reasonable time after initial disclosure hereunder; (b) is or becomes generally
available to the public other than by means of the Receiving Party's breach of
its obligations under this Agreement; (c) is independently obtained from a third
party whose disclosure violates no duty of confidentiality; (d) is independently
developed by or on behalf of the Receiving Party without access to or use of or
reliance on any Confidential Information furnished to it under this Agreement,
and such independent development can be reasonably evidenced by the Receiving
Party; or (e) is disclosed pursuant to applicable law or regulation or by
operation of law, provided that the Receiving Party may disclose only such
information as is legally required, and provided further that the Receiving
Party shall provide reasonable notice to the Disclosing Party of such
requirement and a reasonable opportunity to object to such disclosure.
12. INDEMNIFICATION.
12.1. INDEMNITY. Each party (the "Indemnifying Party") shall indemnify
and hold harmless the other party, its affiliates, and their respective
officers, directors, members, employees and agents (the "Indemnified Party")
from and against any and all claims, actions, suits or proceedings instituted by
third parties, as well as any and all losses, liabilities, damages, costs and
expenses (including, without limitation, reasonable attorneys fees) arising out
of or accruing from (a) any misrepresentation or breach or alleged breach of the
Indemnifying Party's representations and warranties set forth in this Agreement,
and (b) any non-compliance by the Indemnifying Party with any covenants,
agreements or undertakings of such party contained in or made pursuant to this
Agreement.
12.2. PROCEDURES. Upon the assertion of any claim or the commencement
of any suit or proceeding against an Indemnified Party by any third party that
may give rise to liability of an Indemnifying Party hereunder, the Indemnified
Party shall promptly notify the Indemnifying Party of the existence of such
claim and shall give the Indemnifying Party reasonable opportunity to defend
and/or settle the claim at its own expense and with counsel of its own
selection. The Indemnified Party shall cooperate with the Indemnifying Party and
shall at all times have the right fully to participate in, but not control, such
defense with its own counsel and at its own expense. The Indemnified Party shall
not make any settlement of any claims which might give rise to liability of the
Indemnifying Party hereunder without the prior written consent of the
Indemnifying Party.
13. FORCE MAJEURE. Neither party shall be deemed in default or otherwise liable
for any delay in or failure of performance under this Agreement or any Order
Form (other than Customer's payment obligations hereunder) by reason of any act
of God, fire, natural disaster, accident, riot, act of government, shortage of
materials or supplies, failure of transportation or communication or of supplies
of goods or services, or any other cause beyond the reasonable control of such
party.
14. LIMITATION OF LIABILITY. Icon CMT's liability for any and all claims arising
in connection with this Agreement shall not exceed the lesser of (a) $50,000 and
(b) the sum total of payments made by Customer to Icon CMT pursuant to the
corresponding Order Form during the six (6) months immediately preceding
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<PAGE>
the event for which damages are claimed. Claims for damages must be made within
one year of the incident to which they relate or be forever barred. TO THE
MAXIMUM EXTENT PERMITTED BY LAW, NEITHER ICON CMT NOR ITS EMPLOYEES, OFFICERS,
DIRECTORS, AFFILIATES, AGENTS OR SUPPLIERS SHALL BE LIABLE TO CUSTOMER FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, RELIANCE OR PUNITIVE DAMAGES OR
LOST OR IMPUTED PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF
SUBSTITUTE GOODS OR SERVICES, WHETHER FOR BREACH OF WARRANTY OR ANY OBLIGATION
ARISING THEREFROM OR OTHERWISE, WHETHER LIABILITY IS ASSERTED IN CONTRACT OR
TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY) AND IRRESPECTIVE OF
WHETHER ICON CMT HAS ADVISED OR HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH
LOSS OR DAMAGE. CUSTOMER HEREBY WAIVES ANY CLAIM THAT THESE EXCLUSIONS DEPRIVE
SUCH PARTY OF AN ADEQUATE REMEDY. Some States do not allow the exclusion of
incidental or consequential damages and therefore certain provisions hereof may
not apply to customers located in those States. The provisions of this Section
allocate the risks under this Agreement between Icon CMT and Customer. Icon
CMT's pricing reflects the allocation of risk and limitation of liability
specified herein.
