<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
REGISTRATION NO. 333-91619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MD2PATIENT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 7375 62-1798114
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
501 CORPORATE CENTRE DRIVE,
SUITE 200, FRANKLIN, TENNESSEE 37067
(615) 383-8400
(Address, including zip code, and telephone number, including
area code, of registrant's executive offices)
JOHN E. BLOUNT
MD2PATIENT, INC.
501 CORPORATE CENTRE DRIVE, SUITE 200
FRANKLIN, TENNESSEE 37067
(615) 383-8400
(Name, address, including zip code, and telephone number
including area code, of agent for service)
The Commission is requested to send copies of all communications to:
<TABLE>
<S> <C>
R. GREGORY BROPHY, ESQ. J. PAGE DAVIDSON, ESQ.
ALSTON & BIRD LLP BASS, BERRY & SIMS PLC
ONE ATLANTIC CENTER 2700 FIRST AMERICAN CENTER
ATLANTA, GEORGIA 30309-3424 NASHVILLE, TENNESSEE 37238-2700
(404) 881-7000 (615) 742-6200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2000
PROSPECTUS
38,500,000 SHARES
MD2PATIENT.COM
SERIES B CONVERTIBLE PREFERRED STOCK
-------------------------
md2patient.com is offering up to 38,500,000 shares of its Series B
Convertible Preferred Stock. md2patient.com is conducting this offering
simultaneously with an offering of up to 2,000,000 shares of its Series A
Convertible Preferred Stock.
This offering will terminate on the earlier to occur of the sale of all of
the shares offered hereby or December 31, 2000. All payments for shares offered
hereby will be deposited into an escrow account at SunTrust Bank until we
receive payments for at least 10,000,000 shares of Series B Convertible
Preferred Stock. If we do not receive payments for at least 10,000,000 shares of
Series B Convertible Preferred Stock by December 31, 2000, we will terminate
this offering and promptly return all payments plus interest, if any.
Shares of our Series A and Series B Convertible Preferred Stock do not have
ordinary voting rights, except with respect to a proposed merger or sale of our
company. Shares of our Common Stock have ordinary voting rights. Heritage Group,
LLC and its affiliates own approximately 87% of our outstanding shares of Common
Stock. As a result, Heritage Group, LLC and its affiliates control our company
and will continue to control our company following the completion of this
offering.
This is the initial public offering of our Series B Convertible Preferred
Stock. The shares offered by this prospectus may not be transferred or re-sold
without our prior written consent. No public market for these shares currently
exists and we do not expect a public market to develop. Accordingly, we do not
intend to list our Series B Convertible Preferred Stock on any securities
exchange or on the Nasdaq Stock Market.
We have engaged WR Hambrecht + Company, LLC to act as our placement agent in
this offering. The placement agent will take and process purchase orders for
shares, arrange for the electronic delivery of prospectuses to purchasers,
accept money from purchasers and deliver shares to purchasers in this offering.
The placement agent is not required to purchase any shares or to undertake any
affirmative selling efforts in this offering.
<TABLE>
<CAPTION>
TOTAL
PER -------------------------
SHARE MINIMUM MAXIMUM
----- ----------- -----------
<S> <C> <C> <C>
Price to public............................................. $1.00 $10,000,000 $38,500,000
Placement agency fee........................................ $0.03 $ 500,000* $ 1,155,000
Proceeds, before expenses, to md2patient.com................ $0.97 $ 9,500,000 $37,345,000
</TABLE>
- ---------------
* If the minimum number of shares are sold, the placement agent will receive a
fee equal to the greater of 3.0% of the aggregate sales price of all shares
sold or $500,000.
-------------------------
INVESTING IN THE SERIES B CONVERTIBLE PREFERRED 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.
(WR HAMBRECHT & CO. LOGO)
, 2000
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 18, 2000
PROSPECTUS
2,000,000 SHARES
MD2PATIENT.COM
SERIES A CONVERTIBLE PREFERRED STOCK
------------------------
md2patient.com is offering up to 2,000,000 shares of its Series A
Convertible Preferred Stock. md2patient.com is conducting this offering
simultaneously with an offering of up to 38,500,000 shares of its Series B
Convertible Preferred Stock.
This offering will terminate on the earlier to occur of the sale of all of
the shares offered hereby or December 31, 2000. All payments for shares offered
hereby will be deposited into an escrow account at SunTrust Bank until we
receive payments for at least 10,000,000 shares of Series B Convertible
Preferred Stock. If we do not receive payments for at least 10,000,000 shares of
Series B Convertible Preferred Stock by December 31, 2000, we will terminate
this offering and promptly return all payments plus interest, if any.
Shares of our Series A and Series B Convertible Preferred Stock do not have
ordinary voting rights, except with respect to a proposed merger or sale of our
company. Shares of our Common Stock have ordinary voting rights. Heritage Group,
LLC and its affiliates own approximately 87% of our outstanding shares of Common
Stock. As a result, Heritage Group, LLC and its affiliates control our company
and will continue to control our company following the completion of this
offering.
This is the initial public offering of our Series A Convertible Preferred
Stock. The shares offered by this prospectus may not be transferred or re-sold
without our prior written consent. No public market for these shares currently
exists and we do not expect a public market to develop. Accordingly, we do not
intend to list our Series A Convertible Preferred Stock on any securities
exchange or on the Nasdaq Stock Market.
We have engaged WR Hambrecht + Company, LLC to act as our placement agent in
this offering. The placement agent will take and process purchase orders for
shares, arrange for the electronic delivery of prospectuses to purchasers,
accept money from purchasers and deliver shares to purchasers in this offering.
The placement agent is not required to purchase any shares or to undertake any
affirmative selling efforts in this offering.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Price to public............................................. $1.00 $2,000,000
Placement agency fee........................................ $0.03 $ 60,000*
Proceeds, before expenses, to md2patient.com................ $0.97 $1,940,000
</TABLE>
- -------------------------
* If the required minimum number of shares of Series B Convertible Preferred
Stock are sold, the placement agent will receive a fee equal to the greater of
3.0% of the aggregate sales price of all shares of Series A and Series B
Convertible Preferred Stock sold or $500,000.
------------------------
INVESTING IN THE SERIES A CONVERTIBLE PREFERRED 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.
WR HAMBRECHT & CO. LOGO
, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Forward Looking Statements.................................. 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 24
Management.................................................. 32
Certain Relationships and Related Transactions.............. 37
Principal Stockholders...................................... 38
Description of Capital Stock................................ 39
Shares Eligible for Future Sale............................. 42
Plan of Distribution........................................ 44
Legal Matters............................................... 46
Experts..................................................... 46
Where You Can Find More Information......................... 46
Index to Financial Statements............................... F-1
</TABLE>
2
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information that
you should consider before investing in our stock.
MD2PATIENT.COM
We were incorporated in July 1999 to develop and operate a web site to
provide access to selected on-line healthcare content and services and to
develop customized web pages for our physician subscribers. Our web site became
operational during January 2000 for the limited purpose of accepting
subscriptions for our proposed Internet services. Based on our current
development schedule, we believe that during the second quarter of 2000, our web
site will include customized web pages for our physician subscribers, links to
other healthcare web sites or clinical information databases and other general
healthcare information. Our focus will be to enhance the relationship between
our physician subscribers and their patients by aggregating existing on-line
content and services that will be useful in educating patients, improving
administrative efficiency and improving communications between physicians, or
their staff, and patients.
The selection of our content and services will be made by our physician
panels. We are in the process of forming these panels and believe that at least
four physician panels will be formed during the first and second quarters of
2000. Our staff will regularly survey the Internet to identify and recommend to
our physician panels new content and service offerings that may be of benefit to
our physician subscribers, their staff and their patients. Our physician panels
will be responsible for reviewing the content and services recommended by our
staff and selecting content and services for inclusion on or through our web
site. We will regularly upgrade our site as our physician panels select new
offerings.
We are a development stage company and, to date, we have not generated any
revenues. Since our inception we have incurred losses and negative cash flow
and, as of December 31, 1999, we had an accumulated deficit of $650,469. We
expect negative cash flow and operating losses to continue for the foreseeable
future, and we may never become profitable. We expect to incur costs of no more
than $1,000,000 associated with the initial development and launch of our web
site. Through December 31, 1999, we had incurred approximately $260,000 of such
costs.
The market for the Internet services and products we intend to offer is
intensely competitive. Since the commercialization of the Internet in the early
1990s, the number of web sites on the Internet competing for users' attention
has proliferated with no substantial barriers to entry, and we expect that
competition will continue to intensify. As of January 1, 2000, we had 259
subscribers to our web site, of which 139 received their subscriptions for free
in connection with their participation as investors in a November 1999 private
placement of our Series A Convertible Preferred Stock.
3
<PAGE> 6
THE OFFERING
Series B Convertible Preferred Stock. We are offering a minimum of
10,000,000 shares and a maximum of 38,500,000 shares of our Series B Convertible
Preferred Stock at a price of $1.00 per share. This is the initial public
offering of our Series B Convertible Preferred Stock. This offering will
terminate on the earlier to occur of the sale of all of the shares offered
hereby or December 31, 2000. The offering price of $1.00 per share was
determined arbitrarily by us and does not necessarily reflect the value of a
share of Series B Convertible Preferred Stock.
Series A Convertible Preferred Stock. We are also offering up to 2,000,000
shares of our Series A Convertible Preferred Stock at a price of $1.00 per
share. This is the initial public offering of our Series A Convertible Preferred
Stock. The offering of Series A Convertible Preferred Stock will terminate at
the same time the offering of Series B Convertible Preferred Stock terminates.
The offering price of $1.00 per share was determined arbitrarily by us and does
not necessarily reflect the value of a share of Series A Convertible Preferred
Stock.
THE SHARES OFFERED
Shares of Series B Convertible Preferred Stock automatically convert into
shares of Series A Convertible Preferred Stock on a one-for-one basis at the
rate of one-third per year on each anniversary of their issuance. Shares of
Series A Convertible Preferred Stock are convertible at any time at the election
of the holder into shares of Common Stock on a one-for-one basis. If we complete
an underwritten public offering of our Common Stock in which at least
$10,000,000 worth of our Common Stock is sold at a price of not less than $1.00
per share, then:
(1) our Series B Convertible Preferred Stock will automatically become
convertible into shares of our Common Stock on the same terms that it is
presently convertible into shares of our Series A Convertible Preferred
Stock; and
(2) all outstanding shares of our Series A Convertible Preferred Stock
will automatically convert into shares of our Common Stock on a one-for-one
basis.
Elsewhere in this prospectus, we sometimes refer to that type of public offering
as a "Qualified Public Offering."
Shares of Series A and Series B Convertible Preferred Stock may not be
transferred or re-sold without our prior written consent.
Shares of Series A or Series B Convertible Preferred Stock do not have any
voting rights, except with respect to a proposed merger or sale of the company
and except as otherwise required by law.
Upon the liquidation, dissolution or winding up of md2patient.com, holders
of shares of Series A or Series B Convertible Preferred Stock sold in this
offering would be entitled to be paid, before any payment to holders of our
Common Stock, an amount equal to $1.00 per share.
These terms and all other material terms of the Series A and Series B
Convertible Preferred Stock are described in greater detail under the heading
"Description of Capital Stock" later in this prospectus.
4
<PAGE> 7
The following table summarizes the pro forma conversion to Common Stock of
all shares of Series A and Series B Convertible Preferred Stock currently
outstanding or subject to currently outstanding warrants and all shares offered
in this offering:
<TABLE>
<CAPTION>
SERIES B SERIES A COMMON
---------- ---------- ----------
<S> <C> <C> <C>
Preferred Stock outstanding or reserved
for issuance prior to offering:
Series A............................... -- 5,000,000(1) 5,000,000
Series A issuable pursuant to
warrants............................ -- 1,000,000(1) 1,000,000
Preferred Stock offered hereby:
Series A............................... -- 2,000,000(1) 2,000,000
Series B............................... 38,500,000(2) 38,500,000(1) 38,500,000
Common Stock outstanding prior to
offering............................... -- -- 20,627,500
----------
Total pro forma Common Stock........ 67,127,500
==========
</TABLE>
- -------------------------
(1) Shares of Series A are convertible into Common Stock at any time on a
one-for-one basis.
(2) Shares of Series B automatically convert into shares of Series A on a
one-for-one basis at a rate of one-third per year on each anniversary of
their issuance.
CONDITIONS OF THIS OFFERING
This offering will terminate on the earlier to occur of the sale of all of
the shares offered hereby or December 31, 2000. All payments for shares offered
hereby will be deposited into an escrow account at SunTrust Bank until we
receive payments for at least 10,000,000 shares of Series B Convertible
Preferred Stock. If we do not receive payments for at least 10,000,000 shares of
Series B Convertible Preferred Stock by December 31, 2000, we will terminate
this offering and promptly return all payments together with interest, if any.
USE OF PROCEEDS
After deducting fees of the placement agent and estimated offering expenses
of $450,000, we expect to receive a minimum of (1) $9,050,000 in net proceeds
from the offering of Series B Convertible Preferred Stock and (2) no proceeds
from the offering of Series A Convertible Preferred Stock. We cannot assure you
that we will receive any net proceeds in excess of these estimated minimums. We
plan to use the proceeds from this offering for working capital and general
corporate purposes, including developing and expanding the functionality of our
web site, enhancing our marketing and sales organization and pursuing business
relationships with third party vendors of on-line content and services. However,
at this time, we are not able to estimate with certainty the specific uses to
which the proceeds will be put or the allocation of the proceeds among the
various possible uses. Accordingly, our officers and directors will have broad
discretion over how the proceeds of this offering will be used.
-------------------------
Our principal executive offices are located at 501 Corporate Centre Drive,
Suite 200, Franklin, Tennessee 37067. Our telephone number is (615) 383-8400.
Our Internet address is www.md2patient.com. We do not intend for information
contained on or linked to our web site to be incorporated into this prospectus.
In this prospectus, references to the "company," "md2patient.com," "we," "us,"
and "ours" refer to MD2patient, Inc.
5
<PAGE> 8
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before buying shares in this offering. Our business could be adversely affected
by any of the following factors, in which event the value of our business could
decline, and you could lose part or all of your investment.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT
We were incorporated in July 1999 and have not yet launched our web site.
We have no meaningful operating history that you can use to evaluate our
business or our future prospects. Investors must consider our business in light
of the risks, uncertainties, expenses, and problems frequently encountered by
companies in the early stages of development, particularly companies in the new
and rapidly evolving Internet market.
WE HAVE NO REVENUES, WE ARE NOT PROFITABLE AND WE EXPECT FUTURE LOSSES
Since our inception, we have incurred losses and negative cash flow, and,
as of December 31, 1999, we had an accumulated deficit of $650,469. We expect
negative cash flow and operating losses to continue for the foreseeable future,
and we may never become profitable. We expect our operating costs to increase,
but because we have no operating history, we have no historical financial data
to use as a basis for determining future operating expenses. The principal costs
of expanding our business will include:
- substantial direct and indirect selling, marketing, advertising and
promotional costs;
- costs incurred in connection with hiring additional personnel to meet our
anticipated growth; and
- costs incurred to develop our web site and obtain services and content to
be offered on or through our web site.
We cannot assure you that we will ever achieve or sustain profitability.
OUR BUSINESS MODEL IS NEW AND UNTESTED AND OUR WEB SITE MAY NOT ACHIEVE MARKET
ACCEPTANCE
Our success will depend upon our ability to attract physician subscribers
to our web site and to motivate those subscribers and their patients to utilize
our web site to obtain healthcare information, products and services over the
Internet. However, our business model is new and our web site is untested. We
cannot guarantee that physician subscribers and patients will utilize our web
site, or even the Internet, as a replacement for traditional sources of
healthcare information, products and services.
Acceptance of web sites by physicians and their patients will require a
broad acceptance of new methods of conducting business and exchanging
information. Our failure to achieve market acceptance and to develop and
maintain a large base of physician subscribers and patient users for our web
site would cause our business to fail.
WE DO NOT CURRENTLY HAVE ANY CONTENT OR SERVICES ON OUR WEB SITE
We do not currently have any content or services on our web site. All of
the web site content and services described in this prospectus will have to be
obtained from third party
6
<PAGE> 9
content and service providers or developed independently by us. We currently do
not have any agreements with content or service providers to obtain content and
services for our web site. We are currently relying on outside firms to develop
our web site and to assist us in establishing relationships with third parties
to obtain the content and services to be offered on our web site. The market for
such relationships is very competitive and there can be no assurance that such
content or services will be available to us on commercially reasonable terms or
at all. Therefore, there can be no assurance that we will be successful in
developing and launching a web site with useful content and services. The
failure to develop and launch a web site with useful content and services will
cause us to fail.
IF WE ARE UNABLE TO ESTABLISH REVENUE-GENERATING RELATIONSHIPS WITH THIRD
PARTIES SUCH AS HEALTHCARE VENDORS AND ADVERTISERS, OUR BUSINESS IS LIKELY TO
FAIL
In addition to creating a large base of physician subscribers and patient
users for our web site, we must establish business relationships with healthcare
vendors and advertisers in order to obtain revenue from commerce originating on
or through our web site. We do not currently have any business relationships of
this type and competition for these relationships from other web sites is
intense. Vendors and advertisers may be unwilling to enter into relationships
with us until our web site is fully operational and we have a significant number
of subscribers. If we fail to establish these relationships, our sources of
revenue will be very limited and our business is likely to fail.
WE INTEND FOR SOME OF OUR REVENUES TO COME FROM ADVERTISING AND SPONSORSHIPS,
AND THE ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING AND SPONSORSHIP IS
UNCERTAIN
While we are unable to determine how much revenue, if any, we will generate
from advertisers and sponsors, we will attempt to obtain some revenue from the
sale of advertisements and sponsorships on our web site. The Internet
advertising market is new and rapidly evolving. It cannot yet be compared with
the traditional advertising market to gauge its effectiveness. As a result,
there is significant uncertainty about the demand and market acceptance for
Internet advertising. For example, increased use of filter software programs
that allow Internet users to limit or remove advertising from their desktops or
the adoption of this type of software by Internet access providers could
adversely affect the viability of advertising on the Internet. Many of our
potential advertising customers and sponsors may conclude that Internet
advertising and sponsorship are not effective relative to traditional
advertising and sponsorship opportunities. If the market for Internet
advertising and sponsorships fails to develop or develops more slowly than we
expect, our potential sources of revenue will be limited and our business may be
adversely affected.
WE FACE INTENSE COMPETITION
The market for Internet services and products is intensely competitive.
Since the Internet's commercialization in the early 1990's, the number of web
sites on the Internet competing for users' attention has proliferated with no
substantial barriers to entry, and we expect that competition will continue to
intensify. We will compete for physician subscribers, content and service
providers, advertisers and sponsors with the following categories of companies:
- on-line services or web sites targeted to the healthcare industry
generally;
- publishers and distributors of traditional offline media, including those
targeted to physicians, many of which have established or may establish
web sites;
7
<PAGE> 10
- general purpose on-line services which provide access to healthcare
content and services;
- public sector and non-profit web sites that provide healthcare
information without advertising or commercial sponsorships; and
- web search and retrieval services and other high-traffic web sites.
Due to the rapidly evolving nature of our market, the limited barriers to
entry and the rapid proliferation of competitors, we are unable to quantify the
number of our competitors, but we believe they are numerous. Although we do not
believe anyone currently dominates our market, there are several well
capitalized companies such as Healtheon/WebMD, Medscape and drkoop.com that are
already pursuing business strategies that are similar to ours. These companies
are significantly further along than we are in the development of their
businesses and are already providing products similar to those that we are
seeking to develop. Competition from these companies will be intense. Some of
our competitors enjoy substantial competitive advantages over us, including:
- greater resources that can be devoted to the development, promotion and
sale of their content and services;
- longer operating histories;
- existing Internet products and services that may have already achieved
market acceptance;
- greater financial, technical and marketing resources;
- existing relationships with key content or service providers;
- greater name recognition; and
- established subscriber bases.
WE ARE A DEVELOPMENT STAGE COMPANY WITH VERY LIMITED CAPITAL RESOURCES
The proceeds of this offering, together with a limited amount of capital
previously raised by us in connection with sales of our Common Stock and our
Series A Convertible Preferred Stock and warrants will be the only capital
resources available to us. These capital resources may not be sufficient to
finance in full the implementation of our business strategy. Therefore, we may
have to raise additional capital, which could entail issuing additional equity
securities or incurring significant amounts of debt. Our issuance of additional
equity securities would cause dilution to investors in this offering. Our
incurrence of debt could result in substantial debt service obligations, which,
in turn, could cause cash flow problems. Additional capital may not be available
to us on commercially reasonable terms or at all. The failure to raise
additional needed capital could cause us to fail.
8
<PAGE> 11
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY
We currently have two pending trademark applications filed with the United
States Patent and Trademark Office, one for md2patient(TM) and one for
md2patient.com(TM). At this point in time, we are unable to predict whether the
United States Patent and Trademark Office will allow these applications to
proceed to registration.
Our business could be adversely affected if unauthorized parties infringe
upon or misappropriate our content, services or proprietary information, such as
our trade names, trademarks or trade secrets. Our efforts to protect our
intellectual property may not be adequate. In the future, litigation may be
necessary to enforce our intellectual property rights or to determine the
validity and scope of the proprietary rights of others, which could be time
consuming and costly.
WE MAY BE LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS
Intellectual property infringement claims could be made against us as the
number of our competitors grows or as we aggregate on-line content and services
from third parties. These claims could be expensive and divert our attention
from our operations. In addition, if we become liable to third parties for
infringing their intellectual property rights related to our content, services,
name or otherwise, we could be required to pay substantial damages, develop
comparable non-infringing intellectual property or obtain a license. We could
also be forced to cease providing the content or services or using the name(s)
that contain the infringing intellectual property. We may be unable to develop
non-infringing intellectual property or obtain a license on commercially
reasonable terms, or at all.
WE MAY INCUR LIABILITY FOR CONTENT AND USER DATA CONTAINED ON OUR WEB SITE
As a content provider, we may face potential liability for intellectual
property infringement, defamation, indecency and other claims. In addition, we
may incur liability for unauthorized duplication or distribution of third-party
content or materials or for information collected from and about our subscribers
and users. Third parties or users may bring claims against us relating to
proprietary rights or use of personal information. We do not currently maintain
general liability insurance for potential claims of this type.
IF WE CANNOT ATTRACT ADDITIONAL PERSONNEL TO MANAGE AND OPERATE OUR BUSINESS, WE
MAY BE UNABLE TO EXECUTE OUR BUSINESS STRATEGY, COMPETE SUCCESSFULLY OR GENERATE
REVENUE
We believe that our future success depends on our ability to attract and
retain additional personnel, particularly management personnel and experienced
professionals capable of marketing Internet-based services to physicians and
their staffs. We are currently seeking to hire a chief executive officer. We are
also seeking to hire up to five persons to assist in the administration and
management of our physician panels and the location and assembly of potential
content and service offerings that can be presented to our physician panels for
possible inclusion on our web site. We anticipate a need in the near future to
hire a web site manager, a marketing executive, up to two additional sales
professionals and additional administrative support staff. There is intense
competition for employees, at all levels, that possess knowledge of both the
Internet industry and the
9
<PAGE> 12
healthcare market. Our failure to attract and retain highly qualified employees
could limit our ability to execute our business strategy, compete successfully
or generate revenue.
OUR ON-LINE ACTIVITIES MAY EXPOSE US TO MALPRACTICE LIABILITY AND OTHER
LIABILITY INHERENT IN HEALTHCARE DELIVERY
We could be exposed to malpractice or other liability against which we are
not insured. Patients who file lawsuits against physicians often name as
defendants all persons or companies with any relationship to the physicians. As
a result, patients could file lawsuits against us based on treatment provided by
physicians who subscribe to our web site, have web pages on our web site or to
whom our web site provides a link. In addition, a plaintiff or government agency
could take the position that our delivery of healthcare information directly, or
information delivered by a third-party web site that a patient accesses through
our web site, exposes us to liability for wrongful delivery of healthcare
services or erroneous healthcare information. The amount of insurance we may
maintain with insurance carriers in the future may not be sufficient to cover
all of the losses we might incur from these potential claims.
STATE RESTRICTIONS ON THE PRACTICE OF MEDICINE COULD NEGATIVELY AFFECT OUR
ACTIVITIES
Any finding in a state that we are not in compliance with its laws could
require us to restructure our services, which could be time consuming and
expensive and which could limit the marketability of our web site. The laws in
some states prohibit some business entities from practicing medicine. This is
commonly referred to as the prohibition against the "corporate practice of
medicine." In general, these laws prohibit us from employing physicians to
practice medicine or from directly furnishing medical care to patients. Each
state requires licensure for the practice of medicine within that state, and
some states consider the receipt of an electronic transmission of selected
healthcare information in that state to be the practice of medicine. These types
of laws could restrict our activities and the extent to which we can provide
healthcare information to patients, physicians and others. If our activities are
found to be not in compliance with these laws, we could be subjected to
penalties or forced to change our business operations in a manner that increases
our costs or reduces our revenue.
STATE AND FEDERAL LAWS THAT PROTECT THE PRIVACY OF HEALTHCARE INFORMATION MAY
LIMIT OUR ABILITY TO COLLECT, USE AND DISCLOSE THAT INFORMATION
Our business could be harmed if we fail to comply with current or future
laws or regulations governing the collection, dissemination, use and
confidentiality of patient healthcare information. Numerous federal and state
laws and regulations govern collection, dissemination, use and confidentiality
of patient-identifiable healthcare information, including:
- state privacy and confidentiality laws;
- state laws regulating healthcare professionals, such as physicians,
pharmacists and nurse practitioners;
- Medicaid laws;
10
<PAGE> 13
- the Health Insurance Portability and Accountability Act of 1996 and
related rules proposed by the Health Care Financing Administration; and
- Health Care Financing Administration standards for Internet transmission
of healthcare data.
The U.S. Congress has been considering proposed legislation that would
establish a new federal standard for protection and use of healthcare
information. We may not be able to safeguard patient healthcare information from
unauthorized disclosure or use, which may subject us to claims for violations of
law. In addition, other third party web sites that consumers may access through
our web site may not maintain systems to safeguard this healthcare information.
Future laws or changes in current laws may necessitate costly adaptations to our
systems.
IF WE ARE NOT ABLE TO PREVENT INTERNET SECURITY BREACHES, UTILIZATION OF OUR WEB
SITE COULD DECLINE OR NEVER DEVELOP AND WE COULD BE EXPOSED TO LIABILITY
The difficulty of securely transmitting confidential information over the
Internet has been a significant barrier to conducting electronic commerce and
engaging in sensitive communications over the Internet. It is anticipated that
we will rely on browser-level encryption, authentication and certificate
technologies, all of which will be licensed from third parties, to provide the
security and authentication necessary to effect secure transmission of
confidential information. However, we cannot guarantee that advances in computer
capabilities, new discoveries in the field of cryptography or other similar
developments will not result in a compromise or breach of our security measures.
A party who is able to circumvent our security measures could misappropriate
proprietary information or confidential communications or cause interruptions to
our operations. We may be required to spend significant capital and other
resources to protect against the threat of security breaches or to alleviate
problems caused by security breaches. Any well-publicized compromise of Internet
security could deter people from using the Internet or from conducting
transactions that involve transmitting confidential information, including
confidential healthcare information. To the extent that our activities or the
activities of third parties with whom we have business relationships involve the
storage and transmission of confidential information, such as patient records or
credit information, security breaches could expose us to claims, litigation or
other liabilities.
WE MAY EXPERIENCE SYSTEM FAILURES
To succeed, we must be able to operate our web site 24 hours a day, seven
days a week, without interruption. It is anticipated that almost all of our
communications and information services will be provided to us by third parties.
To operate without interruption, our third party providers must guard against:
- damage from fire, power loss and other natural disasters;
- communication failures;
- software and hardware errors, failures or crashes;
11
<PAGE> 14
- security breaches, computer viruses and similar disruptive problems; and
- other potential interruptions.
System failures could delay the launch of our web site or adversely affect the
market acceptance of our web site.
THE INTERNET IS SUBJECT TO EXISTING AND POTENTIAL GOVERNMENT REGULATIONS THAT
MAY LIMIT UTILIZATION OF OUR WEB SITE, INCREASE OUR COST OF DOING BUSINESS OR
LIMIT OUR ABILITY TO GENERATE REVENUE
Currently, our business is not subject to substantial government regulation
at the federal or state level. However, the amount of government regulation is
expected to increase as a number of new laws and regulations affecting Internet
businesses are currently under consideration by federal and state legislators.
Laws and regulations may be adopted with respect to the Internet and on-line
businesses covering issues such as:
- privacy of user information;
- pricing of Internet access or of on-line commerce;
- taxation of Internet access or of on-line commerce;
- quality and characteristics of on-line content and services;
- copyrights;
- on-line advertising of healthcare products and services; and
- confidentiality of patient information.
Increasing government regulation of these and other areas affecting Internet
activities could:
- slow the development of Internet commerce, which could limit or eliminate
some or all of our anticipated sources of revenue;
- increase regulatory compliance costs for us and the companies with whom
we intend to do business;
- slow the acceptance of the Internet as an advertising medium, which could
limit or eliminate advertising as a potential source of revenue for us;
and
- limit the scope of content and services made available on the Internet
generally, or on or through our web site in particular, which could limit
the market acceptance of our web site among users and/or advertisers and
vendors.
OUR BUSINESS COULD BE HARMED IF INTERNET SALES BECOME TAXABLE
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state and local level and by
certain foreign
12
<PAGE> 15
governments that could impose taxes on the sale of goods and services over the
Internet and certain other Internet activities. We cannot predict the effect of
current attempts at taxing or regulating commerce over the Internet. Because our
business will depend on revenues generated by e-commerce activity associated
with our web site, any legislation that impairs the growth of e-commerce could
have a material adverse effect on our business.
INVESTORS IN THIS OFFERING MAY HAVE TO HOLD THEIR SHARES FOR AN INDEFINITE
PERIOD OF TIME
Our Articles of Incorporation provide that no holder of shares of our
Series A or Series B Convertible Preferred Stock may sell, assign or transfer
any of such shares without our prior written consent. In addition, there is no
public market for our Series A or Series B Convertible Preferred Stock and no
such public market is expected to develop in the future. We do not intend to
apply for listing of any class or series of our capital stock on any securities
exchange or the Nasdaq Stock Market unless and until we complete an underwritten
public offering of our Common Stock. After any such public offering, we would
only list for trading our Common Stock. We do not currently know whether or when
we will attempt an underwritten public offering of our Common Stock and there
can be no assurance that we will ever complete such a public offering or that a
market for our Common Stock will ever develop. Therefore, investors in this
offering may have to hold their shares for an indefinite period of time and may
never have an opportunity to resell them.
INVESTORS IN THIS OFFERING WILL INCUR IMMEDIATE DILUTION IN THE BOOK VALUE OF
THEIR SHARES
Investors purchasing shares in this offering will incur immediate and
substantial dilution of up to $0.63 in the net tangible book value per share
from the public offering price of $1.00 per share. In addition, our Board of
Directors has the authority to issue a significant number of additional shares
of our capital stock without obtaining shareholder approval to do so. Any such
issuances will dilute the ownership interest in md2patient.com obtained by
investors in this offering. For more information, see "Dilution."
HERITAGE GROUP, LLC AND ITS AFFILIATES WILL MAINTAIN VOTING CONTROL OF OUR
COMPANY
Holders of our Series A and Series B Convertible Preferred Stock only have
the right to vote on a proposed merger or sale of the company, and not on other
matters submitted to a vote of shareholders, such as the election of directors.
Holders of our Common Stock have the right to vote on all matters submitted to a
vote of shareholders. Heritage Group, LLC and its affiliates own 18,000,000
shares of our Common Stock, which constitutes approximately 87% of the
outstanding shares of our Common Stock. As a result, Heritage Group, LLC and its
affiliates currently control our company and have the ability to determine the
outcome of all matters requiring shareholder approval. Following the completion
of this offering, Heritage Group, LLC will continue to have this ability, with
the possible exception of a proposed merger or sale of the company, which will
depend on how many shares are sold in this offering.
13
<PAGE> 16
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements are found in the sections entitled "Prospectus
Summary," "Risk Factors," "Use of Proceeds," "Dividend Policy," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." They include statements concerning:
- plans for developing and launching our web site;
- anticipated sources of revenue;
- our business and operating strategy;
- anticipated sources of capital and the ability to meet future liquidity
and capital requirements;
- plans for hiring additional personnel;
- use of proceeds of this offering; and
- plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts.
When used in this prospectus, the words "expect," "believe," "goal,"
"plan," "intend," "estimate," "may," "will" and similar expressions are
generally intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, actual results could
differ materially from those expressed or implied by these forward-looking
statements for a number of reasons, including those discussed under "Risk
Factors" and elsewhere in this prospectus. Except as required by federal
securities laws, we assume no obligation to update any forward-looking
statements.
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<PAGE> 17
USE OF PROCEEDS
After deducting fees of the placement agent and estimated offering
expenses, we expect to receive a minimum of (1) no proceeds from the offering of
Series A Convertible Preferred Stock and (2) $9,050,000 in net proceeds from the
offering of Series B Convertible Preferred Stock. If all of the shares of Series
A and Series B Convertible Preferred Stock offered hereby are sold, we would
expect to receive a maximum of $38,835,000 in net proceeds, after deducting fees
of the placement agent and estimated offering expenses. However, we cannot
assure you that we will receive any net proceeds in excess of the estimated
minimum of $9,050,000.
We expect to use the net proceeds from this offering for working capital
and general corporate purposes, including expenditures for implementing and
expanding the functionality of our web site and associated databases, enhancing
our marketing and sales organizations, and pursuing relationships with
third-party vendors of on-line content and services. At this time, we are not
able to estimate with certainty the specific uses to which the proceeds will be
put or the allocation of the proceeds among the various possible uses.
Accordingly, our officers and directors will have broad discretion over how the
proceeds of this offering will be used. If we sell less than the maximum number
of shares offered hereby, we expect to apply the proceeds of this offering first
to implementing the functionality of our web site and associated databases.
Pending these uses, the net proceeds of this offering will be invested in
short-term, investment grade, interest-bearing investments or accounts.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends on any class or series of our capital stock for the foreseeable
future.
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of md2patient.com as of
December 31, 1999:
- on an actual basis; and
- as adjusted to reflect the sale by md2patient.com of the minimum
10,000,000 shares of Series B Convertible Preferred Stock offered hereby
at a public offering price of $1.00 per share and the receipt of the
estimated net proceeds therefrom, after deducting fees of the placement
agent and estimated offering expenses.
The information below is qualified by and should be read in conjunction
with "Management's Discussion and Analysis and Results of Operations" and our
financial statements and the notes to those statements appearing at the end of
this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Shareholders' equity:
Preferred Stock, $.01 par value; 300,000,000 shares
authorized:
Series A Convertible; 50,000,000 shares designated;
5,000,000 shares issued and outstanding, actual;
5,000,000 shares issued and outstanding, as
adjusted.............................................. $ 50,000 $ 50,000
Series B Convertible; 50,000,000 shares designated; no
shares issued and outstanding, actual; 10,000,000
shares issued and outstanding, as adjusted............ -- 100,000
Common Stock, $.01 par value; 300,000,000 shares
authorized; 10,000,000 shares issued and outstanding,
actual and as adjusted ................................. 100,000 100,000
Additional paid-in capital................................ 4,686,087 13,636,087
Deficit accumulated during the development stage.......... (650,469) (650,469)
---------- -----------
Total shareholders' equity............................ $4,185,618 $13,235,618
========== ===========
</TABLE>
The capitalization information set forth in the table above:
- does not reflect the fact that shares of Series B Convertible Preferred
Stock automatically convert into shares of Series A Convertible Preferred
Stock on a one-for-one basis at a rate of one-third per year on each
anniversary of their issuance;
- does not reflect the fact that holders of Series A Convertible Preferred
Stock may at any time elect to convert all or any portion of those shares
into Common Stock on a one-for-one basis;
- excludes 1,000,000 shares of Series A Convertible Preferred Stock
reserved for issuance upon the exercise of outstanding warrants with an
exercise price of $1.00 per share;
- excludes 10,627,500 shares of Common Stock issued subsequent to December
31, 1999; and
- excludes 10,000,000 shares of Common Stock reserved for future issuance
under our stock option plan.
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<PAGE> 19
DILUTION
Our pro forma net tangible book value at December 31, 1999, after giving
effect to the conversion of all outstanding shares of Series A Convertible
Preferred Stock into Common Stock on a one-for-one basis and after giving effect
to the issuance of 10,627,500 shares of Common Stock in January 2000, was
$4,185,618, or $0.16 per share. Pro forma net tangible book value per share is
equal to our total tangible assets less our total liabilities, divided by the
number of shares of Common Stock outstanding on a pro forma basis.
Dilution per share represents the difference between the price per share
paid by investors in this offering and the as adjusted pro forma net tangible
book value per share immediately after this offering. After giving effect to the
sale of the maximum 38,500,000 shares of Series B Convertible Preferred Stock
and 2,000,000 shares of Series A Convertible Preferred Stock in this offering at
$1.00 per share, and after deducting fees of the placement agent and estimated
offering expenses, our as adjusted pro forma net tangible book value at December
31, 1999 would have been approximately $43,020,618, or $0.65 per share. This
represents an immediate decrease in pro forma net tangible book value of $0.35
per share to new investors. Similarly, after giving effect to the sale of the
minimum 10,000,000 shares of Series B Convertible Preferred Stock in this
offering at $1.00 per share, and after deducting fees of the placement agent and
estimated offering expenses, our as adjusted pro forma net tangible book value
at December 31, 1999 would have been approximately $13,235,618, or $0.37 per
share. This represents an immediate decrease in pro forma net tangible book
value of $0.63 per share to new investors. The following tables illustrate this
dilution:
MAXIMUM SHARES SOLD (38,500,000 SERIES B AND 2,000,000 SERIES A)
<TABLE>
<S> <C> <C>
Public offering price per share............................. $1.00
Pro forma net tangible book value per share at December
31, 1999............................................... $0.16
Increase per share attributable to new investors.......... 0.49
As adjusted pro forma net tangible book value per share
after this offering....................................... 0.65
-----
Dilution per share to new investors......................... $0.35
=====
</TABLE>
MINIMUM SHARES SOLD (10,000,000 SERIES B)
<TABLE>
<S> <C> <C>
Public offering price per share............................. $1.00
Pro forma net tangible book value per share at December
31, 1999............................................... $0.16
Increase per share attributable to new investors.......... 0.21
As adjusted pro forma net tangible book value per share
after this offering....................................... 0.37
-----
Dilution per share to new investors......................... $0.63
=====
</TABLE>
The following table summarizes, on a pro forma basis after giving effect to
this offering, the difference between the number of shares of capital stock
purchased from us, the total consideration paid and the average price per share
paid by existing shareholders and by new investors purchasing shares of Series B
Convertible Preferred Stock and
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<PAGE> 20
Series A Convertible Preferred Stock in this offering. We have not deducted fees
of the placement agent or estimated offering expenses in our calculations.
MAXIMUM SHARES SOLD (38,500,000 SERIES B AND 2,000,000 SERIES A)
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders:
Common....................... 20,627,500 31.2% $ 100,000 0.2% $0.01
Series A Convertible 5,000,000 7.6 5,000,000 11.0 1.00
Preferred.................
New investors.................. 40,500,000 61.2 40,500,000 88.8 1.00
---------- ----- ----------- ----- -----
Total..................... 66,127,500 100.0% $45,600,000 100.0% $0.69
========== ===== =========== ===== =====
</TABLE>
MINIMUM SHARES SOLD (10,000,000 SERIES B)
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders:
Common....................... 20,627,500 57.9% $ 100,000 0.7% $0.01
Series A Convertible 5,000,000 14.0 5,000,000 33.1 1.00
Preferred.................
New investors.................. 10,000,000 28.1 10,000,000 66.2 1.00
---------- ----- ----------- ----- -----
Total..................... 35,627,500 100.0% $15,100,000 100.0% $0.42
========== ===== =========== ===== =====
</TABLE>
The foregoing discussion and tables do not reflect that, upon the
liquidation dissolution or winding up md2patient.com, holders of shares of
Series A and Series B Convertible Preferred Stock sold in this offering are
entitled to be paid out of our assets, before any payment to holders of our
Common Stock, an amount equal to $1.00 per share, as described in more detail
later in this prospectus under the heading "Description of Capital Stock." In
addition, the foregoing discussion and tables assume no exercise of outstanding
warrants to purchase 1,000,000 shares of Series A Convertible Preferred Stock at
an exercise price of $1.00 per share. See "Description of Capital
Stock -- Warrants."
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<PAGE> 21
SELECTED FINANCIAL DATA
In the table below, we provide you with selected financial data of
md2patient.com. We have prepared this information using our historical financial
statements as of December 31, 1999 and for the period from July 30, 1999 (date
of inception) through December 31, 1999.
When you read this selected financial data, it is important that you read
along with it the historical financial statements and related notes included in
this prospectus, as well as the section of this prospectus entitled,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Historical results are not necessarily indicative of future
results.
<TABLE>
<CAPTION>
PERIOD FROM JULY 30, 1999
(DATE OF INCEPTION)
THROUGH
DECEMBER 31, 1999
-------------------------
<S> <C>
STATEMENT OF OPERATIONS DATA
Revenues
Interest Income........................................ $ 25,610
Costs and expenses:
Selling, general and administrative.................... 676,079
----------
Net loss................................................. $ (650,469)
==========
Basic and diluted net loss per share..................... $ (0.07)
==========
Weighted average shares used in calculating basic and
diluted net loss per share(1).......................... 10,000,000
==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------
<S> <C>
BALANCE SHEET DATA
Cash..................................................... $4,025,058
Working capital.......................................... 3,794,601
Total assets............................................. 4,667,910
Stockholders' equity..................................... 4,185,618
</TABLE>
- -------------------------
(1) See Note 4 of Notes to Financial Statements.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a development stage company recently formed to develop and operate a
web site to provide access to selected on-line healthcare content and services
to our physician subscribers and their patients. We have not yet completed the
development of our web site, begun to offer Internet services, or entered into
any agreements with third party vendors, suppliers or advertisers to provide
content or services on or through our site.
ANTICIPATED SOURCES OF REVENUE
We anticipate that our web site will be operational by the end of the
second quarter of 2000. Once operational, we will seek to generate revenue
primarily from the following sources:
- Fees paid by physician subscribers;
- Fees paid by web vendors in connection with installing and managing
content and services on or through our site;
- Advertising revenue from businesses desiring to access our physician
subscribers and their patients;
- Fees paid by vendors in connection with business-to-business e-commerce
transactions generated through our site;
- Fees paid by vendors in connection with business-to-consumer e-commerce
transactions generated through our site; and
- Fees paid by pharmaceutical research and drug manufacturing companies in
connection with medical research and/or participation in on-line clinical
drug trials.
Physician Subscriptions. We plan to build and to retain a physician
subscriber base by offering an evolving array of content and services selected
by our physician specialty panels. Subscriptions will be sold for three years of
service to be paid in a single lump sum of $1,000 or three annual installments
of $400. As of January 1, 2000, we had 259 physician subscribers, of which 139
received free subscriptions in connection with their purchase of shares of
Series A Convertible Preferred Stock in our November 1999 private placement.
Web Vendors. For an ongoing fee plus participation in revenues generated
from traffic originating from our site, we anticipate entering into agreements
with vendors to install and manage selected healthcare content and services on
or through our site with links to their site. Such content and services will
have been reviewed and selected by our physician specialty panels for inclusion
on or through our site. As of the date of this prospectus, we have not entered
into any agreements with vendors to provide content or services for our site.
Advertising. The key factors in attracting advertising revenue is the size
of our physician subscriber base, our ability to capture demographic information
valuable to advertisers, and the frequency with which our web site is accessed.
In connection with the
20
<PAGE> 23
development of our web site, we are also developing the databases necessary to
capture and present the information that we believe will be particularly
valuable to advertisers. As of the date of this prospectus, we have not entered
into any relationships or agreements with vendors or advertisers.
Business-to-Business e-commerce Transactions. In connection with the
development of our web site, we plan to offer our physician subscribers and
their practice staffs content and services that will assist them in the
day-to-day management and operation of their practices. We believe this category
of services will allow us to generate additional revenues from
business-to-business e-commerce transactions originating from our site and
enhance our ability to improve the efficiency of our physician subscribers'
practices. Some of the services offered through our site will be targeted to all
physicians, while other services will be targeted to specific medical
specialties.
Business-to-Consumer e-Commerce Transactions. We believe our physician
subscribers will include a large number of affluent consumers with significant
disposable income which will be attractive to vendors. We will attempt to secure
relationships with selected vendors that desire to offer consumer products and
services to our physician subscribers through our site. We believe we will be
able to structure these relationships in a manner that will allow us to charge
access fees and otherwise participate in the revenues generated from such
transactions.
We also believe that the patients of our physician subscribers will
represent a consumer base that will be attractive to vendors of consumer
healthcare products and services. Accordingly, we will seek to generate
additional revenue by charging access fees and/or a percentage of the revenues
generated by transactions between vendors and patients that occur through our
site.
Medical Research and Clinical Drug Trials. We plan to promote our
physician subscriber base to pharmaceutical research and drug manufacturing
companies interested in enrolling physicians in on-line surveys and clinical
drug trials. If we are successful in these efforts, we believe participating
companies will pay us a fee for information generated from our database, access
to our subscribing physicians and advertisements of their surveys and drug
trials on our web site. As of the date of this prospectus, we have not entered
into any agreements with pharmaceutical research or drug manufacturing
companies.
CURRENT AND ANTICIPATED FINANCIAL COMMITMENTS
We have entered into an agreement with Arthur Andersen LLP to assist us in
developing our technical infrastructure and web site. Arthur Andersen will work
closely with our technology staff to develop and launch our web site. We
anticipate leasing the servers and the related computer hardware and equipment
that will support our web site. These costs are expected to be expensed as
incurred.
We are currently seeking to hire a chief executive officer. We are also
seeking to hire up to five persons to assist in the administration and
management of our physician panels and the location and assembly of potential
content and service offerings that can be presented to our physician panels for
possible inclusion on our web site. We anticipate a need in the near future to
hire a web site manager, a marketing executive, up to two additional sales
professionals and additional administrative support staff.
As a result of these activities, prior to the completion of this offering
we anticipate incurring substantial additional costs and expenses related to the
continued development of
21
<PAGE> 24
our web site and the hiring of qualified personnel. Future costs and expenses
will include sales and marketing expenses incurred to attract physician
subscribers to our web services, as well as ongoing technology costs to enhance
the content and services available to our physician subscribers and their
patients.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the commencement of this offering, we raised $5,000,000 through a
private placement of 5,000,000 shares of our Series A Convertible Preferred
Stock and warrants. We also raised $100,000 through the private placement of
Common Stock to Heritage Group, LLC. As of December 31, 1999, our principal
commitments consisted of our agreements with Arthur Andersen, our web site
consultants, and the costs and expenses incurred in connection with the private
placements and this offering. We believe that we have sufficient capital to
complete the development of our web site, formally launch our web site and
maintain our web site for the next 12 months. When formally launched, our web
site will include physician web pages, which will allow patient access to
information relating to individual physician practices. The web site will also
make limited content and services available to our physician subscribers,
including the development of customized web pages and links to medical societies
and various clinical information databases. If we are not successful in selling
at least the minimum number of shares of Series B Convertible Preferred Stock
available in this offering, we do not believe we will have sufficient capital to
completely implement our sales and marketing plans with respect to our Internet
services or to add all of the content and services to our site that we otherwise
intend to make available to our subscribers in the next 12 months.
While the minimum net proceeds of this offering are expected to be
sufficient to meet our anticipated working capital needs through at least the
next 12 months, additional capital could be required if unexpected costs arise
or if we seek to enhance or accelerate the implementation of our business plan
through the acquisition of complementary businesses. If additional capital
requirements arise, we may need to raise additional funds sooner than expected.
If we raise additional funds through the issuance of equity or convertible debt
securities, these securities may have rights, preferences or privileges that are
superior to those of the shares available in this offering and may result in
substantial dilution to existing shareholders. If additional funding is needed,
there is no assurance that such funding will be available on terms acceptable to
md2patient.com, if at all.
Our losses from inception to December 31, 1999 total $650,469, consisting
principally of costs incurred in the form of direct expenses primarily
consisting of payroll, legal and consulting fees. These costs relate to the
development of our web site, our initial organization and our capital-raising
activities to date.
YEAR 2000
Many existing computer programs use only two digits to identify a year.
These programs were developed without addressing the impact of the recent change
in the century. If not corrected, many computer software applications could fail
or create erroneous results as a result of the change to the year 2000. We will
use software, computer technology and other services provided by third-party
vendors. We are also dependent on telecommunications vendors to maintain our
communications network.
We believe that our third-party supplied software and computer technology
is and will be year 2000 compliant. All of our software and computer technology
supplied by third-
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<PAGE> 25
party vendors has been purchased recently or will be purchased in the near
future. In connection with these purchases, we generally request our vendors to
represent in writing that each of their technology products is year 2000
compliant. However, to date we have not actually received any such written
representations. The failure of any software or systems upon which we rely to be
year 2000 compliant could have a material adverse impact on the development or
operation of our web site.
To date, we have not experienced any problems associated with the change to
the year 2000, nor have we incurred any costs in connection with the change to
the year 2000. Based upon our assessment of our software and computer
technology, we do not believe that we need to develop a year 2000 contingency
plan and we have not developed any such plan. However, the failure of any of our
third-party service providers to be year 2000 compliant could delay the launch
of our web site.
The year 2000 compliance of the general system necessary to support our
operations is difficult to assess. For instance, we will depend on the integrity
and stability of the Internet to provide our services. We will also depend on
the year 2000 compliance of the computer systems used by our subscribers. Thus,
the system necessary to support our operations will consist of a network of
computers and telecommunications systems located throughout the world and
operated by numerous unrelated entities and individuals, none of which has the
ability to control or manage the potential year 2000 issues that may impact the
entire system. It is not possible to predict potential negative impact of year
2000 issues of these systems.
Our worst-case year 2000 scenario would involve a major disruption in
access to the Internet, a failure of our systems and a failure in the systems of
our third-party content and service providers. This would result in the delay of
the launch of our web site and would delay the implementation of our business
strategy.
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<PAGE> 26
BUSINESS
OUR BUSINESS
We were incorporated in July 1999 to develop and operate a web site to
provide access to selected on-line healthcare content and services and to
develop customized web pages for our physician subscribers. We have not yet
completed the development of our web site or begun to offer Internet services to
our physician subscribers. Since incorporation, our founders have been
developing the business concept for md2patient.com and have engaged outside
consultants to assist us in the development of our technical infrastructure and
web site. Our operations to date have focused primarily on the development and
design of our web site, the acquisition and configuration of necessary software
and hardware, building a sales and marketing organization, recruiting key
management and raising capital.
Our web site became operational during January 2000 for the limited purpose
of accepting subscriptions for our Internet services. As such, our web site
currently consists of a homepage, containing general information about
md2patient.com, and procedures for physicians to register and subscribe for our
Internet services. We are continuing the development of the other functions to
be made available on or through our web site and have commenced the process of
identifying third party content and services to be added to our site. Based on
our current development schedule, we believe that by the end of the second
quarter of 2000, our web site will also include customized web pages for our
physician subscribers, links to various other healthcare content sites or
clinical information databases, as well as the following general information:
- Directory of our physician subscribers;
- Physician search engine;
- General women's health issues;
- General men's health issues;
- Drug interaction assessment tool;
- On-line physician's desk reference (PDR);
- List or links to disease specific discussion groups;
- List or links to disease specific on-line support groups;
- First aid/CPR instructional information and diagrams;
- Nutritional information; and
- Access to on-line shopping.
OUR INDUSTRY
The U.S. healthcare system is plagued with information-related problems. Of
the roughly $1.2 trillion projected to be spent on healthcare in the U.S. in
1999, an estimated $400 billion relates to avoidable or inappropriate treatment.
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In addition to these inefficiencies, there are significant intangible costs
that result from poor information flow. We believe that the Internet will
dramatically change how information flows and how people and organizations
interact in healthcare. As an inexpensive and flexible technology, we believe
the Internet will be used to streamline current processes, enhance the quality
of care and create entirely new ways of conducting business relating to
healthcare. We believe that both physicians and their patients will benefit from
the Internet's strength as an information source and a communications medium.
Growth of the Internet
The Internet is the fastest growing medium in history and has rapidly
become a significant global medium for information, communications, news and
commerce. The Internet is distinct from traditional media because it offers
immediate access to dynamic and interactive content and enables virtually
instantaneous communication among users. 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.
Internet Use by Patients and Healthcare Consumers
Health and medical information is one of the fastest growing areas of
interest on the Internet. According to the Harris Poll, up to an estimated 74%
of all Internet users in the United States seek healthcare information on-line.
We believe that pharmaceutical and other healthcare companies will have an
increasing interest in using on-line advertising to reach target groups with
appealing and compatible demographics.
Internet Use by Physicians
The rapid overall adoption of on-line health and medical information stands
in contrast to the slow rate at which physicians are developing physician-driven
web sites. There are more than 16,000 healthcare-related web sites available on
the Internet, and the number is growing. We believe that the massive number of
sites has served to frustrate both patients and physicians from a standpoint of
reliability, accuracy and trust. We believe there are opportunities for
physicians to help improve the quality of information their patients access
on-line.
Convergence of the Internet and Physician Practices
We believe that over the long term the focus of the convergence of the
Internet and healthcare will trend towards the physician's office because the
delivery of healthcare is increasingly moving to the outpatient setting and
physicians control the majority of healthcare expenditures. We believe a
uniquely attractive opportunity exists to assist physicians in using the
Internet to increase the efficiency of their practices and improve patient
satisfaction through the aggregation of reliable healthcare content and
services.
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THE MD2PATIENT.COM STRATEGY
Our goal is to aggregate reliable healthcare content and services from
existing on-line sources for the benefit of our physician subscribers, their
staff and their patients. Our focus will be to assist our physician subscribers
in utilizing the Internet to enhance their practices and increase patient
satisfaction. A central element of this focus will be our development of
customized physician web pages for our physician subscribers that will give each
subscriber the ability to select and place on his or her web page the content
and services available through our site that he or she determines will best
serve his or her patients.
The selection of our content and services will be made by our physician
specialty panels. To date, no physician panels have been formed; however, we are
in the process of doing so and believe that at least four physician panels will
be formed during the first and second quarters of 2000. Once formed, our staff
will regularly survey the Internet to identify and recommend to our physician
panels new content and service offerings that may be of benefit to our physician
subscribers, their staff and their patients. The physician panels will be
responsible for reviewing the content and services recommended by our staff and
selecting the content and services for inclusion on or through our web site. We
will regularly upgrade our site as our physician panels select new offerings.
To implement our strategy, we will:
- Focus on the Physician/Patient Relationship. We believe that the
relationship between the physician and his or her patient is unique. Our
focus will be to improve this relationship by offering customized web
pages to our physician subscribers that may be accessed by their patients
and the general public. We believe that our physician subscribers and
their staff will encourage their patients to visit the physician web page
given the practice-specific information that it will contain and the fact
that the content on the web page will have been reviewed by our specialty
panels and selected by the physician.
- Focus on Physician Needs. The physician functions in the following
capacities: (1) clinician; (2) business owner; and (3) consumer. We
intend to assist our physician subscribers in each of these capacities
through the content and services to be made available on or through our
web site. As clinician, our focus will include identifying, by specialty,
helpful and informative content to assist in educating patients with
respect to their medical condition and treatment. As business owner, our
focus will include improving the administrative efficiency of our
subscriber's practice through such services as on-line appointment
scheduling, insurance verification and, where necessary, preauthorization
of healthcare services. As consumer, our focus will include providing our
subscribers and their patients with personal services, such as access to
on-line shopping.
- Capitalize on the Purchasing Power of our Physician Subscribers and their
Patients. We believe that our physician subscribers and their patients
represent an attractive consumer group. If we are successful in
developing a large physician subscriber base, we believe we will be able
to offer e-commerce opportunities to our subscribers and their patients
and develop revenue generating relationships with third parties that
offer on-line commerce.
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PHYSICIAN WEB PAGES
We intend to offer each physician subscriber a customized web page that can
be accessed by his or her patients and the general public. Each physician
subscriber will have the ability to select the content to be included on his or
her web page from the content reviewed by our physician panels and made
available on or through our web site. Each physician subscriber may include some
or all of the following information on his or her web page:
- Picture of physician and/or staff;
- Physician demographic information;
- Practice office hours and policies;
- After hours assistance and emergency phone numbers;
- Location of offices and parking information;
- Directions to office;
- Patient comment area via anonymous e-mail to physician's office;
- Physician comment area to provide any special information to patients;
- Links to content sites selected by the physician; and
- Links to md2patient.com disease-specific pages.