15. NON-SOLICITATION OF EMPLOYEES. The parties recognize that their respective
employees, and such employees' loyalty and services, constitute valuable assets
of the other. Accordingly, neither party shall, during the Term and for a period
of six (6) months thereafter, directly or indirectly solicit, employ, offer to
employ nor engage as a consultant, any employee of the other party. The parties
agree that the remedy at law for any breach of the foregoing provisions shall be
inadequate and that, in addition to any other remedy it might have, the
aggrieved party shall be entitled to injunctive relief without proof of
irreparable injury and without posting bond.
16. INDEPENDENT CONTRACTOR. Icon CMT, in performing its obligations under this
Agreement, is acting as an independent contractor and shall have exclusive
control of the manner and means of performing such obligations. Each party shall
be solely responsible for the supervision, daily direction and control of its
employees and payment of their salaries (including withholding of appropriate
payroll taxes), worker's compensation, disability, and other benefits. Nothing
in this Agreement shall be construed as making either party the agent of the
other party, as granting to the other party the right to enter into any contract
on behalf of the other party, or as establishing a partnership, franchise or
joint venture between the parties. Under no circumstances shall the employees of
one party be deemed to be employees of the other for any purpose.
17. ARBITRATION. Except for the right of either party to apply to a court of
competent jurisdiction for an injunction or other equitable relief or for
collection of an account stated, any controversy or claim arising out of or
relating to this Agreement or its breach shall be settled by arbitration before
a single arbitrator (or a panel of three if the amount in issue exceeds
$250,000) in New York County, State of New York, in accordance with the rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrator may be entered in any Court of competent jurisdiction. As a
condition to the parties' agreement to submit any such controversy or claim to
arbitration, the parties agree that the arbitrator must be an expert in computer
technology and/or computer law.
18. ASSIGNMENT. Neither party may assign this Agreement without the prior
written consent of the other, except (a) in connection with the sale of all or
substantially all of it assets, (b) to the surviving entity in any merger or
consolidation, or (c) in the case of Icon CMT, to an affiliated company. Icon
CMT shall be free to perform all or any party of this Agreement through one or
more subcontractors.
19. GOVERNING LAW; ENTIRE AGREEMENT. This Agreement and each Order Form shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of law. This Agreement, together with
any Order Form(s) executed pursuant hereto, constitute the entire agreement
between the parties with respect to the subject matter hereof, and supersede all
previous or contemporaneous agreements, proposals, understandings, and
representations, written or oral, with respect to the terms and conditions
hereof. Neither this Agreement nor any Order Form may be modified or amended
except in writing signed by a duly authorized representative of each party.
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<PAGE>
20. WAIVER. The waiver by either party of any default or breach of this
Agreement or any Order Form shall not constitute a waiver of any other or
subsequent default or breach. Except for actions for nonpayment, no action,
regardless of form, arising out of this Agreement or any Order Form may be
brought by either party more than one year after the cause of action has been
accrued.
21. NOTICES. All notices, including notices of address changes, required or
permitted to be given by either party under this Agreement shall be sent by
registered or certified mail or by reputable overnight commercial delivery to
the address specified herein by each party. Notices to Icon CMT shall be sent to
the attention of its General Counsel.
22. ATTORNEY'S FEES. In any action or proceeding to enforce any of the terms or
provisions of this Agreement or on account of the breach hereof, the party
prevailing shall be entitled to recover all its expenses, including, without
limitation, reasonable attorney's fees.