Each web page is intended to function as an extension of the physician's
practice. Specifically, a physician web page could allow his or her patients to
find answers to frequently asked questions about issues such as treatment
options and drug interactions. We believe that the web pages will assist our
physician subscribers in utilizing the Internet to enhance their practices and
increase patient satisfaction.
PHYSICIAN PANELS AND PHYSICIAN ADVISORY BOARD
We intend to form physician panels, organized by specialty, and a Physician
Advisory Board to assist us in selecting the content and services to be made
available on or through our web site. While these have not been formed to date,
we believe that our Physician Advisory Board and at least four physician panels
will be formed during the first and second quarters of 2000. We have not yet
determined whether or to what extent we may compensate members of our physician
panels or the advisory board.
Physician Panels
Each of our physician specialty panels will typically consist of 7 to 10
physician subscribers from the same or similar medical specialties. The criteria
for selection will include recognized leadership in the area of specialty and
demographic diversity. Once formed, the physician panels will review the content
and services recommended by our staff and select the content and services for
inclusion on or through our web site. We will regularly update our site as our
physician panels select new offerings.
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Physician Advisory Board
Our Physician Advisory Board will typically consist of 8 to 12 physician
subscribers from various medical specialties. Its primary focus will be to
assist in the prioritization and manner of presentation of the content and
services to be offered on our web site. This board will also serve in an
advisory capacity to management in identifying potential members of the
physician specialty panels and establishing the criteria for selection of the
content and services to be made available on or through our site. Similar to our
physician panels, the criteria for selection to our Physician Advisory Board
will include recognized leadership in one's area of specialty and demographic
diversity.
THE MD2PATIENT.COM WEB SITE
In connection with the implementation of our web site, we intend to
organize our healthcare content by medical specialty and topic. We intend to add
medical specialties and topic areas as our physician panels or Physician
Advisory Board members deem appropriate. As of the date of this prospectus, we
have not completed the development of our site and no healthcare content or
services are available to our physician subscribers or their patients.
We also plan to offer to our physician subscribers content and services
that will assist them in the day-to-day management and operation of their
practices. These content and service offerings, if any, will be reviewed by our
Physician Advisory Board and/or physician panels before they are made available
on or through our web site.
THIRD PARTY BUSINESS RELATIONSHIPS
We will seek to enter into business relationships with third parties for
most of the healthcare content and services to be included on or through our web
site. We believe these relationships will benefit both our organization and
these third parties by providing the third parties with direct access to our
physician subscribers and their patients. As of the date of this prospectus, we
do not presently have any such business relationships; however, we have
commenced the process of identifying potential third parties for this purpose.
PHYSICIAN SUBSCRIPTIONS TO OUR WEB SITE
To utilize all of the features of our web site, a physician user must
become a subscriber to our web services. We will require each subscriber to
provide his or her name, practice information and physician license number. The
information provided by the physicians will be secured on our web site through
transfer encryption technology and a firewall server.
Subscriptions will be sold for three years of service. Physicians will have
the option of paying a lump sum of $1,000 for all three years or an annual fee
paid in three (3) installments of $400. In either case, the subscription fees
must be paid in advance. As of January 1, 2000, we had 259 physician subscribers
to our web site, of which 139 received their subscriptions for free in
connection with their participation as investors in our private placement of
Series A Convertible Preferred Stock.
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COMPETITION
Due to the rapid expansion of the Internet, the market for Internet
services and products is intensely competitive and rapidly changing. There are
no substantial barriers to entry in the Internet market, and we expect that
competition will continue to intensify. We will compete, directly and
indirectly, for subscribers, users and advertisers with other on-line services
or web sites targeted to the healthcare industry generally, including WebMD.com,
Medscape.com and drkoop.com.
We believe the principal competitive factors in attracting and retaining
physician subscribers and their patients are the depth, reliability and
trustworthiness of our healthcare content and services, as well as the value
derived from our web site's content and services, such as saving time, improving
the quality of outcomes and services and contributing financial benefit to a
physician's practice. We believe that the principal competitive factors that
will attract and retain advertisers, third party vendors, and other potential
sources of revenue include:
- Long-term commitment by physicians;
- The amount of success that physicians and their staffs have in directing
patients to use their web pages on our web site;
- Depth and penetration of our base of physician subscribers in certain
markets;
- Continued growth of our base of physician subscribers and patient users;
and
- Generating repeat visits to our web site from physicians, their staffs
and their patients.
SALES AND MARKETING
We have a direct sales organization consisting of nine sales professionals,
with an average of 19 years of healthcare and sales experience. We anticipate
that as we expand our operations we will hire additional sales professionals
with a focus on selling Internet subscriptions to physicians. We generally seek
to hire individuals with significant experience selling to physicians and
working with physicians' staffs.
We are engaged in a sales campaign focused on attracting new physician
subscribers and increasing awareness of the md2patient.com brand. We will use a
combination of direct sales efforts, including direct mail and telemarketing,
and indirect media based activities, including on-line activities. We will also
participate in tradeshows, conferences and speaking engagements focused on
physician associations and trade groups. We plan to allocate significant
resources to market the md2patient.com brand to the physician's office, their
staff and their patients.
We have identified our top 50 target markets and are in the process of
arranging and making presentations to physicians in those markets regarding the
development of our web site and the opportunity to subscribe for our Internet
services. Each presentation is made in-person by one or more of our sales
professionals. Physicians are invited to the presentations through the direct
marketing efforts of our sales professionals or by physicians, most of whom are
existing subscribers for our Internet services. To date we have not engaged in
any local or national advertising campaigns. We have spent less than $50,000 to
date on marketing activities, but we intend to spend significantly more on such
activities as we expand our operations over the next 12 months.
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PLAN OF OPERATION
For a discussion of our plan of operation for the fiscal year 2000, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION
Currently, we are not subject to substantial government regulation at the
federal or state level. Although there are currently relatively few laws or
regulations directly applicable to communications or commerce over the Internet,
several proposals by federal, state and foreign governments may lead to laws or
regulations concerning various aspects of the Internet, including privacy and
the collection and use of personal information on-line. If these governments
adopt legislation protecting user privacy or the collection of personal
information, our ability to collect or use personal information could become
limited, which could make our web site less attractive to advertisers and
sponsors. In addition, several proposals have been made at the federal, state
and local level and by some foreign governments that could impose taxes on the
sale of goods and services and other Internet activities. We cannot predict the
effect of current attempts at taxing or regulating commerce over the Internet.
Any legislation that substantially impairs the growth of e-commerce could have a
material adverse effect on our business or delay the implementation of our
business strategy.
The applicability to the Internet of existing laws is uncertain. If new
laws are adopted or existing laws or applied in an unforeseen manner, use of the
Internet may decrease, which could decrease the demand for our services and
increase our cost of doing business.
INTELLECTUAL PROPERTY
We currently have two pending trademark applications filed with the United
States Patent and Trademark Office, one for md2patient.com(TM) and one for
md2patient.com(TM). At this point in time, we are unable to predict whether the
United States Patent and Trademark Office will allow these applications to
proceed to registration.
We expect that we will obtain most of our content and service offerings
under licenses or other agreements with third parties. We expect to enter into
confidentiality agreements with our employees, consultants, vendors and
customers. We will generally seek to control access to and distribution of our
technology, documentation and other proprietary information. We currently hold
the domain name md2patient.com, however, the legal status of intellectual
property on the Internet is currently subject to various uncertainties. The
current system for registering, allocating and managing domain names has been
the subject of litigation and proposed regulatory reform. Accordingly, the
extent of our ability to protect the domain name md2patient.com is uncertain.
We will rely on a variety of technology that we license from third parties,
including our Internet servers and server software, which will be used in our
web site to perform key functions. We cannot assure you that these third party
technology licenses will be available to us on commercially reasonable terms.
The loss of or our inability to maintain or obtain upgrades to any of these
technology licenses could materially adversely affect our business or delay the
implementation of our business strategy. In addition, because we expect to
license most of our content from third parties, our exposure to copyright
infringement actions may increase because we must rely upon these third parties
for information as to the origin and ownership of our licensed content.
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EMPLOYEES
As of January 1, 2000, we had 16 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 principal executive offices are currently located at 501 Corporate
Centre Drive, Suite 200, Franklin, Tennessee. The office space occupies
approximately 10,000 square feet and is leased pursuant to a lease that has a
three year term commencing in the first quarter of 2000 with an option to renew
for an additional five years. We believe that this space will meet our current
needs and will also allow for our future growth.
LEGAL PROCEEDINGS
There are no claims or proceedings pending or threatened against us.
However, from time to time, we may be involved in litigation relating to claims
arising out of our operations or regulatory proceedings. We may also 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 or through our web site.
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MANAGEMENT
The following table sets forth information with respect to our executive
officers and directors as of January 1, 2000.
OUR DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Rock A. Morphis............................ 41 Chairman of the Board
John E. Blount............................. 48 President and Director
Thomas A. Gallagher........................ 42 Executive Vice President of
Business Development and
Director
James G. Petway, Jr........................ 42 Executive Vice President and
Chief Financial Officer
Albert Rodewald............................ 50 Executive Vice President, Chief
Technology Officer and Director
</TABLE>
Rock A. Morphis has served as a Director of md2patient.com since its
incorporation in July 1999 and as Chairman of the Board since January 1, 2000.
In addition, Mr. Morphis is a founder and Director of Heritage Group, LLC, a
company that develops and manages physician-owned healthcare projects. He is the
current Chairman, President and Chief Executive Officer of Heritage Health
Systems, Inc., a company that operates physician-owned independent practice
associations (IPAs) and manages capitated reimbursement risk, which he
co-founded in August 1992, and has served as its CEO since September 1995. From
January 1994 until June 1995, Mr. Morphis served as Chairman of the Board, Chief
Executive Officer and President of Surgical Health Corporation, a company that
developed, owned and operated outpatient surgery centers. From 1991 until 1994,
Mr. Morphis served as President, Chief Executive Officer and Chairman of
Heritage Surgical Corporation, also a company that developed, owned and operated
outpatient surgery centers. From 1986 until 1991, Mr. Morphis was co-founder and
Managing Director of Heritage Group, Inc., a firm that specialized in partnering
with physicians to own and operate imaging centers, surgery centers, and
lithotripsy units. A graduate of the University of Tennessee, Mr. Morphis holds
a B.S. in accounting. Mr. Morphis has 16 years of health industry experience.
John E. Blount has served as President and Director of md2patient.com since
its incorporation in July 1999. In addition, Mr. Blount is a founder and
Director of Heritage Group, LLC, a company that develops and manages
physician-owned healthcare projects. Mr. Blount is currently serving as a
Director of Heritage Health Systems, Inc., a company that operates
physician-owned independent practice associations (IPAs) and manages capitated
reimbursement risk, and has served as such since co-founding that company in
August 1992. Mr. Blount served as Executive Vice President and Secretary of
Heritage Health Systems, Inc. from May 1995 to December 1998. From January 1994
until December 1995, Mr. Blount served as Executive Vice President of
Development of Surgical Health Corporation, a company that developed, owned and
operated outpatient surgery centers. Mr. Blount served as a Director of Heritage
Surgical Corporation, also a company that developed, owned and operated
outpatient surgery centers, since its founding in 1991 and as Executive Vice
President of such company from 1991 to 1994. From 1986
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until 1991, Mr. Blount was co-founder and Managing Director of Heritage Group,
Inc. a firm that specialized in partnering with physicians to own and operate
imaging centers, surgery centers, and lithotripsy units. A graduate of Duke
University, Mr. Blount also holds an M.B.A. from the University of North Dakota
and a Masters Degree in Health Administration from the Medical College of
Virginia. Mr. Blount has 22 years of health industry experience.
Thomas A. Gallagher has served as a Director of md2patient.com since its
incorporation in July 1999 and as Executive Vice President of Business
Development since January 1, 2000. In addition, Mr. Gallagher is a founder and
Director of Heritage Group, LLC, a company that develops and manages
physician-owned healthcare projects. He served as Executive Vice President,
Chief Development Officer and a Director of Heritage Health Systems, Inc., a
company that operates physician-owned independent practice associations (IPAs)
and manages capitated reimbursement risk, which he co-founded in August 1992,
from September 1995 through December 1999. Mr. Gallagher served as Chief
Executive Officer and President of Heritage Health Systems, Inc. from January
1994 to September 1995. Between April 1992 and January 1994, Mr. Gallagher
served as Executive Vice President and Chief Financial Officer of Heritage
Surgical Corporation, a company that developed, owned and operated outpatient
surgery centers. Prior to joining Heritage Surgical Corporation, Mr. Gallagher
was a General Partner in two venture funds: Lawrence Tyrrell Ortale and Smith I
& II. Mr. Gallagher holds an M.B.A. from Vanderbilt University's Owen Graduate
School of Business and a B.S. in accounting from the University of Tennessee.
Mr. Gallagher has 15 years of health industry experience.
James G. Petway, Jr. has served as Executive Vice President and Chief
Financial Officer of md2patient.com since January 1, 2000. Prior to joining
md2patient.com, Mr. Petway was a partner with Arthur Andersen, LLP and had been
with the firm since 1979. A graduate of the University of Tennessee, Mr. Petway
holds a B.S. in Accounting and is a certified public accountant. Mr. Petway has
20 years of public accounting experience, during which time he served numerous
clients in the healthcare, technology and software industries.
Albert Rodewald has served as Executive Vice President, Chief Technology
Officer and a Director of md2patient.com since its incorporation in July 1999.
In addition, Mr. Rodewald is a founder and Director of Heritage Group, LLC, a
company that develops and manages physician-owned healthcare projects. Mr.
Rodewald is also currently serving as Chairman of the Board and Director of
Interlogics, Inc., a developer of software for the workers' compensation
industry. From co-founding ProSeed, LLC, a developer of prostate cancer
treatment centers, in 1996 until its sale in 1998, Mr. Rodewald served as its
Director and Vice President of Development. As a co-founder of Heritage Health
Systems, Inc., a company that operates physician-owned independent practice
associations (IPAs) and manages capitated reimbursement risk, Mr. Rodewald
served as a Director of that company from 1992-1995. Mr. Rodewald is a
co-founder of Heritage Surgical Corporation, a company that developed, owned and
operated outpatient surgery centers, and served as its director and Vice
President of Facility Development from 1991-1994. From 1986 to 1991, he was a
co-founder and Managing Director of Heritage Group, Inc. a firm that specialized
in partnering with physicians to own and operate imaging centers, surgery
centers, and lithotripsy units. A graduate of the University of Wisconsin, Mr.
Rodewald holds an MS from City University of New York. Mr. Rodewald has 28 years
of health industry experience.
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EXECUTIVE COMPENSATION
The following table contains information in summary form concerning the
compensation paid to our principal executive officer during the year ended
December 31, 1999 and the compensation paid to our other executive officers to
whom we paid more than $100,000 during the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-----------------------
RESTRICTED SECURITIES ALL 2000
STOCK UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS AWARD(S) OPTIONS COMPENSATION SALARY
- --------------------------- -------- -------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
John E. Blount.......... $102,083 -- -- -- -- $175,000
President
Albert Rodewald......... $102,083 -- -- -- -- $175,000
Executive Vice President
</TABLE>
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Messrs. Blount, Gallagher,
Petway and Rodewald as of January 1, 2000. The terms of these employment
agreements expire on January 1, 2002, subject to automatic one-year renewals
thereafter. md2patient.com may terminate these employment agreements at any
time. Each employment agreement provides that in the event md2patient.com
terminates the executive's employment without "cause," as defined therein, the
executive shall continue to receive his then current salary as a severance
payment for a period of one year following such termination.
The employment agreements entitle Messrs. Blount, Gallagher, Petway and
Rodewald to annual base salaries of $175,000 and also provide that our Board of
Directors may grant a bonus from time to time to each executive. In addition,
the employment agreements provide that each executive will be granted a
restricted stock award of 2,000,000 shares of our Common Stock, which vests
ratably over a five-year period. Pursuant to this requirement, we entered into
restricted stock award agreements with each of these four executive officers.
The vesting periods under the restricted stock awards began as of July 1, 1999
for Messrs. Blount and Rodewald and as of January 1, 2000 for Messrs. Gallagher
and Petway.
Each of the employment agreements prohibits the executive's disclosure and
use of confidential information and restricts, for a period of 12 months
following termination of employment, the executive's competition with us or
disclosure of our proprietary information.
2000 LONG-TERM INCENTIVE PLAN
On January 13, 2000, our Board of Directors adopted the 2000 Long-Term
Incentive Plan, which was approved by our shareholders on January 13, 2000. A
summary of the Incentive Plan is set forth below and is qualified in its
entirety by reference to the full text of the Incentive Plan, a copy of which is
included as an exhibit to the registration statement of which this prospectus is
a part.
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The purpose of the Incentive Plan is to promote the success, and enhance
the value, of md2patient.com by linking the personal interests of employees,
officers, consultants and directors to those of the shareholders, and by
providing such persons with an incentive for outstanding performance.
The Incentive Plan authorizes the granting of awards to our employees,
officers, consultants and directors in the following forms:
- Incentive Stock Options (ISOs) to purchase shares of our Common Stock;
- Non-Qualified Stock Options (NQSOs) to purchase shares of our Common
Stock;
- Stock Appreciation Rights (SARs);
- Performance Units;
- Restricted Stock;
- Dividend Equivalent Rights; and
- Other stock-based awards.
Subject to adjustment as provided in the Incentive Plan, the aggregate
number of shares of Common Stock reserved and available for Awards or which may
be used to provide a basis of measurement for or to determine the value of an
Award, such as with a SAR or Performance Share, is 10,000,000. The maximum
number of shares of Common Stock with respect to one or more Options and/or SARs
that may be granted during any one calendar year under the Incentive Plan to any
one participant is 2,000,000. The maximum fair market value of any Awards other
than Options and SARs that may be received by a participant, less any
consideration paid by the participant for such Award, during any one calendar
year under the Incentive Plan is $100,000.
The Incentive Plan is administered by our Board of Directors, or the
Compensation Committee of the Board of Directors, when appointed, which has the
power, authority and discretion to: designate participants; determine the type
or types of Awards to be granted to each participant and the terms and
conditions thereof; establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Incentive Plan; and make all
other decisions and determinations that may be required under, or as it deems
necessary or advisable to administer, the Incentive Plan. The Board or the
Compensation Committee of the Board may, at any time and from time to time,
terminate, amend or modify the Incentive Plan without shareholder approval. No
termination, amendment, or modification of the Incentive Plan may adversely
affect any Award previously granted under the Incentive Plan, without the
consent of the participant.
Upon the participant's death or disability during his or her employment or
his or her service as a director, all outstanding Options, SARs, and other
Awards in the nature of rights that may be exercised will become fully vested
and exercisable and all restrictions on outstanding Awards will lapse. In
addition, in the event of a Change in Control of md2patient.com (as defined in
the Incentive Plan), all outstanding Options, SARs, and other Awards in the
nature of rights that may be exercised will become fully vested and exercisable
and all restrictions on all outstanding Awards will lapse. Unexercised or
restricted Awards generally will not be assignable or transferable by a
participant other than by will or the laws of descent and distribution or,
except in the case of an ISO, pursuant to a qualifying domestic relations order.
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended, we may not deduct compensation in excess of $1.0 million paid to our
principal executive officer and the four next most highly compensated executive
officers. The Incentive Plan is designed to comply with Section 162(m) of the
Internal Revenue Code so that the grant
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<PAGE> 38
of Options and SARs under the Incentive Plan, and other Awards, such as
Performance Shares, that are conditioned on the performance goals described in
the Incentive Plan, will be excluded from the calculation of annual compensation
for purposes of Section 162(m) and will be fully deductible.
BOARD OF DIRECTORS AND COMMITTEES
We intend to expand the size of our Board of Directors to include no less
than two of our physician subscribers and no less than two independent
non-physician directors.
We also intend to establish an Audit Committee of our Board of Directors.
The Audit Committee will be responsible for reviewing our external audit
procedures and internal accounting controls and recommending the engagement of
our independent auditors.
DIRECTOR COMPENSATION
Our directors do not currently receive any compensation for serving as
directors. However, we anticipate implementing a stock-based compensation
program for non-employee directors prior to completion of this offering.
Additionally, we reimburse directors for out-of-pocket expenses they incur in
attending Board meetings or Board committee meetings in their capacities as
directors.
We have entered into a restricted stock award agreement with our Chairman
of the Board, Rock A. Morphis, pursuant to which Mr. Morphis has been granted a
restricted stock award of 2,000,000 shares of our Common Stock, which vests
ratably over a five-year period commencing January 1, 2000.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
As permitted under Georgia law, our Articles of Incorporation provide that
a director shall not be personally liable to md2patient.com or its shareholders
for monetary damages for breach of the duty of care or any other duty owed to
the corporation as a director, except liability for any of the following:
- any appropriation, in violation of his duties, of any business
opportunity of the corporation,
- for acts or omissions which involve intentional misconduct or a knowing
violation of law,
- for unlawful corporate distributions, or
- for any transaction from which the director received an improper personal
benefit.
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<PAGE> 39
Under our Bylaws, we are required to indemnify our directors to the full
extent permitted by Georgia law. Georgia law provides that a corporation may
indemnify its directors, officers, employees and agents against judgments,
fines, penalties, amounts paid in settlement, and reasonable expenses, including
attorney's fees, resulting from various types of legal actions or proceedings,
including, but not limited to any threatened, pending, or completed action, suit
or proceeding whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal, if the actions of the party being
indemnified meet the standards of conduct specified therein. Determination
concerning whether or not the applicable standard of conduct has been met can be
made by the following:
- the Board of Directors by a majority vote of all the disinterested
directors, if there are at least two disinterested directors;
- a majority vote of a committee of two or more disinterested directors;
- special legal counsel; or
- an affirmative vote of a majority of shares held by disinterested
shareholders.
No indemnification shall be made in connection with a proceeding by or in
the right of md2patient.com, except for reasonable expenses incurred in
connection with the proceeding if it is determined that the indemnitee has met
the relevant standard of conduct. In addition, indemnification shall not be made
in connection with any other proceeding in which such person was adjudged liable
on the basis that personal benefit was improperly received by him.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 30, 1999, we were formed as a wholly owned subsidiary of Heritage
Group, LLC and we issued 50,000,000 shares of our Common Stock to Heritage
Group, LLC for a purchase price of $100,000. Messrs. Blount, Gallagher, Morphis
and Rodewald are the members of Heritage Group, LLC. At the time of such initial
issuance, Heritage Group, LLC believed it could attract additional management
employees and enter into strategic alliances with third parties through the
limited liability company on a tax efficient basis. Heritage Group, LLC
subsequently determined that it would be preferable to attract future employees
through incentive plans to be adopted by md2patient.com and to enter into
strategic alliances directly through md2patient.com. Accordingly, on November
23, 1999, Heritage Group, LLC effected a recapitalization pursuant to which
40,000,000 shares of Common Stock were returned to md2patient.com to be
available for reissuance at the discretion of our Board of Directors.
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<PAGE> 40
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our capital stock as of January 14, 2000 by each person or entity
who beneficially owns more than 5% of any class or series of our capital stock,
each of our directors and executive officers, and all of our directors and
executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
COMMON PREFERRED PREFERRED
NAME STOCK %(1) STOCK % STOCK %
- ---- ---------- ---- ----------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C>
Heritage Group, LLC(2)....... 10,000,000 39.0 -- -- -- --
John E. Blount(3)............ 12,000,000 46.8 -- -- -- --
Thomas A. Gallagher(4)....... 12,000,000 46.8 -- -- --
Rock A. Morphis(5)........... 12,000,000 46.8 -- -- -- --
James G. Petway, Jr.(6)...... 2,000,000 7.8 -- -- -- --
Albert Rodewald(7)........... 12,000,000 46.8 -- -- -- --
All directors and executive
officers as a group (5
persons)................... 20,000,000 78.0 -- -- -- --
</TABLE>
- -------------------------
(1) Percentage calculations give effect to the issuance of 5,000,000 shares of
Common Stock issuable upon conversion of currently outstanding shares of
Series A Convertible Preferred Stock.
(2) Heritage Group, LLC's business address is 1913 21st Avenue South, Nashville,
Tennessee 37212.
(3) Includes 10,000,000 shares owned by Heritage Group, LLC, of which Mr. Blount
is a member. Mr. Blount disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest in Heritage Group, LLC.
Includes 2,000,000 restricted shares issued pursuant to a restricted stock
award agreement.
(4) Includes 10,000,000 shares owned by Heritage Group, LLC, of which Mr.
Gallagher is a member. Mr. Gallagher disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in Heritage Group,
LLC. Includes 2,000,000 restricted shares issued pursuant to a restricted
stock award agreement.
(5) Includes 10,000,000 shares owned by Heritage Group, LLC, of which Mr.
Morphis is a member. Mr. Morphis disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in Heritage Group,
LLC. Includes 2,000,000 restricted shares issued pursuant to a restricted
stock award agreement.
(6) Represents restricted shares issued pursuant to a restricted stock award
agreement.
(7) Includes 10,000,000 shares owned by Heritage Group, LLC, of which Mr.
Rodewald is a member. Mr. Rodewald disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in Heritage Group,
LLC. Includes 2,000,000 restricted shares issued pursuant to a restricted
stock award agreement.
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<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is a summary of the material
terms of our Common Stock and our Series A and Series B Convertible Preferred
Stock and is qualified in its entirety by reference to the full text of our
Articles of Incorporation which are included as an exhibit to the registration
statement of which this prospectus is a part.
The total number of shares of stock of all classes that we have authority
to issue is 600,000,000 shares, consisting of: (1) 300,000,000 shares of Common
Stock, par value $.01 per share; and (2) 300,000,000 shares of Preferred Stock,
of which 50,000,000 shares are designated as Series A Convertible Preferred
Stock, par value $.01 per share, and 50,000,000 shares are designated as Series
B Convertible Preferred Stock, par value $.01 per share. As of January 14, 2000,
there were outstanding 20,627,500 shares of our Common Stock, 5,000,000 shares
of our Series A Convertible Preferred Stock and no shares of our Series B
Convertible Preferred Stock. In addition, as of January 14, 2000, there were
outstanding warrants to purchase 1,000,000 shares of our Series A Convertible
Preferred Stock.
COMMON STOCK
Our Common Stock is subject to all of the rights, privileges, preferences
and priorities of the Preferred Stock set forth in our Articles of
Incorporation.
Dividends may be paid on the Common Stock, and on any other class or series
of stock entitled to participate with Common Stock as to dividends, when and as
declared by our Board of Directors.
In the event of any dissolution, liquidation, or winding up of
md2patient.com, the holders of Common Stock, Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock are entitled to participate
equally in the distribution of any assets remaining after we have paid all of
our debts and liabilities and after we have paid the preferential amounts
summarized below in the description of our Series A and Series B Convertible
Preferred Stock.
Each holder of Common Stock is entitled to cast one vote for each share of
Common Stock held upon any matter submitted to a vote of our stockholders,
including the election of directors.
During the 180-day period following our first Qualified Public Offering (as
defined below), shares of Common Stock other than those sold in the Qualified
Public Offering may not be transferred or re-sold without our prior written
consent. However, this restriction does not prohibit the following transfers:
- as a bona fide gift, provided the person receiving the gift agrees to the
same transfer restriction,
- as a distribution to the partners, members or shareholders of a Common
Stock holder, provided that the persons receiving the distribution agree
to the same transfer restriction, or
- to members of the immediate family of a holder of Common Stock, provided
that the family members agree to the same transfer restriction.
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<PAGE> 42
SERIES A AND SERIES B CONVERTIBLE PREFERRED STOCK
Except as required by law and except for any Corporate Transaction (as
defined below) submitted to a vote of our shareholders, holders of shares of
Series A and Series B Convertible Preferred Stock do not have any voting rights
whatsoever. With respect to any Corporate Transaction submitted to a vote of our
shareholders, (1) each holder of shares of Series A or Series B Convertible
Preferred Stock is entitled to cast one vote for each share of Series A or
Series B Convertible Preferred Stock held and (2) the holders of shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Common Stock vote together and not as separate classes or series.
The holders of shares of Series A or Series B Convertible Preferred Stock
are entitled to participate equally in all dividends paid on Common Stock,
except that if dividends on Common Stock are payable in shares of Common Stock,
(1) the corresponding dividends to be paid on Series A Convertible Preferred
Stock must be paid in shares of Series A Convertible Preferred Stock and (2) the
corresponding dividends to be paid on Series B Convertible Preferred Stock must
be paid in shares of Series B Convertible Preferred Stock.
In the event of any liquidation, dissolution or winding up of
md2patient.com, each holder of shares of Series A or Series B Convertible
Preferred Stock then outstanding is entitled to be paid, before any payment is
made to holders of Common Stock, an amount equal to the price paid to
md2patient.com for the initial issuance of such shares of Series A or Series B
Convertible Preferred Stock Convertible Preferred Stock (the "Convertible
Preferred Stock Liquidation Preference"). If the assets to be distributed are
insufficient to permit the payment in full of the Convertible Preferred Stock
Liquidation Preference, then all of the assets available for distribution will
be distributed to holders of Series A and Series B Convertible Preferred Stock
pro rata in proportion to the full Convertible Preferred Stock Liquidation
Preference each holder would otherwise be entitled to receive. After the payment
in full of the Convertible Preferred Stock Liquidation Preference, the holders
of Common Stock then outstanding are entitled to be paid an amount per share of
Common Stock equal to the Convertible Preferred Stock Liquidation Preference
divided by the total number of then outstanding shares of Series A and Series B
Convertible Preferred Stock. If the assets available for distribution are
insufficient to permit the payment in full of the amount referred to in the
immediately preceding sentence, then all assets will be paid to the holders of
Common Stock pro rata based on the number of shares of Common Stock they hold.
After payment in full of this amount to the holders of Common Stock, all
remaining assets will be distributed to the holders of shares of Common Stock
and to the holders of shares of Series A and Series B Convertible Preferred
Stock pro rata based on the number of shares of Common Stock and/or Series A and
Series B Convertible Preferred Stock they hold.
However, if the foregoing manner of distribution would result in payment
with respect to any share of Series A or Series B Convertible Preferred Stock
(an "Affected Preferred Share") being less than the amount payable with respect
to each share of Common Stock, then the aggregate amount that would have been
payable with respect to all Affected Preferred Shares plus the aggregate amount
that would have been payable with respect to all shares of Common Stock will
instead be paid to the holders of Affected Preferred Shares and to the holders
of shares of Common Stock pro rata based on the number of Affected Preferred
Shares and/or shares of Common Stock they hold.
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<PAGE> 43
In the case of any Corporate Transaction (as defined below), each holder of
shares of Series A or Series B Convertible Preferred Stock will have the right
to receive the same consideration that a holder of an equal number of shares of
Common Stock would be entitled to receive pursuant to the Corporate Transaction.
However, if the consideration so payable to any holder of Series A or Series B
Convertible Preferred Stock is not at least equal in value to the Convertible
Preferred Stock Liquidation Preference of his or her shares of Series A or
Series B Convertible Preferred Stock, then the Corporate Transaction shall
instead be treated as a liquidation and payments will be made in accordance with
the procedure described in the preceding two paragraphs. In addition, any
consideration payable with respect to shares of Series B Convertible Preferred
Stock pursuant to a Corporate Transaction may be made payable on a delayed basis
over the same period of time as is described below with respect to the automatic
conversion of shares of Series B Convertible Preferred Stock.
The term "Corporate Transaction" means (1) any consolidation, merger of or
share exchange by md2patient.com, other than any merger, consolidation or share
exchange not resulting in a change of control of md2patient.com or (2) any sale
or other disposition by md2patient.com of all or substantially all of its assets
to a third party.
Any holder of shares of Series A Convertible Preferred Stock may at any
time convert all or any number of his or her shares into shares of Common Stock
on a one-for-one basis. In addition, all shares of Series A Convertible
Preferred Stock automatically convert into shares of Common Stock on a
one-for-one basis upon the closing of a Qualified Public Offering (as defined
below).
The term "Qualified Public Offering" means an underwritten public offering
of Common Stock in which at least $10,000,000 worth of our Common Stock is sold
at a price of not less than $1.00 per share.
Outstanding shares of Series B Convertible Preferred Stock automatically
convert into shares of Series A Convertible Preferred Stock, on a one-for-one
basis, at the rate of one-third per year on each anniversary of their date of
issuance. Each one-third calculation is applied per holder of applicable shares
with respect to the aggregate number of applicable shares held, rounding up to
the nearest whole share. Shares of Series B Convertible Preferred Stock will
only be converted on an anniversary of their date of issuance and no pro rata
adjustments will be made to allow for conversions on any day other than an
anniversary of the date of issuance. If we complete a Qualified Public Offering,
shares of our Series B Convertible Preferred Stock will automatically become
convertible into shares of our Common Stock on the same terms that they are
presently convertible into shares of our Series A Convertible Preferred Stock.
A holder of Series A or Series B Convertible Preferred Stock may not
transfer or otherwise re-sell any shares of Series A or Series B Convertible
Preferred Stock without our prior written consent.
UNDESIGNATED PREFERRED STOCK
There are 200,000,000 shares of undesignated (or "blank check") Preferred
Stock authorized by our Articles of Incorporation. Our Board of Directors has
the authority, without obtaining prior shareholder approval, to issue shares of
undesignated Preferred Stock in one or more classes or series and to determine
the dividend rights, conversion rights, liquidation preferences, voting rights,
redemption rights, number of shares
41
<PAGE> 44
constituting any class or series and other rights, terms and designations of
such classes or series. Such issuances may dilute or otherwise adversely affect
the economic, ownership and other rights and interests of the holders of Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock and Common
Stock.
WARRANTS
As of January 14, 2000, there were outstanding warrants to purchase
1,000,000 shares of our Series A Convertible Preferred Stock. If we complete a
Qualified Public Offering, then the warrants will automatically become
exercisable for shares of our Common Stock on the same terms that they are
presently exercisable for shares of our Series A Convertible Preferred Stock.
The shares issuable upon exercise of the warrants are referred to herein as the
"Warrant Shares." The exercise price of the warrants is $1.00 per Warrant Share.
The warrants are exercisable at any time during the period from November 18,
2000 to November 18, 2004. Upon exercise of a warrant, in lieu of paying the
warrant exercise price in cash, the holder of the warrant may elect to receive a
lesser number of Warrant Shares that have a value equal to the difference
between the fair market value of the Warrant Shares at the time of exercise and
the aggregate exercise price.
SHARES ELIGIBLE FOR FUTURE SALE
COMMON STOCK
As of January 14, 2000, there were outstanding an aggregate of 20,627,500
shares of Common Stock that were issued in private transactions in reliance on
exemptions from the registration requirements of the federal securities laws.
These shares of Common Stock are considered restricted securities under Rule 144
promulgated under the Securities Act of 1933. Accordingly, absent registration
for re-sale, these shares may only be re-sold publicly in reliance on and
subject to the limitations set forth in Rule 144, which are described below.
Under the terms of our Articles of Incorporation, during the 180-day period
following a Qualified Public Offering, no holder of shares of our Common Stock
may sell, assign or transfer any of such shares without our prior written
consent.
SERIES A CONVERTIBLE PREFERRED STOCK
We have issued and sold an aggregate of 5,000,000 shares of our Series A
Convertible Preferred Stock in private transactions in reliance on exemptions
from the registration requirements of the federal securities laws. These shares
are also considered restricted securities under Rule 144. Although Rule 144
would permit public re-sales of these shares subject to the limitations of Rule
144 described below, our Articles of Incorporation provide that no holder of
shares of our Series A Convertible Preferred Stock may sell, assign or transfer
any of such shares without our prior written consent.
The Series A Convertible Preferred Stock distributed in this offering will
be unrestricted for purposes of the federal securities laws and will not be
subject to Rule 144. However, our Articles of Incorporation provide that no
holder of shares of Series A Convertible Preferred Stock may sell, assign or
transfer any of such shares without our prior written consent.
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<PAGE> 45
SERIES B CONVERTIBLE PREFERRED STOCK
The Series B Convertible Preferred Stock distributed in this offering will
be unrestricted for purposes of the federal securities laws and will not be
subject to Rule 144. However, our Articles of Incorporation provide that no
holder of shares of Series B Convertible Preferred Stock may sell, assign or
transfer any of such shares without our prior written consent.
SALES FOLLOWING CONVERSION OF SERIES A OR SERIES B CONVERTIBLE PREFERRED STOCK
Shares of our Series A Convertible Preferred Stock are convertible at any
time at the option of the holder into shares of Common Stock and automatically
convert to Common Stock upon the closing of a Qualified Public Offering.
Furthermore, shares of our Series B Convertible Preferred Stock automatically
convert at the rate of one-third per year into shares of Series A Convertible
Preferred Stock, if the conversion date occurs prior to a Qualified Public
Offering, or Common Stock, if the conversion date occurs after a Qualified
Public Offering.
Under the federal securities laws, shares issued upon any such conversion
will retain the status of the shares converted for purposes of determining
whether or not the shares issued upon conversion are restricted. Accordingly,
shares issued upon conversion of shares that are considered restricted under
Rule 144 will also be restricted under Rule 144. Similarly, shares issued upon
conversion of unrestricted securities will also be unrestricted under Rule 144.
Furthermore, if the shares issued upon conversion are shares of Common
Stock, such shares will be subject to the 180-day lock-up period following a
Qualified Public Offering, as discussed above. If the shares issued upon
conversion are shares of Series A Convertible Preferred Stock, such shares will
be subject to the restriction against transfer provided in our Articles of
Incorporation, as discussed above.
SALES UNDER RULE 144
Rule 144 provides that a person holding restricted securities for a period
of at least one year may sell such securities in brokerage transactions in an
amount not to exceed in any three-month period 1% of the total outstanding
number of shares of that class of securities. Because there is no public market
for any of our securities, it will be impossible to sell restricted securities
through brokerage transactions. However, Rule 144(k) provides that a person who
is a "non-affiliate" of md2patient.com and who has held restricted securities
for over two years is not subject to these manner of sale and volume limitations
as long as the other conditions of Rule 144 are met. Therefore, until we
complete a Qualified Public Offering, Rule 144(k) is the only alternative
provided for in Rule 144 pursuant to which a shareholder could publicly sell
restricted securities.
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<PAGE> 46
PLAN OF DISTRIBUTION
We are offering a minimum of 10,000,000 and a maximum of 38,500,000 shares
of our Series B Convertible Preferred Stock and up to 2,000,000 shares of our
Series A Convertible Preferred Stock. We have entered into an agreement with WR
Hambrecht, pursuant to which WR Hambrecht has agreed to assist in the sale, as
our agent, of up to 38,500,000 shares of our Series B Convertible Preferred
Stock and up to 2,000,000 shares of our Series A Convertible Preferred Stock. WR
Hambrecht is not required to sell, as our agent, a specific number or dollar
amount of shares in the offering, or to purchase any of the shares in the
offering for its own account or for the accounts of others.
We intend to sell the shares of Series A and Series B Convertible Preferred
Stock offered hereby to investors who have subscribed for our web services.
After the Commission declares the registration statement relating to this
offering effective, each physician who registers with or subscribes to our web
site will be given access to the prospectus filed with the Commission relating
to the Series B Convertible Preferred Stock in a password-protected, segregated
area of the web site of WR Hambrecht. In addition, certain of the physicians who
subscribe to our web site will also be given access through the WR Hambrecht
site to the prospectus filed with the Commission relating to both the Series A
and Series B Convertible Preferred Stock. We intend to offer the shares of
Series A Convertible Preferred Stock through WR Hambrecht as our agent to those
physicians that we determine have played or will play an important role in the
development or market acceptance of our web site.
To participate in the offering of either the Series A or Series B shares,
investors will be required to open a brokerage account with WR Hambrecht with an
initial minimum deposit of $3,000. After opening an account with WR Hambrecht, a
prospective investor will be permitted to purchase the shares offered hereby in
the appropriate password-protected, segregated area of WR Hambrecht's web site
provided that he or she has subscribed to our web site. WR Hambrecht will
deposit all payments it accepts as our agent into an interest bearing escrow
account at SunTrust Bank by noon of the next business day. Once we receive
payments for at least 10,000,000 shares of Series B Convertible Preferred Stock
and SunTrust Bank notifies us that it has received, as escrow agent, cash or
cleared funds in full payment for the purchase of those shares, we will conduct
an initial closing. At the initial closing, all payments for shares of Series A
and Series B Convertible Preferred Stock received in the escrow account up to
that point, minus the amount of any sales commissions owed to WR Hambrecht, will
be disbursed to us. If we have not received payments for at least 10,000,000
shares of Series B Convertible Preferred Stock by December 31, 2000, all
payments will be promptly refunded in full with interest and without deducting
any expenses. Until such time as the escrow agent has released their payments to
us, investors will not be deemed shareholders. The escrow agent will hold the
payments in escrow for the benefit of the investors and the funds will not be
subject to our creditors. During the period of escrow, investors will not be
entitled to a refund of their payments. Following the initial closing, we will
hold additional interim closings at such times as we agree upon with WR
Hambrecht until all of the shares in this offering have been purchased or until
December 31, 2000, whichever occurs first. At such interim closings, all
payments for shares of Series A and Series B Convertible Preferred Stock
received in the escrow account since the immediately preceding closing, minus
the amount of any sales commissions owed to WR Hambrecht, will be disbursed to
us.
To participate in the offering of Series B Convertible Preferred Stock,
investors must purchase a minimum of 3,000 shares of Series B Convertible
Preferred Stock. In addition,
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<PAGE> 47
investors must purchase the Series B Convertible Preferred Stock in increments
of 1,000 shares. We will divide the number of shares of Series B Convertible
Preferred Stock offered hereby into three tranches and will limit the number of
shares that may be purchased by investors in each tranche as follows:
- no more than 5,000 shares per investor until the first 10,000,000 shares
have been sold;
- no more than 4,000 shares per investor until the next 14,000,000 shares
have been sold; and
- no more than 3,000 shares per investor thereafter.
The following table illustrates these per investor purchase limits and the
maximum number of investors that could participate in each tranche assuming each
investor purchases the maximum number of shares allowed per investor:
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF
INVESTORS IN TRANCHE
MAXIMUM NUMBER OF (ASSUMING EACH INVESTOR
SHARES OFFERED PER PURCHASES MAXIMUM
TRANCHE INVESTOR NUMBER OF SHARES)
- ------- --------------------------- -----------------------
<S> <C> <C>
First 10,000,000 shares............. 5,000 2,000
Next 14,000,000 shares.............. 4,000 3,500
Last 14,500,000 shares.............. 3,000 4,833
</TABLE>
We intend to effect offers and sales of the shares in the offering through
the delivery of this prospectus by WR Hambrecht, as our agent. The offering will
be limited to those prospective investors who consent to receive a prospectus
through electronic delivery in accordance with the procedures set forth in the
segregated area of the web site of WR Hambrecht.
If the minimum of 10,000,000 shares of Series B Convertible Preferred Stock
are sold, WR Hambrecht will receive a commission in an amount equal to the
greater of 3% of the aggregate sales price of the shares sold in the offering or
$500,000. We have agreed to indemnify WR Hambrecht against specified
liabilities, including liabilities under the Securities Act, or to contribute to
payments that WR Hambrecht may be required to make in respect thereof.
The expenses of the offering, exclusive of any sales commissions payable to
WR Hambrecht, as placement agent, include the Commission registration fee, the
NASD filing fee, printing expenses, legal fees and expenses, accounting fees and
expenses, blue sky fees and expenses, transfer agent and registrar fees, and
other miscellaneous fees. We estimate that these fees and expenses will be an
aggregate of approximately $450,000. These fees and expenses are payable
entirely by us.
WR Hambrecht does not intend to act as a market maker for the Series B
Convertible Preferred Stock or for the Series A Convertible Preferred Stock
following this offering.
We have not determined the offering price by negotiation with WR Hambrecht,
as is customary in many initial public offerings. Instead, the offering price
has been determined arbitrarily by our Board of Directors.
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<PAGE> 48
WR Hambrecht is an investment banking firm formed as a limited liability
company in February 1998. In addition to this offering, WR Hambrecht has engaged
in the business of public and private equity investing and financial advisory
services since its inception. The manager of WR Hambrecht, William R. Hambrecht,
has 40 years of experience in the securities industry.
LEGAL MATTERS
The validity of the securities offered in this offering will be passed upon
by Alston & Bird LLP, Atlanta, Georgia. Certain legal matters will be passed
upon for the placement agent by Bass, Berry & Sims PLC, Nashville, Tennessee.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999, and for the period from July 30, 1999 (date of
inception) to December 31, 1999, as set forth in their report. We've included
our financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission in Washington,
D.C. a Registration Statement on Form S-1 under the Securities Act with respect
to the securities offered in this prospectus. This prospectus, filed as part of
the registration statement, does not contain all of the information set forth in
the registration statement and its exhibits and schedules, portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information about us and the securities offered by this prospectus,
we refer you to the registration statement and to its exhibits and schedules.
Statements in this prospectus about the contents of any contract, agreement or
other document are not necessarily complete and, in each instance, we refer you
to the copy of such contract, agreement or document filed as an exhibit to the
registration statement. Each such statement is qualified in all respects by
reference to the document to which it refers. Anyone may inspect the
registration statement and its exhibits and schedules without charge at the
public reference facilities the Commission maintains at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661. You may obtain copies of all or
any part of these materials from the Commission upon payment to the Commission
of prescribed fees. You may also inspect these reports and other information
without charge at a web site maintained by the Commission. The address of this
site is http://www.sec.gov.
Upon completion of this offering, we will become subject to the
informational requirements of the Securities Exchange Act of 1934 and, in
accordance therewith, file reports and other information with the Commission.
Although we do not anticipate that we will send any of these reports to our
stockholders, you will be able to inspect and copy these reports and other
information at the public reference facilities maintained by the Commission and
at the Commission's regional offices at the addresses noted above. You
46
<PAGE> 49
also will be able to obtain copies of this material from the Public Reference
Section of the Commission as described above, or inspect them without charge at
the Commission's web site.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering for sale, and seeking offers to
buy, shares of our Preferred Stock only in jurisdictions where offers and sales
are permitted.
47
<PAGE> 50
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Stockholders' Equity........................... F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
MD2patient, Inc., formerly MDpathways, Inc.
We have audited the accompanying balance sheet of MD2patient, Inc.,
formerly MDpathways, Inc. (a Company in the development stage) as of December
31, 1999, and the related statements of operations, stockholders' equity, and
cash flows for the period from July 30, 1999 (date of inception) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MD2patient, Inc. at December
31, 1999, and the results of its operations and its cash flows for the period
from July 30, 1999 (date of inception) to December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
January 14, 2000
Nashville, Tennessee
F-2
<PAGE> 52
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $4,025,058
Prepaid and other........................................... 107,168
----------
Total current assets................................... 4,132,226
Deferred offering costs..................................... 184,328
Computer software costs..................................... 259,283
Equipment and furniture..................................... 92,073
----------
Total assets........................................... $4,667,910
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses....................... $ 257,292
Deferred subscription fees.................................. 80,333
----------
Total current liabilities.............................. 337,625
Deferred subscription fees.................................. 144,667
----------
Total liabilities...................................... 482,292
----------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value, 300,000,000
shares authorized;
-- Series A Convertible; 50,000,000 shares designated;
5,000,000 shares issued and outstanding (liquidation
preference of $5,000,000 at December 31, 1999)............ 50,000
-- Series B Convertible; 50,000,000 shares designated;
no shares issued and outstanding....................... --
Common stock, $.01 par value, 300,000,000 shares authorized;
10,000,000 shares issued and outstanding.................. 100,000
Additional paid-in capital.................................. 4,686,087
Deficit accumulated during development stage................ (650,469)
----------
4,185,618
----------
$4,667,910
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 53
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 30, 1999 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
REVENUES:
Interest income............................................. $ 25,610
COSTS AND EXPENSES:
Selling, general and administrative......................... 676,079
-----------
Net loss.................................................. $ (650,469)
===========
Basic and diluted net loss per share........................ $ (0.07)
===========
Basic and diluted weighted average shares outstanding....... 10,000,000
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 54
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 30, 1999 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
SERIES A CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING
--------------------- ---------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
---------- -------- ----------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception, July 30,
1999................. -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common
stock.............. -- -- 10,000,000 100,000 -- -- 100,000
Issuance of Series A
Convertible
Preferred Stock,
net of expenses of
$124,913 and
subscription fees
of $139,000........ 5,000,000 50,000 -- -- 4,526,087 -- 4,576,087
Issuance of warrants
on Series A
Convertible
Preferred Stock.... -- -- -- -- 160,000 -- 160,000
Net loss........... -- -- -- -- -- (650,469) (650,469)
--------- ------- ----------- -------- ---------- --------- ----------
Balance, December 31,
1999............... 5,000,000 $50,000 10,000,000 $100,000 $4,686,087 $(650,469) $4,185,618
========= ======= =========== ======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 55
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 30, 1999 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (650,469)
Adjustments to reconcile net loss to net cash used from
operating activities:
Change in assets and liabilities:
Prepaid and other...................................... (107,168)
Accounts payable and accrued expenses.................. 257,292
Deferred subscription fees............................. 225,000
----------
Net cash used in operating activities................ (275,345)
----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures........................................ (351,356)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................... 100,000
Issuance of Series A Convertible Preferred Stock............ 4,576,087
Issuance of warrants on Series A Convertible Preferred
Stock..................................................... 160,000
Deferred offering costs..................................... (184,328)
----------
Net cash provided by financing activities............ 4,651,759
----------
Net increase in cash................................. 4,025,058
Cash, beginning of period................................... --
----------
Cash, end of period......................................... $4,025,058
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 56
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION AND NATURE OF BUSINESS
MD2patient, Inc. ("the Company") is a Georgia corporation which was
incorporated and capitalized by Heritage Group LLC ("Heritage") in July 1999
under the name of MDpathways, Inc. The Company changed its name to MD2patient,
Inc. in December 1999. The Company is developing a web site to provide access to
selected on-line healthcare content and services and to develop web pages for
its physician subscribers.
MD2patient, Inc. is in the development stage as its operations principally
involve the building of its web site infrastructure, market analysis, capital
raising and other business planning activities. No revenue has been generated.
Since MD2patient, Inc. is in the development stage, the accompanying financial
statements should not be regarded as typical for normal operating periods.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant
concentrations of credit risk, consist principally of cash. The Company
maintains cash with one financial institution located in Tennessee, which
may at times exceed federally insured limits.
The carrying amounts reported in the balance sheets for cash and accounts
payable approximate their fair values due to the short-term nature of these
financial instruments.
b. 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 these estimates.
c. Computer hardware and software
Property and equipment are stated at cost and will be amortized over the
expected useful lives of the assets ranging from three to seven years.
d. Advertising
MD2patient, Inc. expenses advertising costs when incurred. There were no
advertising expenses incurred for the period ended December 31, 1999. At
December 31, 1999, the Company had prepaid $100,000 related to an
advertising retainer for fiscal 2000.
F-7
<PAGE> 57
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
e. Start-up Costs
MD2patient, Inc. has adopted Statement of Position No. 98-5 requiring
companies to expense all start-up related expenses when incurred. Start-up
expenses incurred for the period ended December 31, 1999, were $3,582.
f. Revenue Recognition
The Company recognizes revenues at the time that services are performed.
Subscription revenue is recognized over the life of the subscription which
is one or three years. At December 31, 1999, $225,000 of proceeds from
subscription sales were deferred until such time as the website becomes
functional. No revenues were recognized during 1999.
g. Website Development and Maintenance Costs
MD2patient, Inc. has adopted Statement of Position No. 98-1 with regard to
the accounting for costs of developing and implementing its website, as
software developed for internal use. Costs related to the maintenance of the
website, including populating content, are expensed as incurred.
h. Basic and Diluted Net Loss per Share
Basic net loss per share excludes dilution for common stock equivalents and
is computed by dividing net loss by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if Series A Convertible Preferred Stock
and warrants to purchase Series A Convertible Preferred Stock were exercised
and converted into common stock. The treasury stock method is used to
calculate dilutive shares. Diluted net loss per share is equal to basic loss
per share since all Series A Convertible Preferred Stock and warrants to
purchase Series A Convertible Preferred Stock are anti-dilutive.
Diluted net loss per common share does not include the effects of 1,000,000
warrants to purchase Series A Convertible Preferred Stock and 5,000,000
shares of Series A Convertible Preferred Stock on an "as if" converted basis
for the period ended December 31, 1999.
i. Income Taxes
Income taxes are computed based on the liability method of accounting
whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
j. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," effective July 30, 1999. This
statement requires a full set of general purpose financial statements to be
expanded to include the reporting of "comprehensive income." Comprehensive
income is comprised of two
F-8
<PAGE> 58
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
components, net income and other comprehensive income. During the period
ended December 31, 1999, the Company had no items qualifying as other
comprehensive income; accordingly, the adoption of SFAS No. 130 had no
impact on the Company's financial statements.
k. Segment Reporting
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." This statement changes the way public
business enterprises report segment information, including financial and
descriptive information about their selected information in interim and
annual financial statements. Under SFAS No. 131, operating segments are
defined as revenue producing components of the enterprise which are
generally used internally for evaluating segment performance. As the Company
has a limited operating history, the effects of SFAS No. 131 on the
Company's financial position or results of operations for the period ended
December 31, 1999 could not yet be determined.
l. Recently Issued Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to
as derivatives), and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999. The
Company believes SFAS No. 133 will have no material effect on its financial
position or results of operations.
3. DEFERRED OFFERING COSTS
Deferred offering costs represent costs incurred as of the balance sheet
date as they relate to MD2patient, Inc.'s proposed initial public offering.
4. SHAREHOLDERS' EQUITY
CAPITAL STOCK
The authorized shares of the Company total 600,000,000 shares, consisting
of: (a) 300,000,000 shares of Common Stock, $0.01 par value per share ("Common
Stock"); and (b) 300,000,000 shares of Preferred Stock, $0.01 par value per
share ("Preferred Stock"), of which 50,000,000 shares have been designated as
Series A Convertible Preferred Stock ("Series A Preferred") and 50,000,000
shares have been designated as Series B Convertible Preferred Stock ("Series B
Preferred"), these preferred shares together are referred to as the "Convertible
Preferred Stock."
F-9
<PAGE> 59
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMMON STOCK
On July 30, 1999, the Company was formed as a wholly-owned subsidiary of
Heritage Group, LLC ("Heritage") and in connection with such formation,
50,000,000 shares of Common Stock were issued to Heritage for $100,000. For
certain business and tax planning purposes, Heritage elected to return
40,000,000 shares of Common Stock to the Company effective November 23, 1999,
which is available for reissuance at the discretion of the Board of Directors.
This has been accounted for as a reverse stock split and all amounts have been
adjusted accordingly.
The Common Stock is subject to all of the rights, privileges, preferences
and priorities of the Preferred Stock as set forth in the Company's Articles of
Incorporation. Dividends may be paid on the Common Stock, but only when and as
declared by the Board of Directors. Upon any dissolution, liquidation or winding
up of the Company, the holders of the Common Stock, and any holders of any class
or series of stock entitled to participate therewith will become entitled to
participate in the distribution of any assets of the Company after payment of
all debt and liabilities, and after the Company has paid or set aside for
payment, amounts due to holders of any class of stock having preference over the
Common Stock.
Each holder of Common Stock is entitled to cast one vote for each
outstanding share of Common Stock held upon any matter or thing submitted to a
vote of the stockholders of the Company.
CONVERTIBLE PREFERRED STOCK
Effective November 18, 1999, the Company closed a private placement of
Series A Convertible Preferred Stock whereby 5,000,000 shares were sold for
$1.00 per share. Included with this purchase, investors received warrants to
purchase 1,000,000 shares of Series A Convertible Preferred Stock for $1.00 per
share and are exercisable beginning one year after the date of issuance. The
estimated fair value of those warrants totaled $160,000 at November 18, 1999 and
has been allocated to warrants from additional paid in capital on the statement
of stockholders' equity. The fair value of each warrant was estimated using a
minimal value model with the following assumptions: expected life of three
years; 0% dividend; and a risk-free interest rate of 5.77%. Additionally,
investors in this Series A placement received free three year subscriptions to
the website. Deferred subscription fees have been recorded and additional
paid-in-capital has been reduced by $139,000 which represents the price of a
three year subscription.
VOTING RIGHTS. Except as required by law and except for any "Corporate
Transaction" submitted to a vote of the stockholders of the Company, holders of
shares of Convertible Preferred Stock do not have any voting rights whatsoever.
A Corporate Transaction is defined as (a) any consolidation or merger of the
Company, other than any merger, consolidation or share exchange resulting in the
holders of the capital stock of the Company entitled to vote for the election of
directors holding a majority of the capital stock of the surviving or resulting
entity entitled to vote for the election of directors, or (b) any sale or other
disposition by the Company of all or substantially all of its assets to
F-10
<PAGE> 60
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
a third party. With respect to any Corporate Transaction submitted to a vote of
the stockholders of the Company, (i) each holder of shares of Convertible
Preferred Stock is entitled to cast one vote for each outstanding share of
Convertible Preferred Stock so held and (ii) the holders of shares of
Convertible Preferred Stock and Common Stock will vote together and not as
separate classes or series.