23. CONFLICT. The terms and conditions of this Agreement, including all Order
Forms executed pursuant hereto, shall prevail notwithstanding any different or
additional terms and conditions of any purchase order or other form for purchase
or payment submitted by Customer to Icon CMT, all of which are hereby rejected.
Icon CMT is only willing to do business with customers on the terms of this
Agreement, and any customer unwilling to accept these terms should not proceed
with this Agreement.
24. SEVERABILITY. In the event that any one or more of the provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be affected, or if any one or more of the provisions
contained herein shall be held to be excessively broad as to duration, activity
or subject, such provision shall be construed by limiting and reducing such
provisions so as to be enforceable to the maximum extent compatible with
applicable law.
25. SURVIVAL. All terms and provisions of this Agreement which should by their
nature survive the termination of this Agreement shall so survive, including but
not limited to sections 7.3, 11, 12, 14 and 15.
26. COUNTERPARTS. This Agreement may be executed in separate counterparts, each
of which shall be deemed an original, and all of which shall be deemed one and
the same instrument.
27. HEADINGS. The headings in this Agreement are used for convenience of
reference and shall not be deemed to modify or affect the interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly
executed by their respective duly authorized officers or representatives as of
the day and year first above written.
ICON CMT CORP.
/s/ LAURA GILL
- ------------------------------------ -----------------------------------
Signature Signature
LAURA GILL
- ------------------------------------ -----------------------------------
Print Name Print Name
Chief Operating Officer
- ------------------------------------ -----------------------------------
Title Title
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EXHIBIT 23.2
The 20 for 1 stock split described in Note 1 to the consolidated financial
statements has not been consummated at September 2, 1999. When it has been
consummated, we expect to be in a position to render the following consent.
/s/ Arthur Andersen LLP
------------------------------------------------------------------------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
for AmericasDoctor.com, Inc. for the period from August 8, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998, (and to all references
to our Firm) included in or made part of this Form S-1 Registration Statement
under the Securities Act of 1933.
Baltimore, Maryland
September 2, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICA'S DOCTOR.COM, INC. AS OF AND FOR THE PERIODS
ENDED DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS YEAR 4-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1999 JAN-01-1998 AUG-08-1997
<PERIOD-END> JUN-30-1998 JUN-30-1999 DEC-31-1998 DEC-31-1997
<CASH> 0 5,287,714 270,698 67,035
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 95,049 61,500 0
<ALLOWANCES> 0 5,000 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 6,690,682 1,351,933 132,035
<PP&E> 0 1,125,676 445,226 0
<DEPRECIATION> 0 152,255 35,570 0
<TOTAL-ASSETS> 0 8,557,189 1,843,120 140,868
<CURRENT-LIABILITIES> 0 1,985,434 1,066,260 48,983
<BONDS> 0 26,471 5,769 0
0 5,119,496 0 0
0 26,667 0 0
<COMMON> 0 106,151 83,289 6,597
<OTHER-SE> 0 (13,937,739) (1,886,547) 84,381
<TOTAL-LIABILITY-AND-EQUITY> 0 8,557,189 1,843,120 140,868
<SALES> 0 0 0 0
<TOTAL-REVENUES> 0 545,865 61,500 0
<CGS> 0 0 0 0
<TOTAL-COSTS> 230,770 4,949,263 2,472,991 0
<OTHER-EXPENSES> 903,311 8,470,136 2,192,479 11,812
<LOSS-PROVISION> 0 5,000 0 0
<INTEREST-EXPENSE> 259,111 49,946 639,561 29,674
<INCOME-PRETAX> (1,393,058) (12,890,225) (5,241,913) (41,486)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (1,393,058) (12,890,225) (5,241,913) (41,486)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (1,393,058) (12,890,225) (5,241,913) (41,486)
<EPS-BASIC> (0.53) (1.27) (1.12) (0.02)
<EPS-DILUTED> (0.53) (1.27) (1.12) (0.02)
</TABLE>