DIVIDEND RIGHTS. Holders of Convertible Preferred Stock are entitled to
participate on a share for share basis in all dividends declared and paid on
Common Stock, provided, however, that in case of dividends on Common Stock that
are payable in Common Stock, or in options, warrants or rights to acquire Common
Stock, or in securities convertible into or exchangeable for Common Stock, (i)
the corresponding dividends to be paid to holders of Series A Preferred Stock
will be paid in shares of, or options, warrants or rights to acquire, or
securities convertible or exchangeable for, as the case may be, Series A
Preferred Stock, and (ii) the corresponding dividends to be paid to holders of
Series B Preferred Stock will be paid in shares of, or options, warrants or
rights to acquire, or securities convertible into or exchangeable for, as the
case may be, Series B preferred Stock.
LIQUIDATION. Upon any dissolution, liquidation or winding up of the
Company, the holders of the Convertible Preferred Stock will be entitled to be
paid out of the assets of the Company legally available for distribution to its
stockholders, before any payment or declaration and setting apart for payment of
any amount is made in respect to Common Stock, an amount equal in value to the
consideration received by the Company for the initial issuance of such shares of
Convertible Preferred Stock, as adjusted. If upon liquidation, the assets to be
distributed to the Convertible Preferred Stock are insufficient to permit the
payment in full of the Convertible Preferred Stock Liquidation Preference, then
all of the assets legally available for distribution to the holders of
Convertible Preferred Stock will be distributed to such holders ratably in
proportion the amount otherwise entitled.
CONVERSION OF SERIES A PREFERRED STOCK
OPTIONAL CONVERSION. Any holder of shares of Series A Preferred Stock may
at any time convert all or any number of the shares held into shares of Common
Stock on a one-for-one basis by surrendering the certificate. At the time
conversion has been effected, the shares surrendered for conversion will no
longer be deemed to be outstanding, all rights of a converting holder with
respect to the shares surrendered for will immediately terminate and the holder
will be deemed to have become the holder of record of the shares of Common Stock
issuable upon conversion.
AUTOMATIC CONVERSION. All shares of Series A Preferred Stock will
automatically be converted into shares of Common Stock on a one-for-one basis
upon the closing of a "Qualified Public Offering," defined as a firm commitment
underwritten public offering of Common Stock pursuant to a registration
statement declared effective under the Securities Act of 1933, as amended, in
which (i) the gross aggregate proceeds, before fees and expenses, received by
the Company (and any selling shareholders) equals or exceeds $10,000,000 and
(ii) the price per share to the public equals or exceeds $1.00; provided,
F-11
<PAGE> 61
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
however, that the term "Qualified Public Offering" will not include an offering
made in connection with a business acquisition or combination or an employee
benefit plan.
The Company will at all times reserve out of its authorized but unissued
capital stock or out of its capital stock held in treasury sufficient shares of
Common Stock to permit the conversion of all outstanding Series A Preferred
Stock.
CONVERSION OF SERIES B PREFERRED STOCK
Outstanding shares of Series B Preferred Stock will automatically be
converted into shares of Series A Preferred Stock (if converted prior to a
Qualified Public Offering) or Common Stock (if converted after a Qualified
Public Offering), on a one-for-one basis, at the rate of one-third per year on
the anniversary of their date of issuance.
The Company will at all times reserve out of its authorized but unissued
capital stock or out of its capital stock held in treasury sufficient shares of
Series A Preferred Stock or Common Stock, as applicable, to permit the
conversion of all outstanding Series B Preferred Stock.
RESTRICTIONS ON TRANSFERS
Holders of Convertible Preferred Stock will not transfer record or
beneficial ownership of, and the Company will not recognize or register the
transfer of, any shares of Convertible Preferred Stock unless the Company gives
its prior written consent.
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
1999
---------
<S> <C>
Deferred tax assets:
Start-up costs.................................... $ 88,664
Deferred subscription fees........................ 85,500
Net operating loss carryforward................... 122,985
---------
Total deferred tax assets........................... 297,149
Valuation allowance............................... (297,149)
---------
Total deferred tax assets, net of valuation
allowance......................................... $ --
=========
</TABLE>
F-12
<PAGE> 62
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The effective income tax rate differed from the federal statutory rate for
the period from July 30, 1999 (date of inception) to December 31, 1999 as
follows:
<TABLE>
<CAPTION>
1999
-----
<S> <C>
U.S. federal income tax rate............................ 34.0%
State income tax, net of federal income tax benefit..... 4.0
Increase in valuation allowance......................... (38.0)
-----
0.0%
=====
</TABLE>
The Company has established a valuation allowance for deferred tax assets
at December 31, 1999 due to the uncertainty of realizing these assets in the
future. The valuation allowance increased $297,149 during 1999. As of December
31, 1999, the Company had future net operating loss carryforwards of $323,644
expiring 2019.
6. COMMITMENTS AND CONTINGENCIES
The Company is obligated under an agreement for the development and
implementation of an Information Technology Infrastructure, which principally
relates to its web site. The agreement allows for termination at any time (i) by
the Company upon thirty days written notice to the vendor; (ii) by the vendor in
the event of a professional conflict upon ten days written notice to the
Company; or (iii) by either party upon written notice for failure to comply with
the terms of the agreement for a thirty-day period following receipt of notice.
Fees associated with this agreement total approximately $200,000 for 1999 and
have been capitalized as computer software costs.
Minimum rental commitments under operating leases having an initial or
remaining non-cancelable term of more than one year are as follows:
2000................................................$165,776
2001.................................................165,776
2002.................................................165,776
-----------------------------
$497,328
-----------------------------
-----------------------------
7. INITIAL PUBLIC OFFERING
The Company is in the process of filing a Registration Statement with the
Securities and Exchange Commission for a proposed initial public offering
("IPO") of its Series A and B Convertible Preferred Stock. In its IPO, the
Company plans to issue a maximum of 2,000,000 shares of its Series A Convertible
Preferred Stock and 38,500,000 shares of its Series B Convertible Preferred
Stock. Offering costs are estimated to be approximately $450,000, not including
placement agency fees.
F-13
<PAGE> 63
MD2PATIENT, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. SUBSEQUENT EVENTS
EMPLOYMENT AGREEMENTS
Effective January 1, 2000, the Company entered into employment agreements
with four executive officers. The agreements generally continue until terminated
with notice by the Company or the executive, and provide for severance payments
under certain circumstances. The agreements include a covenant against
competition with the Company, which extends for a period of one year after
termination. As of January 1, 2000 if all employees under contract were to be
terminated without good cause (as defined) under these contracts, the Company's
liability would be approximately $700,000.
RESTRICTED STOCK GRANTS
During January 2000, the Company granted 10,580,000 restricted shares of
common stock to certain of its employees and directors. Shares were awarded in
the name of the employee, who has all rights of a shareholder, subject to
certain restrictions on transferability and a risk of forfeiture. The forfeiture
provisions expire monthly, over a period not to exceed five years. Restricted
shares subject to forfeiture provisions have been recorded as unearned stock
grant compensation totalling $100,000.
2000 LONG-TERM INCENTIVE PLAN
Effective January 13, 2000, the Board of Directors and shareholders
approved the 2000 Long-term Incentive Plan which provides for the grant of
nonqualified and incentive stock options, stock appreciation rights, performance
shares, restricted stock and other stock-based awards. There are 10,000,000
shares available under this plan for future grants at January 14, 2000. Under
the provisions of the 2000 plan, nonqualified stock options and other stock
awards are to be granted to officers and employees at prices not less than fair
market value at the date of grant.
F-14
<PAGE> 64
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THE INFORMATION OR
REPRESENTATIONS CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY
ADDITIONAL INFORMATION OR REPRESENTATIONS IF MADE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY:
- EXCEPT THE STOCK OFFERED BY THIS PROSPECTUS;
- IN ANY JURISDICTION IN WHICH THE OFFER OR SOLICITATION IS NOT AUTHORIZED;
- IN ANY JURISDICTION WHERE THE DEALER OR OTHER SALESPERSON IS NOT
QUALIFIED TO MAKE THE OFFER OR SOLICITATION;
- TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION;
OR
- TO ANY PERSON WHO IS NOT A UNITED STATES RESIDENT OR WHO IS OUTSIDE THE
JURISDICTION OF THE UNITED STATES.
THE DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING SALE DOES NOT IMPLY
THAT:
- THERE HAVE BEEN NO CHANGES IN THE AFFAIRS OF MD2PATIENT.COM AFTER THE
DATE OF THIS PROSPECTUS; OR
- THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS.
UNTIL , 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.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
38,500,000 SHARES
MD2PATIENT.COM
SERIES B CONVERTIBLE
PREFERRED STOCK
PROSPECTUS
(WR HAMBRECHT & CO. LOGO)
, 2000
------------------------------------------------------
------------------------------------------------------
<PAGE> 65
------------------------------------------------------
------------------------------------------------------
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THE INFORMATION OR
REPRESENTATIONS CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY
ADDITIONAL INFORMATION OR REPRESENTATIONS IF MADE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITY:
- EXCEPT THE STOCK OFFERED BY THIS PROSPECTUS;
- IN ANY JURISDICTION IN WHICH THE OFFER OR SOLICITATION IS NOT AUTHORIZED;
- IN ANY JURISDICTION WHERE THE DEALER OR OTHER SALESPERSON IS NOT
QUALIFIED TO MAKE THE OFFER OR SOLICITATION;
- TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION;
OR
- TO ANY PERSON WHO IS NOT A UNITED STATES RESIDENT OR WHO IS OUTSIDE THE
JURISDICTION OF THE UNITED STATES.
THE DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING SALE DOES NOT IMPLY
THAT:
- THERE HAVE BEEN NO CHANGES IN THE AFFAIRS OF MD2PATIENT.COM AFTER THE
DATE OF THIS PROSPECTUS; OR
- THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS.
UNTIL , 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.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
2,000,000 SHARES
MD2PATIENT.COM
SERIES A CONVERTIBLE
PREFERRED STOCK
PROSPECTUS
(WR HAMBRECHT & CO. LOGO)
, 2000
------------------------------------------------------
------------------------------------------------------
<PAGE> 66
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered. All
amounts are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 11,259
Accounting Fees and Expenses................................ 50,000
Legal Fees and Expenses..................................... 250,000
Printing Costs.............................................. 100,000
Miscellaneous Expenses...................................... 38,741
--------
Total..................................................... $450,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted under Georgia law, our Articles of Incorporation provide that
a director shall not be personally liable to the corporation or its shareholders
for monetary damages for breach of duty of care or any other duty owed to the
corporation as a director, except that such provision shall not eliminate or
limit the liability of a director (a) for any appropriation, in violation of his
duties, of any business opportunity of the corporation, (b) for acts or
omissions which involve intentional misconduct or a knowing violation of law,
(c) for unlawful corporate distributions, or (d) for any transaction from which
the director received an improper personal benefit.
Under our Bylaws, we are required to indemnify our directors to the full
extent permitted by Georgia law. Georgia law provides that a corporation may
indemnify its directors, officers, employees and agents against judgments,
fines, penalties, amounts paid in settlement, and reasonable expenses, including
attorney's fees, resulting from various types of legal actions or proceedings,
including, but not limited to any threatened, pending, or completed action, suit
or proceeding whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal, if the actions of the party being
indemnified meet the standards of conduct specified therein. Determination
concerning whether or not the applicable standard of conduct has been met can be
made by (a) the Board of Directors by a majority vote of all the disinterested
directors, if there are at least two disinterested directors, (b) a majority
vote of a committee of two or more disinterested directors, (c) special legal
counsel, or (d) an affirmative vote of a majority of shares held by
disinterested shareholders. No indemnification shall be made (i) in connection
with a proceeding by or in the right of MD2patient, Inc. except for reasonable
expenses incurred in connection with the proceeding if it is determined that the
indemnitee has met the relevant standard of conduct, or (ii) in connection with
any other proceeding in which such person was adjudged liable on the basis that
personal benefit was improperly received by him.
II-1
<PAGE> 67
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of MD2patient, Inc. on July 30, 1999, we
sold 50,000,000 shares of common stock to Heritage Group, LLC for a purchase
price of $100,000.00.
To raise working capital, on November 18, 1999, we sold 5,000,000 shares of
Series A Convertible Preferred Stock to individual investors. The aggregate
purchase price for such purchases was $5,000,000.
The offer, sale and issuance of the above securities were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act as a transactions by an issuer not involving a public
offering. The recipient of securities represented its intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificate issued in the transactions. The recipient had adequate access to
information about MD2patient, Inc.
On November 23, 1999, Heritage Group, LLC effected a recapitalization
pursuant to which 40,000,000 shares of Common Stock were returned to MD2patient,
Inc. to be available for reissuance at the discretion of our Board of Directors.
On January 14, 2000, we issued 10,380,000 shares of common stock to our
directors, executive officers and employees pursuant to restricted stock award
agreements. The consideration for the issuance of these restricted shares is
future services that we expect to receive from these individuals. The offer,
sale and issuance of these shares were deemed to be exempt from registration
under the Securities Act in reliance on Rule 701 promulgated under the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <C> <S>
**1.1 -- Agency Agreement.
*3.1 -- Articles of Incorporation of MD2patient, Inc.
3.1.1 -- Articles of Amendment to the Articles of Incorporation of
MD2patient, Inc.
*3.2 -- Bylaws of MD2patient, Inc.
4.1 -- Specimen Series A Convertible Preferred Stock certificate.
4.2 -- Specimen Series B Convertible Preferred Stock certificate.
**4.3 -- Escrow Agreement.
5.1 -- Opinion of Alston & Bird LLP.
++10.1 -- Business Consulting Statement of Work dated November 10,
1999 by and between Arthur Andersen LLP and MD2patient, Inc.
10.2 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and John E. Blount.
10.3 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and Thomas A. Gallagher.
10.4 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and Albert Rodewald.
</TABLE>
II-2
<PAGE> 68
<TABLE>
<C> <C> <S>
10.5 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and James G. Petway, Jr.
10.6 -- MD2patient, Inc. 2000 Long-Term Incentive Plan.
10.7 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and John E. Blount.
10.8 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Thomas A.
Gallagher.
10.9 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Albert Rodewald.
10.10 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and James G. Petway,
Jr.
10.11 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Rock A. Morphis.
23.1 -- Consent of Independent Auditors.
23.2 -- Consent of Alston & Bird LLP (included in Exhibit 5.1).
*24.1 -- Powers of Attorney.
*27.1 -- Financial Data Schedule.
27.2 -- Financial Data Schedule.
</TABLE>
- -------------------------
* previously filed.
** to be filed by amendment.
++ Confidential Treatment pursuant to 17 CFR sec. 200.80 and 230.406 has been
requested regarding certain provisions of the indicated Exhibit, which
portions have been separately filed with the Commission.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
II-3
<PAGE> 69
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Franklin, State of Tennessee, on January 14,
2000.
MD2patient, Inc.
By: /s/ JOHN E. BLOUNT
-----------------------------------
John E. Blount
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on January 14, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JOHN E. BLOUNT President and Director
- ---------------------------------------------------
John E. Blount
/s/ JAMES G. PETWAY, JR. Executive Vice President and Chief
- --------------------------------------------------- Financial Officer (Principal
James G. Petway, Jr. Financial and Accounting Officer)
/s/ ALBERT RODEWALD* Executive Vice President and Director
- ---------------------------------------------------
Albert Rodewald
/s/ THOMAS A. GALLAGHER* Executive Vice President and Director
- ---------------------------------------------------
Thomas A. Gallagher
/s/ ROCK A. MORPHIS* Chairman of the Board
- ---------------------------------------------------
Rock A. Morphis
*By: /s/ JOHN E. BLOUNT
---------------------------------------------
John E. Blount
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 71
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
** 1.1 -- Agency Agreement.
*3.1 -- Articles of Incorporation of MD2patient, Inc.
3.1.1 -- Articles of Amendment to the Articles of Incorporation of
MD2patient, Inc.
*3.2 -- Bylaws of MD2patient, Inc.
4.1 -- Specimen Series A Convertible Preferred Stock certificate.
4.2 -- Specimen Series B Convertible Preferred Stock certificate.
**4.3 -- Escrow Agreement.
5.1 -- Opinion of Alston & Bird LLP.
++10.1 -- Business Consulting Statement of Work dated November 10,
1999 by and between Arthur Andersen LLP and MD2patient, Inc.
10.2 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and John E. Blount.
10.3 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and Thomas A. Gallagher.
10.4 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and Albert Rodewald.
10.5 -- Employment Agreement dated as of January 1, 2000 by and
between MD2patient, Inc. and James G. Petway, Jr.
10.6 -- MD2patient, Inc. 2000 Long-Term Incentive Plan.
10.7 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and John E. Blount.
10.8 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Thomas A.
Gallagher.
10.9 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Albert Rodewald.
10.10 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and James G. Petway,
Jr.
10.11 -- Restricted Stock Award Agreement dated as of January 14,
2000 by and between MD2patient, Inc. and Rock A. Morphis.
23.1 -- Consent of Independent Auditors.
23.2 -- Consent of Alston & Bird LLP (included in Exhibit 5.1).
*24.1 -- Powers of Attorney.
*27.1 -- Financial Data Schedule.
27.2 -- Financial Data Schedule.
</TABLE>
- -------------------------
* previously filed.
** to be filed by amendment.
++ Confidential Treatment pursuant to 17 CFR sec. 200.80 and 230.406 has been
requested regarding certain provisions of the indicated Exhibit, which
portions have been separately filed with the Commission.
<PAGE> 1
EXHIBIT 3.1.1
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
MD2PATIENT, INC.
1.
The name of the corporation is MD2patient, Inc.
2.
The Articles of Incorporation of the Corporation are amended by
deleting the first two sentences of Section 4.3(f) of Article 4 in their
entirety and by substituting in lieu thereof two new sentences to read as
follows:
"Outstanding shares of Series B Preferred Stock shall automatically be
converted into shares of Series A Preferred Stock (if the conversion
date occurs prior to the closing of a Qualified Public Offering) or
Common Stock (if the conversion date occurs on or after the closing of
a Qualified Public Offering), on a one-for-one basis, at the rate of
one-third per year on each anniversary of their date of issuance. Each
such one-third calculation shall be applied per holder of applicable
shares with respect to the aggregate number of applicable shares held,
rounding up to the nearest whole share."
3.
The foregoing amendment was duly approved by the shareholders of the
corporation on January 13, 2000 in accordance with Section 14-2-1003 of the
Georgia Business Corporation Code.
IN WITNESS WHEREOF, the undersigned has caused these Articles of
Amendment to be duly executed this 13th day of January, 2000.
MD2PATIENT, INC.
By: /s/ James G. Petway, Jr.
--------------------------
Name: James G. Petway, Jr.
----------------------
Title: Chief Financial Officer
------------------------
<PAGE> 1
EXHIBIT 4.1
MD2patient, Inc.
ORGANIZED UNDER THE LAWS OF THE STATE OF GEORGIA
NUMBER SHARES
MDA
SEE REVERSE FOR
CERTAIN DEFINITIONS
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE
SERIES A CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE, OF
MD2patient, Inc., a Georgia corporation, fully paid and non-assessable,
transferable on the books of the Corporation by the holder hereof in person or
by Attorney, upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
In Witness, Whereof, the said corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated:
/s/ Albert Rodewald /s/ John E. Blount
TREASURER PRESIDENT AND SECRETARY
(CORPORATE SEAL)
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
These securities have not been registered under the Federal Securities Act
of 1933, as amended (the "Federal Act"), or the securities laws of any state,
and are issued and sold in reliance upon certain exemptive provisions of the
Federal Act and such laws. Said securities cannot be sold or transferred except
if, in the opinion of counsel reasonably acceptable to the issuer, any such sale
or transfer would be: (1) pursuant to an effective registration statement under
the Federal Act or pursuant to an exemption from such registration and (2)
pursuant to an effective registration under applicable state securities laws or
pursuant to an exemption from such registration.
The shares of MD2patient, Inc. (the "Corporation") evidenced hereby are
subject to, among other things, (1) transfer restrictions prohibiting the
transfer of such shares to anyone without the prior written consent of the
Corporation, (ii) conversion into shares of Common Stock of the Corporation at
the option of the holder hereof, and (iii) automatic conversion into shares of
Common Stock of the Corporation upon the completion of a qualifying initial
public offering by the Corporation, all as provided in more detail in the
Articles of Incorporation of the Corporation. Copies of the Articles of
Incorporation of the Corporation are available from the Corporate Secretary of
the Corporation at the Corporation's principal office located at 1913 21st
Avenue South, Nashville, Tennessee 37212, and will be furnished to any
stockholder upon written request without cost.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -as tenants in common UNIF GIFT MIN ACT- Custodian
------------------------
TEN ENT -as tenants by the entireties (Cust) (Minor)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act
in common -----------------
(State)
Additional abbreviations may also be used though not in the above list
For value received,_________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
_________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_________________________________________________________________________________
_________________________________________________________________________________
___________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
____________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated______________________
</TABLE>
_________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s)Guaranteed:_________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION SUCH AS
A SECURITIES BROKER/DEALER, COMMERCIAL BANK,
TRUST COMPANY, SAVINGS ASSOCIATION ON A
CREDIT UNION PARTICIPATING IN A MEDALLION
PROGRAM.
<PAGE> 1
EXHIBIT 4.2
NUMBER MD2patient, Inc. SHARES
MDB
ORGANIZED UNDER THE LAWS OF THE STATE OF GEORGIA
SEE REVERSE
FOR CERTAIN
DEFINITIONS
This Certifies That
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES B CONVERTIBLE
PREFERRED STOCK, $.01 PAR VALUE, OF
MD2patient, Inc. a Georgia corporation, fully paid and non-assessable,
transferable on the books of the Corporation by the holder hereof in person or
by Attorney, upon surrender of the certificate properly endorsed. This
Certificate in not valid until countersigned by the Transfer Agent and
registered by the Registrar.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated:
Albert Rodewald [CORPORATE SEAL] John E. Blount
TREASURER PRESIDENT AND SECRETARY
COUNTERSIGNED AND REGISTERED:
SunTrust Bank, Atlanta
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
These securities have not been registered under the Federal Securities Act
of 1933, as amended (the "Federal Act"), or the securities laws of any state,
and are issued and sold in reliance upon certain exemptive provisions of the
Federal Act and such laws. Said securities cannot be sold or transferred except
if, in the opinion of counsel reasonably acceptable to the issuer, any such sale
or transfer would be: (1) pursuant to an effective registration statement under
the Federal Act or pursuant to an exemption from such registration, and (2)
pursuant to an effective registration under applicable state securities laws or
pursuant to an exemption from such registration.
The shares of MD2patient, Inc. (the "Corporation") evidenced hereby are
subject to, among other things, (i) transfer restrictions prohibiting the
transfer of such shares to anyone without the prior written consent of the
Corporation and (ii) automatic conversion into shares of Series A Convertible
Preferred Stock of the Corporation (or Common Stock of the Corporation,
depending on whether the Corporation has completed a qualifying initial public
offering at the time of conversion) over time, all as provided in more detail in
the Articles of Incorporation of the Corporation. Copies of the Articles of
Incorporation of the Corporation are available from the Corporate Secretary of
the Corporation at the Corporation's principal office located at 1913 21st
Avenue South, Nashville, Tennessee 37212, and will be furnished to any
stockholder upon written request without cost.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
--------------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts
to Minors Act
JT TEN - as joint tenants with right of --------------
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
For value received, ______________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the promises.
Dated ________________________
____________________________________________________
THE SIGNATURES(S) TO THIS ASSIGNMENT MUST CORRESPOND
NOTICE: WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed: _______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION SUCH AS A SECURITIES BROKER/
DEALER, COMMERCIAL BANK, TRUST COMPANY, SAVINGS
ASSOCIATION OR A CREDIT UNION PARTICIPATING IN A
MEDALLION PROGRAM.
- --------------------------------------- --------------------------------------
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR: STEVE KOWALSKI
680 BLAIR MILL ROAD 215-830-2197
HORSHAM, PA 19044 PROOF OF DECEMBER 9, 1999
(215) 667-3480 MD2PATIENT, INC.
SALES: A. HOBBS: 404-525-1455 H64253 bk Lot 3
HOME 11/NEW LIVE JOBS/ MD2patient/64263 OPERATOR MT/lr/eg/ml
rev 4
- --------------------------------------- --------------------------------------
<PAGE> 1
EXHIBIT 5.1
[ALSTON&BIRD LLP LETTERHEAD]
January 14, 2000
MD2patient, Inc.
501 Corporate Centre Drive
Suite 200
Franklin, Tennessee 37067
Re: Form S-1 Registration Statement (SEC file No. 333-91619)
MD2patient, Inc.
Gentlemen:
We have acted as counsel for MD2patient, Inc., a Georgia corporation
(the "corporation"), in connection with the above referenced Registration
Statement on Form S-1 (the "Registration Statement") being filed by the
Corporation with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended, and covering (i) 38,500,000 shares of
the Corporation's Series B Convertible Preferred Stock, $.01 par value per
share, and (ii) 2,000,000 shares of the Corporation's Series A Convertible
Preferred Stock, $.01 par value per share (collectively, the "Shares"). This
Opinion Letter is rendered pursuant to Item 16 of Form S-1 and Item 601(b)(5) of
Regulation S-K. Capitalized terms used in this Opinion Letter and not otherwise
defined herein shall have the meanings assigned to such terms in the
Registration Statement.
In the capacity described above, we have considered such matters of law
and of fact, including the examination of originals or copies, certified or
otherwise identified to our satisfaction, of such records and documents of the
Corporation, certificates of public officials and such other documents as we
have deemed appropriate as a basis for the opinions hereinafter set forth. The
opinions set forth herein are limited to the laws of the State of Georgia, in
reliance solely on published general compilations thereof as of the date hereof.
Based upon the foregoing, it is our opinion that when issued the Shares
covered by the Registration Statement will be legally and validly issued, fully
paid and nonassessable.
<PAGE> 2
MD2patient, Inc.
January 14, 2000
Page 2
This Opinion Letter is provided to you for your benefit and for the
benefit of the Commission, in each case, solely with regard to the Registration
Statement, may be relied upon by you and the Commission only in connection with
the Registration Statement, and may not be relied upon by any other person or
for any other purpose without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name wherever
appearing in the Registration Statement.
Sincerely,
ALSTON & BIRD LLP
By: /s/ Nils H. Okeson, Esq.
----------------------------------------
Nils H. Okeson, Esq.
<PAGE> 1
EXHIBIT 10.1
Arthur
Andersen
- ------------------------------------
BUSINESS CONSULTING
(logo) STATEMENT OF WORK
- -------------------------------------------------------------------------------
November 10, 1999
Mr. Albert Rodewald
Managing Director
md2patient
1913 21st Avenue South
Nashville, TN 37212
Dear Albert,
This Statement of Work, including any appendices, schedules, and/or attachments,
documents the understanding between Arthur Andersen LLP ("AA") and md2patient
("Client") with respect to certain services to be performed by AA related to
Information Technology Architecture Design & Implementation ("Services"). These
Services shall be provided under the provisions of this Statement of Work and
AA's Business Consulting Standard Business Terms which, together, describe our
understanding with respect to the Services.
PROJECT SCOPE AND OBJECTIVES
Client is seeking assistance to develop and implement an Information Technology
Architecture. The architecture will support the vision, principles, strategic
direction, initiatives, and objectives of the client. AA consultants will
conduct the project with assistance from third parties and client management.
The objectives of this multi-phased project are:
Phase I
- Identify a third party to outsource the Oracle application hosting process
to.
- Act as vendor liaison through outsourcing process including
hardware/software licensing and purchasing assistance.
- Implement the Oracle Web Database System.
- Implement three Oracle Financial Modules - G/L, A/R & Financial Analysis,
including client training.
- Design, build and implement a custom web-enabled Subscription/Investor
Management System. You have asked that this website be functional by the
end of the calendar year 1999.
- Convert existing investor data into new Oracle-based format.
- Project management.
Phase II
- Design, build and implement a functioning website prototype that
concentrates on two physician specialties - orthopedics and urology
that are integrated with a main portal site for
1
<PAGE> 2
use by physicians and also includes a functioning prototype of a custom
physician homepage linked to the specialty pages. You have asked that we
complete this work prior to the end of March 2000.
- Project management.
Phase III (Out-of-scope)
- Ongoing website design and implementation beyond working prototype
developed in Phase II shall be addressed through a separate arrangement
letter and is therefore not a part of the scope of this engagement.
- Project management.
AA SERVICES AND RESPONSIBILITIES
(a) Services to be provided.
OUTSOURCING VENDOR
- We will develop the criteria necessary to select an outsourcing vendor.
- We will identify several outsourcing vendors that meet the criteria for
selection.
- We will present a summary document to you comparing and contrasting the
outsourcing vendors' products and services along with available pricing
terms.
- We will help you select the vendor of choice.
- We will act as vendor liaison and assist you with contract negotiations.
ORACLE DATABASE AND ORACLE FINANCIAL MODULES
- We will work with the selected outsourcing vendor to acquire a license
to use Oracle Database.
- We will work with the selected outsourcing vendor to implement the
Oracle Database.
- We will work with the selected outsourcing vendor to acquire a license
to use Oracle Financials - G/L, A/R and Financial Analysis Modules.
- We will work with the selected outsourcing vendor to implement the
Oracle Financials.
- We will assist you with configuring the Oracle Financials to suit your
business.
WEB-ENABLED SUBSCRIPTION MANAGEMENT SYSTEM
- We will integrate this tool with the Oracle Database structure.
- We will create forms that allow access to the data.
- We will integrate credit-card processing capabilities within the site to
handle the purchasing of subscriptions from interested physicians.
- We will pre-load it with existing data currently stored in a Goldmine
database.
- We will utilize our Advanced Technology Group to build and implement
this tool working with the Experiential Design and Internet Marketing
Unit to give the tool a nice look and feel along with good navigation
capabilities.
- We will design/incorporate a new web-enabled marketing presentation to
replace the current online PowerPoint presentation.
FUNCTIONING PHYSICIAN WEBSITE PROTOTYPE INCLUDING CUSTOM PHYSICIAN HOMEPAGE
- We will design and implement a branded website prototype to be targeted
for physician use.
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<PAGE> 3
- We will utilize our Advanced Technology Group to build and implement
this site working with the Experiential Design and Internet Marketing
Unit to give the site a nice look and feel along with good navigation
capabilities.
(b) AA's responsibilities and role.
- As project managers, we will lead the engagement and deliver the
required AA resources on a timely and effective basis.
- Accurate and timely communication with client team.
(c) Acceptance criteria.
- We will ask you to sign-off on various stages of the project to
indicate your acceptance to that point so that further steps may
proceed accordingly.
(d) Exclusions.
- As mentioned previously, the arrangement does not provide for work
related to phase III or ongoing website design and implementation
services. These will be contracted through another arrangement letter
to be presented at a later time.
CLIENT RESPONSIBILITIES AND PROJECT ASSUMPTIONS
1. Client Responsibilities
In connection with AA's provision of the Services, Client will perform the
tasks, furnish the personnel, provide the resources, or undertake the
responsibilities specified below ("Client Responsibilities").
- Provide overall project direction and timely issue resolution.
- Provide client personnel to assist in completing the work tasks
specified in this arrangement.
- Provide a part-time project sponsor overseeing the effort with
decision-making authority as required to resolve most issues in any area
that affects this engagement.
- Provide timely access to documentation/data for any current systems to
be converted.
- Provide appropriate on-site workspace including offices with desks,
chairs, phone lines (voice and data), and if necessary, access to
client's local area network.
To the extent that AA's deliverables include surveys, analyses, reports,
evaluations, recommendations or other management consulting services,
Client shall be responsible for any implementation decisions and for any
future action with respect to the matters addressed in the deliverables.
2. Project Assumptions
The Services, fees and delivery schedule for this engagement are based upon
the following assumptions, representation or information supplied by Client
("Assumptions").
3
<PAGE> 4
- Experiential Design and Internet Marketing Group ("EDIM")
output/deliverables will dictate the agreed upon design for use in the
building and implementation of the websites/tools.
- Client will provide necessary investor/marketing/demographic data types
and formats to be included in the investor management tool.
- Client will provide accounting staff to learn and operate financial
modules - G/L, A/R and Financial Analysis.
AA's delivery of the Services and the fees charged are dependent on (i) the
Client's timely and effective completion of the Client Responsibilities,
(ii) the accuracy and completeness of the Assumptions, and (iii) timely
decisions and approvals by Client's management. Client shall be responsible
for any delays, additional costs, or other liabilities caused by or
associated with any deficiencies in the Client Responsibilities and
Assumptions.
PROJECT APPROACH, DELIVERY SCHEDULE, STAFFING
1. Project Approach
We will kick the project off with a one-day workshop to be held in our
Nashville AA office on November 8th, 1999. The purpose of this workshop
is to explore/discover what the investor or subscription portion of the
client's website will look like and its content/functionality as well as
ways to market it to potential physician investors. This workshop has been
addressed in a separate arrangement letter signed by you and is the
springboard into this engagement.
The project will be completed in phases with Phase I including the
identification and implementation of an outsourcing vendor to host all of
the technology resources, implementation of the Oracle back-end and
financial modules, and lastly the web-based subscription management tool.
Phase I is needed to be completed by the end of the calendar year 1999.
Every effort will be made to also have the physician homepage functionality
ready by the end of the year.
Phase II will begin approximately 4 weeks after we begin Phase I and will
include the creation of functioning physician website prototype. Similar to
the kick off described earlier, phase II will also begin with a two-day
Discovery Gallery workshop facilitated by AA's Experiential Design and
Internet Marketing Group. This workshop will also be addressed in a
separate arrangement letter to be signed by you. We are tentatively
planning to facilitate this meeting on Friday and Saturday, December 3rd
and 4th, 1999. At the conclusion of this workshop and the delivery of the
final report, work will begin on the design and implementation of your
website prototype to be completed by the end of the first calendar quarter
of the year 2000.
Phase III which is not in the scope of this agreement shall be addressed in
another arrangement letter that will outline AA's role as an ongoing
provider of services to client relating to continued and perpetual
development/maintenance services of client's website(s).
2. Staffing
The following individuals shall be assigned to the engagement. AA may,
from time to time, add or re-assign personnel.
Mark Oshnock Engagement Partner
Cary Serif Engagement Advisor
Bill Parkey Engagement Manager
4
<PAGE> 5
Joe Sticca Outsourcing Project Manager
Bill Plummer ATG Project Manager
BUSINESS ARRANGEMENTS
See Exhibit A for Fees and Expenses.
Our Standard Business Terms are included in the attachment to this letter and
are included by reference and, therefore, are made a part of this letter of
understanding.
If you agree with the scope, terms, and conditions we have outlined, please sign
this letter where indicated below and return a copy to me.
We appreciate the opportunity to be of service to you and look forward to
working with you on this challenging project. You can be assured that it will
receive our close attention.
Very truly yours,
ARTHUR ANDERSEN LLP
By: /s/ Mark Oshnock
-------------------------------
Mark Oshnock--Partner
Acknowledged and Accepted:
CLIENT
By: /s/ Albert Rodewald
-----------------------------
Title: Executive Vice President
-----------------------------
Date: 11/10/99
-----------------------------
5
<PAGE> 6
Arthur
Andersen
- ------------------------------------
(LOGO) BUSINESS CONSULTING
STANDARD BUSINESS TERMS
- --------------------------------------------------------------------------------
These Business Consulting Standard Business Terms ("Terms") shall govern the
Services provided by Arthur Andersen LLP ("AA") as set forth in the Statement
of Work executed by Client and AA to which these Terms are attached. These
Terms, together with the Statement of Work, constitute the entire understanding
and agreement between Client and AA with respect to the Services described in
the Statement of Work ("Agreement"), supersede all prior oral and written
communications, and may be amended, modified or changed (including changes in
scope or nature of the Services or fees) only in writing when signed by both
parties. If there is a conflict between these Terms and the terms of any
Statement of Work, these Terms shall govern.
SECTION 1. FEES, EXPENSES
Client shall pay AA the professional fees and the related expenses in
accordance with the Statement of Work.
SECTION 2. CLIENT RESPONSIBILITIES
As a prerequisite to AA's delivery of Services, Client shall (i) fulfill the
Client Responsibilities and ensure that all Assumptions are accurate; (ii)
provide AA with reliable, accurate and complete information, as required; (iii)
make timely decisions and obtain required management approvals; and (iv) furnish
AA personnel with a suitable office environment and adequate resources and
supplies, as needed.
SECTION 3. CONFIDENTIALITY
With respect to information supplied in connection with this Agreement and
designated by the disclosing party as confidential, the recipient agrees to:
(i) protect the confidential information in a reasonable and appropriate manner
or in accordance with applicable professional standards; (ii) use confidential
information only to perform its obligations under this Agreement, and (iii)
reproduce confidential information only as required to perform its obligations
under this Agreement. This section shall not apply to information which is (i)
publicly known, (ii) already known to the recipient, (iii) disclosed to a
third party without restriction; (iv) independently developed; or (v) disclosed
pursuant to legal requirement or order. Subject to the foregoing, AA may
disclose Client's confidential information to its subcontractors and
affiliates.
SECTION 4. DELIVERABLES
Client may, solely for its internal business purposes, use, copy, distribute
internally, and modify the deliverables described under AA Services and
Responsibilities in the Statement of Work (the "Deliverables"). Client shall
not, without AA's prior written consent, disclose to a third party, publicly
quote or make reference to the Deliverables. AA shall retain all right, title
and interest in and to: (i) the Deliverables, including but not limited to all
patent, copyright, trademark and other intellectual property rights therein;
and (ii) all methodologies, processes, techniques, ideas, concepts, trade
secrets and know-how embodied in the Deliverables or that AA may develop or
supply in connection with this Agreement (the "AA Knowledge"). Subject to the
confidentiality restrictions contained in Section 3, AA may use the
Deliverables and the AA Knowledge for any purpose.
SECTION 5. ACCEPTANCE
Client shall accept Deliverables which conform to the requirements of the
Statement of Work, or, where applicable, the acceptance test plan was
successfully completed. Client will promptly give AA notification of any
non-conformance of the Deliverables with such requirements ("Non-conformance"),
and AA shall have a reasonable period of time, based on the severity and
complexity of the Non-conformance, to correct the Non-conformance. If Client
uses the Deliverable before acceptance, fails to promptly notify AA of any
Non-conformance, or unreasonably delays the beginning of acceptance testing,
then the Deliverable shall be considered accepted by the Client.
SECTION 6. WARRANTY
(a) AA warrants that the Services shall be performed with reasonable care in a
diligent and competent manner. AA's sole obligation shall be to correct any
non-conformance with this warranty, provided that Client gives AA written
notice within thirty (30) days after the Services are performed or successful
completion of the acceptance test plan, if applicable.
(b) AA does not warrant and is not responsible for any third party products or
services. Client's sole and exclusive rights and remedies with respect to any
third party products or services, are against the third party vendor and not
against AA.
(c) THIS SECTION 6 IS AA'S ONLY WARRANTY CONCERNING THE SERVICES AND ANY
DELIVERABLE, AND IS MADE EXPRESSLY IN LIEU OF
- --------------------------------------------------------------------------------
Business Consulting
Quality Assurance Procedures & Guidelines 6 October 1999
<PAGE> 7
ALL OTHER WARRANTIES AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING ANY
IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT, OR FITNESS FOR A
PARTICULAR PURPOSE, OR OTHERWISE.
SECTION 7. SCOPE OF SERVICES
(a) AA shall have no obligation to identify or correct the failure of any
computer system (including embedded systems) to function as originally intended
with respect to data, calculations and other processing relating to dates
before, on or following January 1, 2000 ("Year 2000 Problem"), or to provide
any type of Year 2000 advice or services. AA has no responsibility in
connection with (i) any inaccuracy, delay or inability to perform the Services
which results from any Year 2000 Problem, and (ii) Client's computer processing
effected by any Year 2000 Problem, (b) AA shall have no obligation to
provide any advice or services, identify any issues, or prepare any system with
respect to the Euro ("Euro Issues"). In addition, AA has no responsibility for
any inaccuracy, delay or inability to perform the Services which results from
any Euro issue.
SECTION 8. RISK ALLOCATION
(a) AA's total liability relating to this Agreement shall in no event exceed
the fees AA receives hereunder for the portion of the work giving rise to
liability, or include any special, consequential, incidental or exemplary
damages or loss (nor any lost profits, savings or business opportunity). (b) As
AA is performing the Services solely for the benefit of Client, Client will
indemnify AA, its affiliates and their partners, principals and personnel
against all costs, fees, expense, damages and liabilities (including defense
costs) associated with any third party claim, relating to or arising as a
result of the Services, Client's use of the Deliverables, or this Agreement.
(c) AA will indemnify Client against any damage or expense relating to bodily
injury or death of any person or damage to real and/or tangible personal
property incurred while AA is performing the Services and to the extent caused
by the negligent or willful acts or omissions of AA's personnel or agents in
performing the Services.
(d) The provisions of this Section 8 are intended to apply in all
circumstances, regardless of the grounds or nature of any claim asserted
(including contract, statute, any form of negligence, whether of client, AA, or
others, tort, strict liability or otherwise) and whether or not AA was advised
of the possibility of the damage or loss asserted, to the extent not contrary
to applicable law.
(e) Any action against AA must be brought within eighteen (18) months after the
cause of action arises.
SECTION 9. PERSONNEL
(a) While AA shall attempt to comply with Client's request for specific
individuals, AA shall be responsible for assigning and re-assigning its
personnel, as appropriate, to perform the Services.
(b) During the term of this Agreement, and for a period of six (6) months
following the expiration or termination thereof, neither party will actively
solicit the employment of the personnel of the other party involved directly
with providing Services hereunder.
SECTION 10. TERMINATION
(a) This Agreement may be terminated at any time (i) by the Client upon thirty
(30) days written notice to AA; or (ii) by AA in the event of a professional
conflict upon ten (10) days written notice to Client.
(b) This Agreement may be terminated by either party upon written notice in the
event the other party fails to comply with the terms of this Agreement, and the
failure continues for a period of thirty (30) days following receipt of written
notice specifying the failure.
(c) Client shall pay AA for all Services rendered and expenses incurred as of
the date of termination, and shall reimburse AA for all reasonable costs
associated with any termination.
(d) Except for matters related to confidentiality or intellectual property
rights, the parties shall first attempt to resolve any dispute or alleged
breach internally by escalating it through management and, prior to pursuing
litigation, use a mutually acceptable alternative dispute resolution process.
SECTION 11. GENERAL
(a) Neither party shall use the other party's name without the written consent
of the named party.
(b) Neither party shall be liable for any delays or failures in performance due
to circumstances beyond its reasonable control.
(c)This Agreement may not be assigned or otherwise transferred without the
prior express written consent of the other party. AA may assign this Agreement
to an affiliate of its international organization or use subcontractors to
provide Services.
(d) Any notices given pursuant to this Agreement shall be in writing, delivered
to the address set forth in the Statement of Work, and shall be considered given
when received.
(e) No term of this Agreement shall be deemed waived, and no breach of this
Agreement excused, unless the waiver or consent is in writing signed by the
party granting such waiver or consent.
(f) If any term or provision of this Agreement is determined to be illegal or
unenforceable, such term or provision shall be deemed stricken, and all other
terms and provisions shall remain in full force and effect.
(g) This Agreement does not make either party an agent or legal representative
of the other party, and does not create a partnership or joint venture. Both
parties are independent contractors and principals for their own accounts.
(h) Section 3 through 11 of these Terms shall survive the expiration or
termination of this Agreement.
(i) The laws of the State of Illinois shall govern this Agreement.
- -------------------------------------------------------------------------------
Business Consulting
Quality Assurance Procedures & Guidelines 7 October 1999
<PAGE> 8
EXHIBIT A
Our fees for the scope of services described in this Statement of Work will be:
Phase I - based upon actual time and materials at our standard rates, which
are estimated to be in the range of * to * , plus out of pocket expenses.
This fee range does not include the first Discovery Gallery which was
addressed via a separate job arrangement letter provided by the EDIM group.
A description of the work however, is included in this arrangement letter
for continuity purposes.
Phase II - based upon actual time and materials at our standard rates,
which are estimated to be in the range of * to * plus out of pocket
expenses. This fee range is wide due to the current low level of
understanding of the business plan and will become clearer after the
business plan is developed as well as the completion of the second
Discovery Gallery to be held on December 3rd & 4th. This fee range does
include the second Discovery Gallery which is in contrast to the first
Discovery Gallery that was addressed via a separate job arrangement letter
provided by the EDIM group.
This fee is based on Client fulfilling its responsibilities and the stated
assumptions in this Statement of Work. We will bill you * at the beginning of
the project then actual in semi-monthly periods.
Out-of-pocket expenses (including transportation, hotels, meals, etc.) will be
billed at the actual amounts incurred. Invoices are due upon presentation.
Should any invoice remain unpaid for more than 21 days, interest shall be paid
at a rate of 1.5% per month (or other appropriate amount based on the
applicable business environment). Any taxes arising out of this arrangement
other than those on our net income shall be your responsibility.
* Confidential Treatment Requested.
8
<PAGE> 1
EXHIBIT 10.2
MD2PATIENT, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 1,
2000, is by and between MD2PATIENT, INC., a Georgia corporation ("Employer"),
and John E. Blount, an individual resident of the State of Tennessee
("Executive").
SECTION 1. EMPLOYMENT.
Employer employs Executive, and Executive accepts employment upon the
terms and conditions of this Agreement.
SECTION 2. TERM.
The term of this Agreement shall begin on the date first set forth
above and shall terminate on the second anniversary of such date. Unless earlier
terminated in accordance with Section 8 hereof, this Agreement shall be
automatically renewed for additional successive periods of one (1) year each
unless written notice of intention not to renew is given by Executive to
Employer or by Employer to Executive at least one hundred twenty (120) days
before the expiration of the term.
SECTION 3. SERVICES.
Executive shall serve as the President of Employer, and shall perform
the services and functions relating to such office or otherwise reasonably
incident to such office, subject to the direction and control of Board of
Directors of Employer. Executive shall exert his best efforts and devote
substantially all of his time and attention to the affairs of the Employer.
SECTION 4. COMPENSATION.
4.1 BASE SALARY. During the first year of this Agreement, Employer
shall pay Executive a base annual salary of $175,000. Executive's base salary
during any extension or renewal of the term of the Agreement shall be as agreed
upon by the parties. During the second year of this Agreement and any extension
or renewal term, the Board of Directors of the Company, or a committee thereof,
may increase Executive's base compensation to a level it deems appropriate in
its sole discretion.
4.2 RESTRICTED STOCK. In addition to the base salary set forth above,
Employer shall grant to Executive 2,000,000 shares of its common stock, par
value $.01 per share, such shares to be subject to certain restrictions set
forth in a restricted stock award agreement to be executed by Executive.
.
4.2 ADDITIONAL COMPENSATION. Executive may also be paid a bonus as may
be agreed upon by the parties from time-to-time or as may be granted from
time-to-time by the Board of Directors of Employer, or a committee thereof,
pursuant to an executive bonus or incentive plan.
<PAGE> 2
4.3 WITHHOLDING. All payments under this Agreement shall be subject to
any and all withholding and other applicable taxes.
SECTION 5. ADDITIONAL BENEFITS.
In addition to his salary, Executive shall receive the benefit of all
standard fringe benefits customarily furnished by Employer to other executives
of equal rank and reimbursement for reasonable expenses incurred on behalf of
Employer as provided in Section 6 below. Employer shall provide health insurance
and disability insurance for Executive.
SECTION 6. EXPENSES.
Executive may incur reasonable expenses for promoting Employer's
business, including expenses for entertainment, travel and similar items.
Employer will reimburse Executive for all such expenses upon Executive's
periodic presentation of an itemized account of such expenditures, accompanied
by receipts, if appropriate.
SECTION 7. VACATION.
Executive shall be entitled to four (4) weeks of paid vacation per
year.
SECTION 8. TERMINATION.
8.1 BY EXECUTIVE. In addition to his right to elect not to renew this
Agreement as provided in Section 2 hereof, Executive may terminate this
Agreement upon thirty (30) days' prior written notice to Employer. In such
event, Executive shall continue to render his services, shall be covered by the
additional benefits in Section 5 above, and shall be paid his regular
compensation up to the date of termination, but no severance allowance shall be
paid to Executive. Upon termination of his employment and upon experiencing a
qualifying event, COBRA coverage shall be made available in compliance with
federal law.
8.2 BY EMPLOYER WITH CAUSE. With cause, Employer may terminate this
Agreement at any time without prior notice. For purposes of this Agreement,
"cause" shall include:
8.2.1 Fraud, misappropriation, embezzlement, or the like by
Executive;
8.2.2 Engaging in competition with Employer, as defined below; or
8.2.3 Disclosing proprietary information of Employer as defined
below, except within the proper scope of Executive's
employment.
8.3 BY EMPLOYER WITHOUT CAUSE. In addition to its right to elect not to
renew this Agreement, as provided herein, Employer may terminate this Agreement
without cause upon 30 days prior written notice to Executive.
-2-
<PAGE> 3
8.4 "ENGAGING IN COMPETITION" DEFINED. For purposes of this Agreement,
the term "engaging in competition with Employer" shall mean serving as a
director, officer, partner, employee, manager, consultant, agent, independent
contractor, advisor, creditor or equity owner (except for ownership of less than
five percent (5%) of the stock of a publicly-traded company) or otherwise
providing any services for or assistance to any business or organization that,
within the State of Tennessee, directly or indirectly engages in competition
with the provision of Internet-based medical content and healthcare services
engaged in by Employer or any subsidiary, division or affiliate thereof as of
the last day of Executive's employment with Employer.
8.5 "DISCLOSING PROPRIETARY INFORMATION OF EMPLOYER" DEFINED. For
purposes of this Agreement, "disclosing proprietary information of Employer"
shall mean disclosing any item of proprietary information or trade secret of
Employer including, but not limited to, customer lists, sales lists, invoices,
confidential selling and profit information, technology, finances, earnings,
volume of business, outlets, methods, systems, practices, plans, and other items
of trade secrets, trade knowledge, and trade know-how with the intent or in a
manner reasonably expected to provide a competitive advantage to another party.
8.6 SEVERANCE PAY. In the event an election not to renew this Agreement
is made by either party pursuant to the provisions of Section 8.1 hereof, or in
the event this Agreement is terminated pursuant to the provisions of Sections
8.2 hereof, Executive's compensation shall cease on the date on which this
Agreement is terminated, and Executive shall be entitled to no severance pay. In
the event this Agreement is terminated pursuant to the provisions of Section 8.3
hereof, as severance pay for such termination, Executive shall continue to
receive his then-current salary and health benefits at Company expense for a
period of one (1) year following such termination.
SECTION 9. RESTRICTIVE COVENANT.
For a period of twelve (12) months following the expiration or
termination of this Agreement for any reason whatever, Executive shall neither
engage in competition with Employer nor disclose proprietary information of
Employer, as those terms are defined in Section 8, hereof, neither shall
Executive solicit or otherwise contact existing subscribers of Employer for
purposes of engaging in competition with Employer. In the event of Executive's
actual or threatened breach of the provisions of this paragraph, Employer shall
be entitled to an injunction restraining Executive therefrom and Executive
hereby consents to such injunction; provided, however, that nothing herein shall
be construed as prohibiting Employer from pursuing any other available remedies
for such breach or threatened breach, including the recovery of damages from
Executive.
SECTION 10. LIFE INSURANCE.
Executive acknowledges that Employer shall have the right, at its sole
expense, to procure life insurance on his life of which the Employer or its
designee shall be the sole beneficiary, and
-3-
<PAGE> 4
agrees that he shall take all such actions, submit to such examinations, and
execute all such documents as are reasonably necessary to enable Employer to
obtain such coverage.
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement, along with any exhibits or schedules attached hereto or
delivered pursuant hereto, all of which form a part hereof, contain the entire
understanding of the parties with respect to the matters set out herein, merging
and superseding all prior and contemporaneous agreements and understandings
between the parties with respect to such matters. This Agreement may be amended
only by a written instrument duly executed by all parties or their respective
heirs, successors, assigns or legal personal representatives.
SECTION 12. ASSIGNMENT.
Executive acknowledges that the services to be rendered by him are
unique and personal and, accordingly, that he shall not assign any of his rights
or delegate any of his duties or obligations under this Agreement.
SECTION 13. WAIVER OF BREACH.
Either party may, by written notice to the other: (i) extend the time
for the performance of any of the obligations or other actions of the other;
(ii) waive compliance with any of the covenants of the other contained in this
Agreement; and (iii) waive or modify performance of any of the obligations of
the other. However, mere forbearance or indulgence by either party in any regard
whatsoever shall not constitute a waiver of the covenant or condition to be
performed by the other party to which the same may apply and, until complete
performance of said covenant or condition, said party shall be entitled to
invoke any remedy available under this Agreement or by law or in equity despite
said forbearance or indulgence.
SECTION 14. NOTICES.
All notices, offers, requests, demands, and other communications
pursuant to this Agreement shall be given in writing by personal delivery, by
prepaid first class registered or certified mail properly addressed with
appropriate postage paid thereon, nationally recognized overnight courier
service, or facsimile transmission, and shall be deemed to be duly given and
received on the date of delivery if delivered personally, on the third business
day after the deposit in the United States Mail if mailed, upon acknowledgement
of receipt of electronic transmission if sent by facsimile transmission, or on
the first business day after delivery to a nationally recognized overnight
courier service for overnight delivery. Notices shall be sent to the parties at
the following addresses:
If to Employer: MD2patient, Inc.
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Attention: Chief Financial Officer
-4-
<PAGE> 5
With a copy to: Alston & Bird, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: R. Gregory Brophy
If to Executive: the address set forth on the signature page hereto
or to such other addresses as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
SECTION 15. GENDER, NUMBER.
Whenever the context of this Agreement so requires, the masculine
gender shall include the feminine or neuter, the singular number shall include
the plural, and reference to one or more parties hereto shall include all
assignees of the party.
SECTION 16. HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 17. GOVERNING LAW; FORUM; SERVICE OF PROCESS.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee. This Agreement and its subject matter have
substantial contacts with Tennessee, and all actions, suits, or other
proceedings with respect to this Agreement shall be brought only in a court of
competent jurisdiction sitting in Davidson County, Tennessee or in the Federal
District Court having jurisdiction over the County. In any such action, suit, or
proceeding, such court shall have personal jurisdiction of all of the parties
hereto, and service of process upon them under any applicable statutes, laws,
and rules shall be deemed valid and good. In the event of a party's actual or
threatened breach of the provisions of this Agreement, the other party to this
Agreement shall be entitled to an injunction restraining such party therefrom
and each party hereby consents to such injunction; provided, however, that
nothing herein shall be construed as prohibiting the other parties from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from such party.
SECTION 18. SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof to any person or circumstance, is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement in that jurisdiction or the application of
that provision to any other person or circumstance or in any other jurisdiction,
and this Agreement shall then be
-5-
<PAGE> 6
construed in that jurisdiction as if such invalid, illegal or unenforceable
provision had not been contained in this Agreement, but only to the extent of
such invalidity, illegality or unenforceability.
SECTION 19. FURTHER ASSURANCES.
Each party shall perform such further acts and execute and deliver such
further documents as may be reasonably necessary to carry out the provisions of
this Agreement.
IN WITNESS WHEREOF the parties hereto have caused the Agreement to be
executed by themselves or their duly authorized representatives as of the day
and year first written above.
EMPLOYER:
MD2PATIENT, INC.
By: /s/ James G. Petway, Jr.
--------------------------------------
Name: James G. Petway, Jr.
------------------------------------
Title: Executive Vice President
----------------------------------
EXECUTIVE:
/s/ John E. Blount
-----------------------------------------
John E. Blount
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-6-
<PAGE> 1
EXHIBIT 10.3
MD2PATIENT, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 1,
2000, is by and between MD2PATIENT, INC., a Georgia corporation ("Employer"),
and Thomas A. Gallagher, an individual resident of the State of Tennessee
("Executive").
SECTION 1. EMPLOYMENT.
Employer employs Executive, and Executive accepts employment upon the
terms and conditions of this Agreement.
SECTION 2. TERM.
The term of this Agreement shall begin on the date first set forth
above and shall terminate on the second anniversary of such date. Unless earlier
terminated in accordance with Section 8 hereof, this Agreement shall be
automatically renewed for additional successive periods of one (1) year each
unless written notice of intention not to renew is given by Executive to
Employer or by Employer to Executive at least one hundred twenty (120) days
before the expiration of the term.
SECTION 3. SERVICES.
Executive shall serve as the Executive Vice President of Business
Development of Employer, and shall perform the services and functions relating
to such office or otherwise reasonably incident to such office, subject to the
direction and control of Board of Directors of Employer. Executive shall exert
his best efforts and devote substantially all of his time and attention to the
affairs of the Employer.
SECTION 4. COMPENSATION.
4.1 BASE SALARY. During the first year of this Agreement, Employer
shall pay Executive a base annual salary of $175,000. Executive's base salary
during any extension or renewal of the term of the Agreement shall be as agreed
upon by the parties. During the second year of this Agreement and any extension
or renewal term, the Board of Directors of the Company, or a committee thereof,
may increase Executive's base compensation to a level it deems appropriate in
its sole discretion.
4.2 RESTRICTED STOCK. In addition to the base salary set forth above,
Employer shall grant to Executive 2,000,000 shares of its common stock, par
value $.01 per share, such shares to be subject to certain restrictions set
forth in a restricted stock award agreement to be executed by Executive.
.
4.2 ADDITIONAL COMPENSATION. Executive may also be paid a bonus as may
be agreed upon by the parties from time-to-time or as may be granted from
time-to-time by the Board of Directors of Employer, or a committee thereof,
pursuant to an executive bonus or incentive plan.
<PAGE> 2
4.3 WITHHOLDING. All payments under this Agreement shall be subject to
any and all withholding and other applicable taxes.
SECTION 5. ADDITIONAL BENEFITS.
In addition to his salary, Executive shall receive the benefit of all
standard fringe benefits customarily furnished by Employer to other executives
of equal rank and reimbursement for reasonable expenses incurred on behalf of
Employer as provided in Section 6 below. Employer shall provide health insurance
and disability insurance for Executive.
SECTION 6. EXPENSES.
Executive may incur reasonable expenses for promoting Employer's
business, including expenses for entertainment, travel and similar items.
Employer will reimburse Executive for all such expenses upon Executive's
periodic presentation of an itemized account of such expenditures, accompanied
by receipts, if appropriate.
SECTION 7. VACATION.
Executive shall be entitled to four (4) weeks of paid vacation per
year.
SECTION 8. TERMINATION.
8.1 BY EXECUTIVE. In addition to his right to elect not to renew this
Agreement as provided in Section 2 hereof, Executive may terminate this
Agreement upon thirty (30) days' prior written notice to Employer. In such
event, Executive shall continue to render his services, shall be covered by the
additional benefits in Section 5 above, and shall be paid his regular
compensation up to the date of termination, but no severance allowance shall be
paid to Executive. Upon termination of his employment and upon experiencing a
qualifying event, COBRA coverage shall be made available in compliance with
federal law.
8.2 BY EMPLOYER WITH CAUSE. With cause, Employer may terminate this
Agreement at any time without prior notice. For purposes of this Agreement,
"cause" shall include:
8.2.1 Fraud, misappropriation, embezzlement, or the like by
Executive;
8.2.2 Engaging in competition with Employer, as defined below; or
8.2.3 Disclosing proprietary information of Employer as defined
below, except within the proper scope of Executive's
employment.
8.3 BY EMPLOYER WITHOUT CAUSE. In addition to its right to elect not to
renew this Agreement, as provided herein, Employer may terminate this Agreement
without cause upon 30 days prior written notice to Executive.
-2-
<PAGE> 3
8.4 "ENGAGING IN COMPETITION" DEFINED. For purposes of this Agreement,
the term "engaging in competition with Employer" shall mean serving as a
director, officer, partner, employee, manager, consultant, agent, independent
contractor, advisor, creditor or equity owner (except for ownership of less than
five percent (5%) of the stock of a publicly-traded company) or otherwise
providing any services for or assistance to any business or organization that,
within the State of Tennessee, directly or indirectly engages in competition
with the provision of Internet-based medical content and healthcare services
engaged in by Employer or any subsidiary, division or affiliate thereof as of
the last day of Executive's employment with Employer.
8.5 "DISCLOSING PROPRIETARY INFORMATION OF EMPLOYER" DEFINED. For
purposes of this Agreement, "disclosing proprietary information of Employer"
shall mean disclosing any item of proprietary information or trade secret of
Employer including, but not limited to, customer lists, sales lists, invoices,
confidential selling and profit information, technology, finances, earnings,
volume of business, outlets, methods, systems, practices, plans, and other items
of trade secrets, trade knowledge, and trade know-how with the intent or in a
manner reasonably expected to provide a competitive advantage to another party.
8.6 SEVERANCE PAY. In the event an election not to renew this Agreement
is made by either party pursuant to the provisions of Section 8.1 hereof, or in
the event this Agreement is terminated pursuant to the provisions of Sections
8.2 hereof, Executive's compensation shall cease on the date on which this
Agreement is terminated, and Executive shall be entitled to no severance pay. In
the event this Agreement is terminated pursuant to the provisions of Section 8.3
hereof, as severance pay for such termination, Executive shall continue to
receive his then-current salary and health benefits at Company expense for a
period of one (1) year following such termination.
SECTION 9. RESTRICTIVE COVENANT.
For a period of twelve (12) months following the expiration or
termination of this Agreement for any reason whatever, Executive shall neither
engage in competition with Employer nor disclose proprietary information of
Employer, as those terms are defined in Section 8, hereof, neither shall
Executive solicit or otherwise contact existing subscribers of Employer for
purposes of engaging in competition with Employer. In the event of Executive's
actual or threatened breach of the provisions of this paragraph, Employer shall
be entitled to an injunction restraining Executive therefrom and Executive
hereby consents to such injunction; provided, however, that nothing herein shall
be construed as prohibiting Employer from pursuing any other available remedies
for such breach or threatened breach, including the recovery of damages from
Executive.
SECTION 10. LIFE INSURANCE.
Executive acknowledges that Employer shall have the right, at its sole
expense, to procure life insurance on his life of which the Employer or its
designee shall be the sole beneficiary, and
-3-
<PAGE> 4
agrees that he shall take all such actions, submit to such examinations, and
execute all such documents as are reasonably necessary to enable Employer to
obtain such coverage.
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement, along with any exhibits or schedules attached hereto or
delivered pursuant hereto, all of which form a part hereof, contain the entire
understanding of the parties with respect to the matters set out herein, merging
and superseding all prior and contemporaneous agreements and understandings
between the parties with respect to such matters. This Agreement may be amended
only by a written instrument duly executed by all parties or their respective
heirs, successors, assigns or legal personal representatives.
SECTION 12. ASSIGNMENT.
Executive acknowledges that the services to be rendered by him are
unique and personal and, accordingly, that he shall not assign any of his rights
or delegate any of his duties or obligations under this Agreement.
SECTION 13. WAIVER OF BREACH.
Either party may, by written notice to the other: (i) extend the time
for the performance of any of the obligations or other actions of the other;
(ii) waive compliance with any of the covenants of the other contained in this
Agreement; and (iii) waive or modify performance of any of the obligations of
the other. However, mere forbearance or indulgence by either party in any regard
whatsoever shall not constitute a waiver of the covenant or condition to be
performed by the other party to which the same may apply and, until complete
performance of said covenant or condition, said party shall be entitled to
invoke any remedy available under this Agreement or by law or in equity despite
said forbearance or indulgence.
SECTION 14. NOTICES.
All notices, offers, requests, demands, and other communications
pursuant to this Agreement shall be given in writing by personal delivery, by
prepaid first class registered or certified mail properly addressed with
appropriate postage paid thereon, nationally recognized overnight courier
service, or facsimile transmission, and shall be deemed to be duly given and
received on the date of delivery if delivered personally, on the third business
day after the deposit in the United States Mail if mailed, upon acknowledgement
of receipt of electronic transmission if sent by facsimile transmission, or on
the first business day after delivery to a nationally recognized overnight
courier service for overnight delivery. Notices shall be sent to the parties at
the following addresses:
If to Employer: MD2patient, Inc.
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Attention: President
-4-
<PAGE> 5
With a copy to: Alston & Bird, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: R. Gregory Brophy
If to Executive: the address set forth on the signature page hereto
or to such other addresses as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
SECTION 15. GENDER, NUMBER.
Whenever the context of this Agreement so requires, the masculine
gender shall include the feminine or neuter, the singular number shall include
the plural, and reference to one or more parties hereto shall include all
assignees of the party.
SECTION 16. HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 17. GOVERNING LAW; FORUM; SERVICE OF PROCESS.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee. This Agreement and its subject matter have
substantial contacts with Tennessee, and all actions, suits, or other
proceedings with respect to this Agreement shall be brought only in a court of
competent jurisdiction sitting in Davidson County, Tennessee or in the Federal
District Court having jurisdiction over the County. In any such action, suit, or
proceeding, such court shall have personal jurisdiction of all of the parties
hereto, and service of process upon them under any applicable statutes, laws,
and rules shall be deemed valid and good. In the event of a party's actual or
threatened breach of the provisions of this Agreement, the other party to this
Agreement shall be entitled to an injunction restraining such party therefrom
and each party hereby consents to such injunction; provided, however, that
nothing herein shall be construed as prohibiting the other parties from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from such party.
SECTION 18. SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof to any person or circumstance, is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement in that jurisdiction or the application of
that provision to any other person or circumstance or in any other jurisdiction,
and this Agreement shall then be
-5-
<PAGE> 6
construed in that jurisdiction as if such invalid, illegal or unenforceable
provision had not been contained in this Agreement, but only to the extent of
such invalidity, illegality or unenforceability.
SECTION 19. FURTHER ASSURANCES.
Each party shall perform such further acts and execute and deliver such
further documents as may be reasonably necessary to carry out the provisions of
this Agreement.
IN WITNESS WHEREOF the parties hereto have caused the Agreement to be
executed by themselves or their duly authorized representatives as of the day
and year first written above.
EMPLOYER:
MD2PATIENT, INC.
By: /s/ John E. Blount
--------------------------------------
Name: John E. Blount
------------------------------------
Title: President
-----------------------------------
EXECUTIVE:
/s/ Thomas A. Gallagher
------------------------------------------
Thomas A. Gallagher
Address:
------------------------------------------
------------------------------------------
------------------------------------------
-6-
<PAGE> 1
EXHIBIT 10.4
MD2PATIENT, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 1,
2000, is by and between MD2PATIENT, INC., a Georgia corporation ("Employer"),
and Albert Rodewald, an individual resident of the State of Tennessee
("Executive").
SECTION 1. EMPLOYMENT.
Employer employs Executive, and Executive accepts employment upon the
terms and conditions of this Agreement.
SECTION 2. TERM.
The term of this Agreement shall begin on the date first set forth
above and shall terminate on the second anniversary of such date. Unless earlier
terminated in accordance with Section 8 hereof, this Agreement shall be
automatically renewed for additional successive periods of one (1) year each
unless written notice of intention not to renew is given by Executive to
Employer or by Employer to Executive at least one hundred twenty (120) days
before the expiration of the term.
SECTION 3. SERVICES.
Executive shall serve as the Executive Vice President and Chief
Technology Officer of Employer, and shall perform the services and functions
relating to such office or otherwise reasonably incident to such office, subject
to the direction and control of Board of Directors of Employer. Executive shall
exert his best efforts and devote substantially all of his time and attention to
the affairs of the Employer.
SECTION 4. COMPENSATION.
4.1 BASE SALARY. During the first year of this Agreement, Employer
shall pay Executive a base annual salary of $175,000. Executive's base salary
during any extension or renewal of the term of the Agreement shall be as agreed
upon by the parties. During the second year of this Agreement and any extension
or renewal term, the Board of Directors of the Company, or a committee thereof,
may increase Executive's base compensation to a level it deems appropriate in
its sole discretion.
4.2 RESTRICTED STOCK. In addition to the base salary set forth above,
Employer shall grant to Executive 2,000,000 shares of its common stock, par
value $.01 per share, such shares to be subject to certain restrictions set
forth in a restricted stock award agreement to be executed by Executive.
4.2 ADDITIONAL COMPENSATION. Executive may also be paid a bonus as may
be agreed upon by the parties from time-to-time or as may be granted from
time-to-time by the Board of Directors of Employer, or a committee thereof,
pursuant to an executive bonus or incentive plan.
<PAGE> 2
4.3 WITHHOLDING. All payments under this Agreement shall be subject to
any and all withholding and other applicable taxes.
SECTION 5. ADDITIONAL BENEFITS.
In addition to his salary, Executive shall receive the benefit of all
standard fringe benefits customarily furnished by Employer to other executives
of equal rank and reimbursement for reasonable expenses incurred on behalf of
Employer as provided in Section 6 below. Employer shall provide health insurance
and disability insurance for Executive.
SECTION 6. EXPENSES.
Executive may incur reasonable expenses for promoting Employer's
business, including expenses for entertainment, travel and similar items.
Employer will reimburse Executive for all such expenses upon Executive's
periodic presentation of an itemized account of such expenditures, accompanied
by receipts, if appropriate.
SECTION 7. VACATION.
Executive shall be entitled to four (4) weeks of paid vacation per
year.
SECTION 8. TERMINATION.
8.1 BY EXECUTIVE. In addition to his right to elect not to renew this
Agreement as provided in Section 2 hereof, Executive may terminate this
Agreement upon thirty (30) days' prior written notice to Employer. In such
event, Executive shall continue to render his services, shall be covered by the
additional benefits in Section 5 above, and shall be paid his regular
compensation up to the date of termination, but no severance allowance shall be
paid to Executive. Upon termination of his employment and upon experiencing a
qualifying event, COBRA coverage shall be made available in compliance with
federal law.
8.2 BY EMPLOYER WITH CAUSE. With cause, Employer may terminate this
Agreement at any time without prior notice. For purposes of this Agreement,
"cause" shall include:
8.2.1 Fraud, misappropriation, embezzlement, or the like by
Executive;
8.2.2 Engaging in competition with Employer, as defined below; or
8.2.3 Disclosing proprietary information of Employer as defined
below, except within the proper scope of Executive's
employment.
8.3 BY EMPLOYER WITHOUT CAUSE. In addition to its right to elect not to
renew this Agreement, as provided herein, Employer may terminate this Agreement
without cause upon 30 days prior written notice to Executive.
-2-
<PAGE> 3
8.4 "ENGAGING IN COMPETITION" DEFINED. For purposes of this Agreement,
the term "engaging in competition with Employer" shall mean serving as a
director, officer, partner, employee, manager, consultant, agent, independent
contractor, advisor, creditor or equity owner (except for ownership of less than
five percent (5%) of the stock of a publicly-traded company) or otherwise
providing any services for or assistance to any business or organization that,
within the State of Tennessee, directly or indirectly engages in competition
with the provision of Internet-based medical content and healthcare services
engaged in by Employer or any subsidiary, division or affiliate thereof as of
the last day of Executive's employment with Employer.
8.5 "DISCLOSING PROPRIETARY INFORMATION OF EMPLOYER" DEFINED. For
purposes of this Agreement, "disclosing proprietary information of Employer"
shall mean disclosing any item of proprietary information or trade secret of
Employer including, but not limited to, customer lists, sales lists, invoices,
confidential selling and profit information, technology, finances, earnings,
volume of business, outlets, methods, systems, practices, plans, and other items
of trade secrets, trade knowledge, and trade know-how with the intent or in a
manner reasonably expected to provide a competitive advantage to another party.
8.6 SEVERANCE PAY. In the event an election not to renew this Agreement
is made by either party pursuant to the provisions of Section 8.1 hereof, or in
the event this Agreement is terminated pursuant to the provisions of Sections
8.2 hereof, Executive's compensation shall cease on the date on which this
Agreement is terminated, and Executive shall be entitled to no severance pay. In
the event this Agreement is terminated pursuant to the provisions of Section 8.3
hereof, as severance pay for such termination, Executive shall continue to
receive his then-current salary and health benefits at Company expense for a
period of one (1) year following such termination.
SECTION 9. RESTRICTIVE COVENANT.
For a period of twelve (12) months following the expiration or
termination of this Agreement for any reason whatever, Executive shall neither
engage in competition with Employer nor disclose proprietary information of
Employer, as those terms are defined in Section 8, hereof, neither shall
Executive solicit or otherwise contact existing subscribers of Employer for
purposes of engaging in competition with Employer. In the event of Executive's
actual or threatened breach of the provisions of this paragraph, Employer shall
be entitled to an injunction restraining Executive therefrom and Executive
hereby consents to such injunction; provided, however, that nothing herein shall
be construed as prohibiting Employer from pursuing any other available remedies
for such breach or threatened breach, including the recovery of damages from
Executive.
SECTION 10. LIFE INSURANCE.
Executive acknowledges that Employer shall have the right, at its sole
expense, to procure life insurance on his life of which the Employer or its
designee shall be the sole beneficiary, and
-3-
<PAGE> 4
agrees that he shall take all such actions, submit to such examinations, and
execute all such documents as are reasonably necessary to enable Employer to
obtain such coverage.
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement, along with any exhibits or schedules attached hereto or
delivered pursuant hereto, all of which form a part hereof, contain the entire
understanding of the parties with respect to the matters set out herein, merging
and superseding all prior and contemporaneous agreements and understandings
between the parties with respect to such matters. This Agreement may be amended
only by a written instrument duly executed by all parties or their respective
heirs, successors, assigns or legal personal representatives.
SECTION 12. ASSIGNMENT.
Executive acknowledges that the services to be rendered by him are
unique and personal and, accordingly, that he shall not assign any of his rights
or delegate any of his duties or obligations under this Agreement.
SECTION 13. WAIVER OF BREACH.
Either party may, by written notice to the other: (i) extend the time
for the performance of any of the obligations or other actions of the other;
(ii) waive compliance with any of the covenants of the other contained in this
Agreement; and (iii) waive or modify performance of any of the obligations of
the other. However, mere forbearance or indulgence by either party in any regard
whatsoever shall not constitute a waiver of the covenant or condition to be
performed by the other party to which the same may apply and, until complete
performance of said covenant or condition, said party shall be entitled to
invoke any remedy available under this Agreement or by law or in equity despite
said forbearance or indulgence.
SECTION 14. NOTICES.
All notices, offers, requests, demands, and other communications
pursuant to this Agreement shall be given in writing by personal delivery, by
prepaid first class registered or certified mail properly addressed with
appropriate postage paid thereon, nationally recognized overnight courier
service, or facsimile transmission, and shall be deemed to be duly given and
received on the date of delivery if delivered personally, on the third business
day after the deposit in the United States Mail if mailed, upon acknowledgement
of receipt of electronic transmission if sent by facsimile transmission, or on
the first business day after delivery to a nationally recognized overnight
courier service for overnight delivery. Notices shall be sent to the parties at
the following addresses:
If to Employer: MD2patient, Inc.
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Attention: President
-4-
<PAGE> 5
With a copy to: Alston & Bird, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: R. Gregory Brophy
If to Executive: the address set forth on the signature page hereto
or to such other addresses as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
SECTION 15. GENDER, NUMBER.
Whenever the context of this Agreement so requires, the masculine
gender shall include the feminine or neuter, the singular number shall include
the plural, and reference to one or more parties hereto shall include all
assignees of the party.
SECTION 16. HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 17. GOVERNING LAW; FORUM; SERVICE OF PROCESS.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee. This Agreement and its subject matter have
substantial contacts with Tennessee, and all actions, suits, or other
proceedings with respect to this Agreement shall be brought only in a court of
competent jurisdiction sitting in Davidson County, Tennessee or in the Federal
District Court having jurisdiction over the County. In any such action, suit, or
proceeding, such court shall have personal jurisdiction of all of the parties
hereto, and service of process upon them under any applicable statutes, laws,
and rules shall be deemed valid and good. In the event of a party's actual or
threatened breach of the provisions of this Agreement, the other party to this
Agreement shall be entitled to an injunction restraining such party therefrom
and each party hereby consents to such injunction; provided, however, that
nothing herein shall be construed as prohibiting the other parties from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from such party.
SECTION 18. SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof to any person or circumstance, is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement in that jurisdiction or the application of
that provision to any other person or circumstance or in any other jurisdiction,
and this Agreement shall then be
-5-
<PAGE> 6
construed in that jurisdiction as if such invalid, illegal or unenforceable
provision had not been contained in this Agreement, but only to the extent of
such invalidity, illegality or unenforceability.
SECTION 19. FURTHER ASSURANCES.
Each party shall perform such further acts and execute and deliver such
further documents as may be reasonably necessary to carry out the provisions of
this Agreement.
IN WITNESS WHEREOF the parties hereto have caused the Agreement to be
executed by themselves or their duly authorized representatives as of the day
and year first written above.
EMPLOYER:
MD2PATIENT, INC.
By: /s/ John E. Blount
---------------------------------------
Name: John E. Blount
-------------------------------------
Title: President
------------------------------------
EXECUTIVE:
/s/ Albert Rodewald
------------------------------------------
Albert Rodewald
Address:
------------------------------------------
------------------------------------------
------------------------------------------
-6-
<PAGE> 1
EXHIBIT 10.5
MD2PATIENT, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 1,
2000, is by and between MD2PATIENT, INC., a Georgia corporation ("Employer"),
and James G. Petway, Jr., an individual resident of the State of Tennessee
("Executive").
SECTION 1. EMPLOYMENT.
Employer employs Executive, and Executive accepts employment upon the
terms and conditions of this Agreement.
SECTION 2. TERM.
The term of this Agreement shall begin on the date first set forth
above and shall terminate on the second anniversary of such date. Unless earlier
terminated in accordance with Section 8 hereof, this Agreement shall be
automatically renewed for additional successive periods of one (1) year each
unless written notice of intention not to renew is given by Executive to
Employer or by Employer to Executive at least one hundred twenty (120) days
before the expiration of the term.
SECTION 3. SERVICES.
Executive shall serve as the Executive Vice President and Chief
Financial Officer of Employer, and shall perform the services and functions
relating to such office or otherwise reasonably incident to such office, subject
to the direction and control of Board of Directors of Employer. Executive shall
exert his best efforts and devote substantially all of his time and attention to
the affairs of the Employer.
SECTION 4. COMPENSATION.
4.1 BASE SALARY. During the first year of this Agreement, Employer
shall pay Executive a base annual salary of $175,000. Executive's base salary
during any extension or renewal of the term of the Agreement shall be as agreed
upon by the parties. During the second year of this Agreement and any extension
or renewal term, the Board of Directors of the Company, or a committee thereof,
may increase Executive's base compensation to a level it deems appropriate in
its sole discretion.
4.2 RESTRICTED STOCK. In addition to the base salary set forth above,
Employer shall grant to Executive 2,000,000 shares of its common stock, par
value $.01 per share, such shares to be subject to certain restrictions set
forth in a restricted stock award agreement to be executed by Executive.
.
4.2 ADDITIONAL COMPENSATION. Executive may also be paid a bonus as may
be agreed upon by the parties from time-to-time or as may be granted from
time-to-time by the Board of Directors of Employer, or a committee thereof,
pursuant to an executive bonus or incentive plan.
<PAGE> 2
4.3 WITHHOLDING. All payments under this Agreement shall be subject to
any and all withholding and other applicable taxes.
SECTION 5. ADDITIONAL BENEFITS.
In addition to his salary, Executive shall receive the benefit of all
standard fringe benefits customarily furnished by Employer to other executives
of equal rank and reimbursement for reasonable expenses incurred on behalf of
Employer as provided in Section 6 below. Employer shall provide health insurance
and disability insurance for Executive.
SECTION 6. EXPENSES.
Executive may incur reasonable expenses for promoting Employer's
business, including expenses for entertainment, travel and similar items.
Employer will reimburse Executive for all such expenses upon Executive's
periodic presentation of an itemized account of such expenditures, accompanied
by receipts, if appropriate.
SECTION 7. VACATION.
Executive shall be entitled to four (4) weeks of paid vacation per
year.
SECTION 8. TERMINATION.
8.1 BY EXECUTIVE. In addition to his right to elect not to renew this
Agreement as provided in Section 2 hereof, Executive may terminate this
Agreement upon thirty (30) days' prior written notice to Employer. In such
event, Executive shall continue to render his services, shall be covered by the
additional benefits in Section 5 above, and shall be paid his regular
compensation up to the date of termination, but no severance allowance shall be
paid to Executive. Upon termination of his employment and upon experiencing a
qualifying event, COBRA coverage shall be made available in compliance with
federal law.
8.2 BY EMPLOYER WITH CAUSE. With cause, Employer may terminate this
Agreement at any time without prior notice. For purposes of this Agreement,
"cause" shall include:
8.2.1 Fraud, misappropriation, embezzlement, or the like by
Executive;
8.2.2 Engaging in competition with Employer, as defined below; or
8.2.3 Disclosing proprietary information of Employer as defined
below, except within the proper scope of Executive's
employment.
8.3 BY EMPLOYER WITHOUT CAUSE. In addition to its right to elect not to
renew this Agreement, as provided herein, Employer may terminate this Agreement
without cause upon 30 days prior written notice to Executive.
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<PAGE> 3
8.4 "ENGAGING IN COMPETITION" DEFINED. For purposes of this Agreement,
the term "engaging in competition with Employer" shall mean serving as a
director, officer, partner, employee, manager, consultant, agent, independent
contractor, advisor, creditor or equity owner (except for ownership of less than
five percent (5%) of the stock of a publicly-traded company) or otherwise
providing any services for or assistance to any business or organization that,
within the State of Tennessee, directly or indirectly engages in competition
with the provision of Internet-based medical content and healthcare services
engaged in by Employer or any subsidiary, division or affiliate thereof as of
the last day of Executive's employment with Employer.
8.5 "DISCLOSING PROPRIETARY INFORMATION OF EMPLOYER" DEFINED. For
purposes of this Agreement, "disclosing proprietary information of Employer"
shall mean disclosing any item of proprietary information or trade secret of
Employer including, but not limited to, customer lists, sales lists, invoices,
confidential selling and profit information, technology, finances, earnings,
volume of business, outlets, methods, systems, practices, plans, and other items
of trade secrets, trade knowledge, and trade know-how with the intent or in a
manner reasonably expected to provide a competitive advantage to another party.
8.6 SEVERANCE PAY. In the event an election not to renew this Agreement
is made by either party pursuant to the provisions of Section 8.1 hereof, or in
the event this Agreement is terminated pursuant to the provisions of Sections
8.2 hereof, Executive's compensation shall cease on the date on which this
Agreement is terminated, and Executive shall be entitled to no severance pay. In
the event this Agreement is terminated pursuant to the provisions of Section 8.3
hereof, as severance pay for such termination, Executive shall continue to
receive his then-current salary and health benefits at Company expense for a
period of one (1) year following such termination.
SECTION 9. RESTRICTIVE COVENANT.
For a period of twelve (12) months following the expiration or
termination of this Agreement for any reason whatever, Executive shall neither
engage in competition with Employer nor disclose proprietary information of
Employer, as those terms are defined in Section 8, hereof, neither shall
Executive solicit or otherwise contact existing subscribers of Employer for
purposes of engaging in competition with Employer. In the event of Executive's
actual or threatened breach of the provisions of this paragraph, Employer shall
be entitled to an injunction restraining Executive therefrom and Executive
hereby consents to such injunction; provided, however, that nothing herein shall
be construed as prohibiting Employer from pursuing any other available remedies
for such breach or threatened breach, including the recovery of damages from
Executive.
SECTION 10. LIFE INSURANCE.
Executive acknowledges that Employer shall have the right, at its sole
expense, to procure life insurance on his life of which the Employer or its
designee shall be the sole beneficiary, and
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<PAGE> 4
agrees that he shall take all such actions, submit to such examinations, and
execute all such documents as are reasonably necessary to enable Employer to
obtain such coverage.
SECTION 11. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement, along with any exhibits or schedules attached hereto or
delivered pursuant hereto, all of which form a part hereof, contain the entire
understanding of the parties with respect to the matters set out herein, merging
and superseding all prior and contemporaneous agreements and understandings
between the parties with respect to such matters. This Agreement may be amended
only by a written instrument duly executed by all parties or their respective
heirs, successors, assigns or legal personal representatives.
SECTION 12. ASSIGNMENT.
Executive acknowledges that the services to be rendered by him are
unique and personal and, accordingly, that he shall not assign any of his rights
or delegate any of his duties or obligations under this Agreement.
SECTION 13. WAIVER OF BREACH.
Either party may, by written notice to the other: (i) extend the time
for the performance of any of the obligations or other actions of the other;
(ii) waive compliance with any of the covenants of the other contained in this
Agreement; and (iii) waive or modify performance of any of the obligations of
the other. However, mere forbearance or indulgence by either party in any regard
whatsoever shall not constitute a waiver of the covenant or condition to be
performed by the other party to which the same may apply and, until complete
performance of said covenant or condition, said party shall be entitled to
invoke any remedy available under this Agreement or by law or in equity despite
said forbearance or indulgence.
SECTION 14. NOTICES.
All notices, offers, requests, demands, and other communications
pursuant to this Agreement shall be given in writing by personal delivery, by
prepaid first class registered or certified mail properly addressed with
appropriate postage paid thereon, nationally recognized overnight courier
service, or facsimile transmission, and shall be deemed to be duly given and
received on the date of delivery if delivered personally, on the third business
day after the deposit in the United States Mail if mailed, upon acknowledgement
of receipt of electronic transmission if sent by facsimile transmission, or on
the first business day after delivery to a nationally recognized overnight
courier service for overnight delivery. Notices shall be sent to the parties at
the following addresses:
If to Employer: MD2patient, Inc.
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
Attention: President
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<PAGE> 5
With a copy to: Alston & Bird, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: R. Gregory Brophy
If to Executive: the address set forth on the signature page hereto
or to such other addresses as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
SECTION 15. GENDER, NUMBER.
Whenever the context of this Agreement so requires, the masculine
gender shall include the feminine or neuter, the singular number shall include
the plural, and reference to one or more parties hereto shall include all
assignees of the party.
SECTION 16. HEADINGS.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 17. GOVERNING LAW; FORUM; SERVICE OF PROCESS.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee. This Agreement and its subject matter have
substantial contacts with Tennessee, and all actions, suits, or other
proceedings with respect to this Agreement shall be brought only in a court of
competent jurisdiction sitting in Davidson County, Tennessee or in the Federal
District Court having jurisdiction over the County. In any such action, suit, or
proceeding, such court shall have personal jurisdiction of all of the parties
hereto, and service of process upon them under any applicable statutes, laws,
and rules shall be deemed valid and good. In the event of a party's actual or
threatened breach of the provisions of this Agreement, the other party to this
Agreement shall be entitled to an injunction restraining such party therefrom
and each party hereby consents to such injunction; provided, however, that
nothing herein shall be construed as prohibiting the other parties from pursuing
any other available remedies for such breach or threatened breach, including the
recovery of damages from such party.
SECTION 18. SEVERABILITY.
In the event that any provision of this Agreement, or the application
thereof to any person or circumstance, is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement in that jurisdiction or the application of
that provision to any other person or circumstance or in any other jurisdiction,
and this Agreement shall then be
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<PAGE> 6
construed in that jurisdiction as if such invalid, illegal or unenforceable
provision had not been contained in this Agreement, but only to the extent of
such invalidity, illegality or unenforceability.
SECTION 19. FURTHER ASSURANCES.
Each party shall perform such further acts and execute and deliver such
further documents as may be reasonably necessary to carry out the provisions of
this Agreement.
IN WITNESS WHEREOF the parties hereto have caused the Agreement to be
executed by themselves or their duly authorized representatives as of the day
and year first written above.
EMPLOYER:
MD2PATIENT, INC.
By: /s/ John E. Blount
-------------------------------------
Name: John E. Blount
-----------------------------------
Title: President
----------------------------------
EXECUTIVE:
/s/ James G. Petway, Jr.
----------------------------------------
James G. Petway, Jr.
Address:
----------------------------------------
----------------------------------------
----------------------------------------
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<PAGE> 1
EXHIBIT 10.6
MD2PATIENT, INC.
2000 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the md2patient, Inc. 2000 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
md2patient, Inc. (the "Corporation"), by linking the personal interests of its
employees, officers and directors to those of Corporation shareholders and by
providing its employees, officers and directors with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to
the Corporation in its ability to motivate, attract, and retain the services of
employees, officers and directors upon whose judgment, interest, and special
effort the successful conduct of the Corporation's operation is largely
dependent. Accordingly, the Plan permits the grant of incentive awards from time
to time to selected employees, officers and directors; provided, however, to the
extent necessary to preserve the employee benefits plan exemption under
applicable state blue sky laws, no non-employee director of the Corporation will
be eligible to receive Awards under the Plan until such time, if any, as the
Corporation's common stock shall be traded on a national securities exchange or
on the Nasdaq National Market.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date
upon which it shall be approved by the Board (the "Effective Date"). However,
the Plan shall be submitted to the shareholders of the Corporation for approval
within 12 months of the Board's approval thereof. No Incentive Stock Options
granted under the Plan may be exercised prior to approval of the Plan by the
shareholders and if the shareholders fail to approve the Plan within 12 months
of the Board's approval thereof, any Incentive Stock Options previously granted
hereunder shall be automatically converted to Non-Qualified Stock Options
without any further act. In the discretion of the Committee, Awards may be made
to Covered Employees which are intended to constitute qualified
performance-based compensation under Code Section 162(m). Any such Awards shall
be contingent upon the shareholders having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with
the initial letter capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the meaning ascribed to it
in this Section or in Section
<PAGE> 2
1.1 unless a clearly different meaning is required by the context. The following
words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Other Stock-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Cause" as a reason for a Participant's termination of
employment shall have the meaning assigned such term in the employment
agreement, if any, between such Participant and the Corporation or an
affiliated company, provided, however that if there is no such
employment agreement in which such term is defined, "Cause" shall mean
any of the following acts by the Participant, as determined by the
Board of Directors of the Corporation: gross neglect of duty, prolonged
absence from duty without the consent of the Corporation, acceptance of
a position with another employer without consent of the Corporation,
intentionally engaging in any activity that is in conflict with or
adverse to the business or other interests of the Corporation, or
willful misconduct, misfeasance or malfeasance of duty which is
reasonably determined to be detrimental to the Corporation.
(e) "Change of Control" means and includes the occurrence of
any one of the following events but shall specifically exclude a Public
Offering:
(i) individuals who, at the Effective Date, constitute the
Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any
person becoming a director after the Effective Date and whose
election or nomination for election was approved by a vote of
at least a majority of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy
statement of the Corporation in which such person is named as
a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or
threatened election contest (as described in Rule 14a-11 under
the 1934 Act ("Election Contest") or other actual or
threatened solicitation of proxies or consents by or on behalf
of any "person" (as such term is defined in Section 3(a)(9) of
the 1934 Act and as used in Section 13(d)(3) and 14(d)(2) of
the 1934 Act) other than the Board ("Proxy Contest"),
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<PAGE> 3
including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest, shall be deemed
an Incumbent Director;
(ii) any person becomes a "beneficial owner" (as
defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of securities of the Corporation representing 35%
or more of the combined voting power of the Corporation's then
outstanding securities eligible to vote for the election of
the Board (the "Company Voting Securities"); provided,
however, that the event described in this paragraph (ii) shall
not be deemed to be a Change in Control of the Corporation by
virtue of any of the following acquisitions: (A) any
acquisition by a person who is on the Effective Date the
beneficial owner of 35% or more of the outstanding Company
Voting Securities, (B) an acquisition by the Corporation which
reduces the number of Company Voting Securities outstanding
and thereby results in any person acquiring beneficial
ownership of more than 35% of the outstanding Company Voting
Securities; provided, that if after such acquisition by the
Corporation such person becomes the beneficial owner of
additional Company Voting Securities that increases the
percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control of the
Corporation shall then occur, (C) an acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any Parent or Subsidiary, (D)
an acquisition by an underwriter temporarily holding
securities pursuant to an offering of such securities, or (E)
an acquisition pursuant to a Non-Qualifying Transaction (as
defined in paragraph (iii)); or
(iii) the consummation of a reorganization, merger,
consolidation, statutory share exchange or similar form of
corporate transaction involving the Corporation that requires
the approval of the Corporation's stockholders, whether for
such transaction or the issuance of securities in the
transaction (a "Reorganization"), or the sale or other
disposition of all or substantially all of the Corporation's
assets to an entity that is not an affiliate of the
Corporation (a "Sale"), unless immediately following such
Reorganization or Sale: (A) more than 50% of the total voting
power of (x) the corporation resulting from such
Reorganization or the corporation which has acquired all or
substantially all of the assets of the Corporation (in either
case, the "Surviving Corporation"), or (y) if applicable, the
ultimate parent corporation that directly or indirectly has
beneficial ownership of 100% of the voting securities eligible
to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by the Corporation Voting
Securities that were outstanding immediately prior to such
Reorganization or Sale (or, if applicable, is represented by
shares into which such Company Voting Securities were
converted pursuant to such Reorganization or Sale), and such
voting power among the holders thereof is in substantially the
same proportion as the voting power of such
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<PAGE> 4
Company Voting Securities among the holders thereof
immediately prior to the Reorganization or Sale, (B) no person
(other than (x) the Corporation, (y) any employee benefit plan
(or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation, or (z) a person who
immediately prior to the Reorganization or Sale was the
beneficial owner of 35% or more of the outstanding Company
Voting Securities) is the beneficial owner, directly or
indirectly, of 35% or more of the total voting power of the
outstanding voting securities eligible to elect directors of
the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation), and (C) at least a majority of the
members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Reorganization
or Sale were Incumbent Directors at the time of the Board's
approval of the execution of the initial agreement providing
for such Reorganization or Sale (any Reorganization or Sale
which satisfies all of the criteria specified in (A), (B) and
(C) above shall be deemed to be a "Non-Qualifying
Transaction"); or
(iv) approval by the stockholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee of the Board described in
Article 4.
(h) "Corporation" means md2patient, Inc., a Georgia
corporation.
(i) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3); provided that no employee shall be a Covered
Employee until the deduction limitation of Code Section 162(m) are
applicable to the Corporation and any reliance period under Code
Section 162(m) has expired, as described in Section 16.15 hereof.
(j) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the
Corporation, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease or mental
disorder which, in the judgment of the Committee, is permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition. Notwithstanding the above, with respect to
an Incentive Stock Option, Disability shall mean Permanent and Total
Disability as defined in Section 22(e)(3) of the Code.
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(k) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(l) "Effective Date" has the meaning assigned such term in
Section 2.1.
(m) "Fair Market Value", on any date, means (i) if the Stock
is listed on a securities exchange or is traded over the Nasdaq
National Market, the closing sales price on such exchange or over such
system on such date or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which
sales were reported, or (ii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between
the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.
(n) "Good Reason" for a Participant's termination of
employment shall have the meaning assigned such term in the employment
agreement, if any, between such Participant and the Corporation or an
affiliated company, provided, however that if there is no such
employment agreement in which such term is defined, "Good Reason" shall
mean any of the following acts by the employer without the consent of
the Participant: (i) the assignment to the Participant of duties
materially inconsistent with the Participant's position, authority,
duties or responsibilities as in effect on the date the Award is
granted (other than an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the employer promptly
after receipt of notice thereof given by the Participant), or (ii) a
reduction by the employer in the Participant's base salary or benefits
as in effect on the date the Award is granted, unless a similar
reduction is made in salary and benefits of peer employees.
(o) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(p) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(q) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(r) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
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<PAGE> 6
(s) "Parent" means a corporation which owns or beneficially
owns a majority of the outstanding voting stock or voting power of the
Corporation. Notwithstanding the above, with respect to an Incentive
Stock Option, Parent shall have the meaning set forth in Section 424(e)
of the Code..
(t) "Participant" means a person who, as an employee, officer
or director of the Corporation or any Parent or Subsidiary, has been
granted an Award under the Plan.
(u) "Performance Share" means a right granted to a
Participant under Article 9, to receive cash, Stock, or other Awards,
the payment of which is contingent upon achieving certain performance
goals established by the Committee.
(v) "Plan" means the md2patient, Inc. 2000 Long-Term
Incentive Plan, as amended from time to time.
(w) "Public Offering" shall occur on the effective time and
date of a registration statement filed by the Corporation under the
1933 Act, for a public offering of any class or series of the
Corporation's equity securities.
(x) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(y) "Retirement" means a Participant's termination of
employment with the Corporation, Parent or Subsidiary after attaining
any normal or early retirement age specified in any pension, profit
sharing or other retirement program sponsored by the Corporation, or,
in the event of the inapplicability thereof with respect to the person
in question, as determined by the Committee in its reasonable judgment.
(z) "Stock" means the $0.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(aa) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(bb) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Corporation. Notwithstanding the above, with
respect to an Incentive Stock Option, Subsidiary shall have the meaning
set forth in Section 424(f) of the Code.
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(cc) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(dd) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a committee (the
"Committee") appointed by the Board (which Committee shall consist of two or
more directors) or, at the discretion of the Board from time to time, the Plan
may be administered by the Board. It is intended that the directors appointed to
serve on the Committee shall be "non-employee directors" (within the meaning of
Rule 16b-3 promulgated under the 1934 Act) and "outside directors" (within the
meaning of Code Section 162(m) and the regulations thereunder) to the extent
that Rule 16b-3 and, if necessary for relief from the limitation under Code
Section 162(m) and such relief is sought by the Corporation, Code Section
162(m), respectively, are applicable. However, the mere fact that a Committee
member shall fail to qualify under either of the foregoing requirements shall
not invalidate any Award made by the Committee which Award is otherwise validly
made under the Plan. The members of the Committee shall be appointed by, and may
be changed at any time and from time to time in the discretion of, the Board.
During any time that the Board is acting as administrator of the Plan, it shall
have all the powers of the Committee hereunder, and any reference herein to the
Committee (other than in this Section 4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the
Plan, the following rules of procedure shall govern the Committee. A majority of
the Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. Except as provided below, the
Committee has the exclusive power, authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
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(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
Not withstanding the above, the Board or the Committee may expressly
delegate to a special committee consisting of one or more directors who are also
officers of the Corporation some or all of the Committee's authority under
subsections (a) through (g) above with respect to those eligible Participants
who, at the time of grant are not, and are not anticipated to be become, either
(i) Covered Employees or (ii) persons subject to the insider trading
restrictions of Section 16 of the 1934 Act.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan,
any Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
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ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 10,000,000.
5.2 LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award
may consist, in whole or in part, of authorized and unissued Stock, treasury
Stock or Stock purchased on the open market.
5.4 LIMITATION ON AWARDS. The following provisions of this Section
5.4 shall not be applicable until the deduction limitation of Code Section
162(m) are applicable to the Corporation and any reliance period under Code
Section 162(m) has expired, as described in Section 16.15 hereof.
Notwithstanding any provision in the Plan to the contrary (but subject to
adjustment as provided in Section 14.1), the maximum number of shares of Stock
with respect to one or more Options and/or SARs that may be granted during any
one calendar year under the Plan to any one Participant shall be 5,000,000. The
maximum fair market value (measured as of the date of grant) of any Awards other
than Options and SARs that may be received by any one Participant (less any
consideration paid by the Participant for such Award) during any one calendar
year under the Plan shall be $2,000,000.
ARTICLE 6
ELIGIBILITY
6.1 GENERAL. Awards may be granted only to individuals who are
employees, officers or directors of the Corporation or a Parent or Subsidiary;
provided, however, that to the extent necessary to preserve the employee
benefits plan exemption under applicable state blue sky laws, no non-employee
director or consultant of the Corporation will be eligible to receive Awards
under the Plan until such time, if any, as the Corporation's common stock shall
be traded on a national securities exchange or on the Nasdaq National Market.
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ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee; provided that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants; provided, however, that if shares of Stock are used to
pay the exercise price of an Option, such shares must have been held by
the Participant for at least six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Corporation and the Participant.
The Award Agreement shall include such provisions, not inconsistent
with the Plan, as may be specified by the Committee.
(e) EXERCISE TERM. In no event may any Option be exercisable
for more than ten years from the date of its grant.
7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Options granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
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(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if an Option is exercised after the dates specified in
paragraphs (3), (4) and (5) below, it will automatically become a
Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Award Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Corporation for
Cause or by the Participant without the consent of the
Corporation, the Incentive Stock Option shall (to the extent
not previously exercised) lapse immediately.
(4) If the Participant terminates employment by reason of
his Disability, the Incentive Stock Option shall lapse, unless
it is previously exercised, one year after the Participant's
termination of employment.
(5) If the Participant dies while employed, or during
the three-month period described in paragraph (3) or during
the one-year period described in paragraph (4) and before the
Option otherwise lapses, the Option shall lapse one year after
the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary, determined in accordance with
Section 13.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
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(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Corporation or any Parent or Subsidiary
unless the exercise price per share of such Option is at least 110% of
the Fair Market Value per share of Stock at the date of grant and the
Option expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Corporation
or Parent or Subsidiary but only in that individual's position as an
employee and not as a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee is
authorized to grant Stock Appreciation Rights to Participants on the following
terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on the
date of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the
Fair Market Value of one share of Stock on the date of grant in
the case of any Stock Appreciation Right related to an
Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee
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at the time of the grant of the Award and shall be reflected in the
Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to
grant Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.
9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock,
or other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject
to such restrictions on transferability and other restrictions as the Committee
may impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the
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Committee may provide in any Award Agreement that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part in
the event of terminations resulting from specified causes, and the Committee may
in other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Restricted Stock are registered in the
name of the Participant, certificates must bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Award, as determined by
the Committee. The Committee may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1 GRANT OF OTHER STOCK-BASED AWARDS. The Committee is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, valued in whole or in part
by reference to, or otherwise based on or related to shares of Stock, as deemed
by the Committee to be consistent with the purposes of the Plan, including
without limitation shares of Stock awarded purely as a "bonus" and not subject
to any restrictions or conditions, convertible or exchangeable debt securities,
other rights convertible or exchangeable into shares of Stock, and Awards valued
by reference to book value of shares of Stock or the value of securities of or
the performance of specified Parents or Subsidiaries. The Committee shall
determine the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1 STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for, any other Award
granted under the Plan. If an Award is granted in substitution for another
Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.
13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1 and Section 15.2), based on the terms
and conditions the Committee determines and communicates to the Participant at
the time the offer is made, and after taking into account the tax, securities
and accounting effects of such an exchange.
13.3 TERM OF AWARD. The term of each Award shall be for the period
as determined by the Committee, provided that in no event shall the term of any
Incentive
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Stock Option or a Stock Appreciation Right granted in tandem with the Incentive
Stock Option exceed a period of ten years from the date of its grant (or, if
Section 7.2(e) applies, five years from the date of its grant).
13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan
and any applicable law or Award Agreement, payments or transfers to be made by
the Corporation or a Parent or Subsidiary on the grant or exercise of an Award
may be made in such form as the Committee determines at or after the time of
grant, including without limitation, cash, Stock, other Awards, or other
property, or any combination, and may be made in a single payment or transfer,
in installments, or on a deferred basis, in each case determined in accordance
with rules adopted by, and at the discretion of, the Committee.
13.5 LIMITS ON TRANSFER. No right or interest of a Participant in
any unexercised or restricted Award may be pledged, encumbered, or hypothecated
to or in favor of any party other than the Corporation or a Parent or
Subsidiary, or shall be subject to any lien, obligation, or liability of such
Participant to any other party other than the Corporation or a Parent or
Subsidiary. No unexercised or restricted Award shall be assignable or
transferable by a Participant other than by will or the laws of descent and
distribution or, except in the case of an Incentive Stock Option, pursuant to a
domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if
such Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any factors deemed relevant, including without
limitation, state or federal tax or securities laws applicable to transferable
Awards.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant
may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant's death. A beneficiary, legal
guardian, legal representative, or other person claiming any rights under the
Plan is subject to all terms and conditions of the Plan and any Award Agreement
applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or
appropriate by the Committee. If no beneficiary has been designated or survives
the Participant, payment shall be made to the Participant's estate. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the
Committee.
13.7 STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
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13.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any
other provision in the Plan or any Participant's Award Agreement to the
contrary, upon the Participant's death or Disability during his employment or
service as a director, all outstanding Options, Stock Appreciation Rights, and
other Awards in the nature of rights that may be exercised shall become fully
exercisable and all restrictions on outstanding Awards shall lapse. Any Option
or Stock Appreciation Rights Awards shall thereafter continue or lapse in
accordance with the other provisions of the Plan and the Award Agreement. To the
extent that this provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess Options shall be deemed to be
Non-Qualified Stock Options.
13.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise
provided in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Corporation's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Corporation of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of the 1934
Act, the Committee may in its sole discretion declare all outstanding Options,
Stock Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.11 ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 13.9 or 13.10 above, the Committee
may in its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
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Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.11.
13.12 EFFECT OF ACCELERATION. If an Award is accelerated under
Section 13.9 or 13.10, the Committee may, in its sole discretion, provide (i)
that the Award will expire after a designated period of time after such
acceleration to the extent not then exercised, (ii) that the Award will be
settled in cash rather than Stock, (iii) that the Award will be assumed by
another party to the transaction giving rise to the acceleration or otherwise be
equitably converted in connection with such transaction, or (iv) any combination
of the foregoing. The Committee's determination need not be uniform and may be
different for different Participants whether or not such Participants are
similarly situated.
13.13. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Parent or Subsidiary of a
specified target return, or target growth in return, on equity or assets, (b)
the Corporation's stock price, (c) the Corporation's total shareholder return
(stock price appreciation plus reinvested dividends) relative to a defined
comparison group or target over a specific performance period, (d) the
achievement by the Corporation or a Parent or Subsidiary, or a business unit of
any such entity, of a specified target, or target growth in, net income or
earnings per share, or (e) any combination of the goals set forth in (a) through
(d) above. If an Award is made on such basis, the Committee shall establish
goals prior to the beginning of the period for which such performance goal
relates (or such later date as may be permitted under Code Section 162(m) or the
regulations thereunder), and the Committee has the right for any reason to
reduce (but not increase) the Award, notwithstanding the achievement of a
specified goal. Any payment of an Award granted with performance goals shall be
conditioned on the written certification of the Committee in each case that the
performance goals and any other material conditions were satisfied.
13.14 TERMINATION OF EMPLOYMENT. Whether military, government or
other service or other leave of absence shall constitute a termination of
employment shall be determined in each case by the Committee at its discretion,
and any determination by the Committee shall be final and conclusive. A
termination of employment shall not occur (i) in a circumstance in which a
Participant transfers from the Corporation to one of its Parents or
Subsidiaries, transfers from a Parent or Subsidiary to the Corporation, or
transfers from one Parent or Subsidiary to another Parent or Subsidiary, or (ii)
in the discretion of the Committee as specified at or prior to such occurrence,
in the case of a spin-off of the Participant's employer from the Corporation or
any Parent or Subsidiary. To the extent that this provision causes Incentive
Stock Options to extend beyond three months from the date a Participant is
deemed to be an employee of the Corporation, a Parent or Subsidiary for purposes
of Section 424(f) of the Code, the Options held by such Participant shall be
deemed to be Non-Qualified Stock Options.
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13.15. LOAN PROVISIONS. With the consent of the Committee, the
Corporation may make, guarantee or arrange for a loan or loans to a Participant
with respect to the exercise of any Option granted under this Plan and/or with
respect to the payment of the purchase price, if any, of any Award granted
hereunder and/or with respect to the payment by the Participant of any or all
federal and/or state income taxes due on account of the granting or exercise of
any Award hereunder. The Committee shall have full authority to decide whether
to make a loan or loans hereunder and to determine the amount, terms and
provisions of any such loan or loans, including the interest rate to be charged
in respect of any such loan or loans, whether the loan or loans are to be made
with or without recourse against the borrower, the terms on which the loan is to
be repaid and the conditions, if any, under which the loan or loans may be
forgiven.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1 GENERAL. In the event of a corporate transaction involving the
Corporation (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
authorization limits under Section 5.1 and 5.4 shall be increased
proportionately, and there shall be substituted for each such share of Stock
then subject to each Award the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award, or, subject
to Section 15.2, there shall be made such other equitable adjustment as the
Committee shall approve.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate the
Plan without shareholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
shareholders of the Corporation if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies or
regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time,
the Committee may amend, modify or terminate any outstanding Award without
approval of the Participant; provided, however, that, subject to the terms of
the applicable Award Agreement, such amendment, modification or termination
shall not, without the Participant's consent, reduce or diminish the value of
such Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination and provided
further that the original term of any Option may not be extended and, except as
otherwise provided in the anti-dilution provision of the Plan, the exercise
price of any Option may not be reduced. No termination, amendment,
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or modification of the Plan shall adversely affect any Award previously granted
under the Plan, without the written consent of the Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1 NO RIGHTS TO AWARDS. No Participant or any eligible
participant shall have any claim to be granted any Award under the Plan, and
neither the Corporation nor the Committee is obligated to treat Participants or
eligible participants uniformly.
16.2 NO STOCKHOLDER RIGHTS. No Award gives the Participant any of
the rights of a shareholder of the Corporation unless and until shares of Stock
are in fact issued to such person in connection with such Award.
16.3 WITHHOLDING. The Corporation or any Parent or Subsidiary shall
have the authority and the right to deduct or withhold, or require a Participant
to remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require or permit
that any such withholding requirement be satisfied, in whole or in part, by
withholding from the Award shares of Stock having a Fair Market Value on the
date of withholding equal to the minimum amount (and not any greater amount)
required to be withheld for tax purposes, all in accordance with such procedures
as the Committee establishes.
16.4 NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any
Award Agreement shall interfere with or limit in any way the right of the
Corporation or any Parent or Subsidiary to terminate any Participant's
employment or status as an officer, director or consultant at any time, nor
confer upon any Participant any right to continue as an employee, officer,
director or consultant of the Corporation or any Parent or Subsidiary.
l6.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Corporation or any Parent or
Subsidiary.
16.6 INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee shall be indemnified and held harmless by the
Corporation from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by
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such member in satisfaction of judgment in such action, suit, or proceeding
against him provided he gives the Corporation an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Corporation's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan
shall be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or benefit plan of
the Corporation or any Parent or Subsidiary unless provided otherwise in such
other plan.
16.8 EXPENSES. The expenses of administering the Plan shall be
borne by the Corporation and its Parents or Subsidiaries.
16.9 TITLES AND HEADINGS. The titles and headings of the Sections
in the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.10 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
16.11 FRACTIONAL SHARES. No fractional shares of Stock shall be
issued and the Committee shall determine, in its discretion, whether cash shall
be given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock issued in connection with the Plan. The shares issued in connection with
the Plan may in certain circumstances be exempt from registration under the 1933
Act, and the Corporation may restrict the transfer of such shares in such manner
as it deems advisable to ensure the availability of any such exemption.
16.13 GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and
governed by the laws of the State of Georgia.
16.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
-20-
<PAGE> 21
16.15 Code Section 162(m). The deduction limits of Code Section
162(m) and the regulation thereunder do not apply to the Corporation until such
time, if any, as any class of the Corporation's common equity securities is
registered under Section 12 of the 1934 Act or the Corporation otherwise meets
the definition of a "publicly held corporation" under Treasury Regulation
1.162-27(c) or any successor provision. Upon becoming a publicly held
corporation, the deduction limits of Code Section 162(m) and the regulations
thereunder shall not apply to compensation payable under this Plan until the
expiration of the reliance period described in Treasury Regulation 1.162-27(f)
or any successor regulation.
-21-
<PAGE> 1
EXHIBIT 10.7
RESTRICTED STOCK AWARD AGREEMENT
Grantee: John E. Blount
Number of Shares: 2,000,000
Date of Grant: January 14, 2000
1. Grant of Shares. MD2patient, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), as inducement for
employment, and subject to the restrictions and the other terms and conditions
set forth in this agreement (this "Agreement"), the number of shares indicated
above of the Corporation's $.01 par value common stock (the "Shares").
2. Defined Terms. The following capitalized terms used herein
and not otherwise defined shall have the following meanings.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Company Voting Securities,
(ii) any acquisition directly from the Corporation, (iii) any
acquisition by the Corporation, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled
by the Corporation, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election
<PAGE> 2
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of
the Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all
of the Corporation's assets either directly or through one or
more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, and
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination.
"Committee" means the Compensation Committee of the Board of
Directors of the Corporation.
"Corporation" means MD2patient, Inc., a Georgia corporation.
"Disability" shall mean any illness or other physical or
mental condition of a Grantee that renders the Grantee incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Grantee's
condition.
- 2 -
<PAGE> 3
"Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Section 9.
"Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
3. Restrictions. The Shares are subject to each of the following
restrictions. "Restricted Shares" mean those Shares which are subject to the
restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged,
assigned, pledged, hypothecated or otherwise encumbered. If the Grantee's
employment with the Corporation or any Subsidiary terminates for any reason
other than as set forth in any of paragraphs (b) and (c) of Section 4 hereof,
then the Grantee shall forfeit all of the Grantee's right, title and interest
in and to the Restricted Shares as of the date of employment termination.
The restrictions imposed under this Section shall apply to all shares
of the Corporation's Stock or other securities issued with respect to
Restricted Shares hereunder in connection with any merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure affecting the common stock of the Corporation.
4. Expiration and Termination of Restrictions. The restrictions
imposed under Section 3 will expire or terminate on the earliest to occur of
the following:
(a) As to the Restricted Shares awarded
hereunder (adjusted proportionately in the event of any change
in the total numbers of Restricted Shares), at the rate of
1/60 of the Restricted Shares on the first day of each
calendar month beginning February 1, 2000; or
(b) On the first day of the calendar month next
following the termination of the Grantee's employment with
the Corporation or any Subsidiary because of his or her death
or Disability; or
- 3 -
<PAGE> 4
(c) On the effective date of the dissolution or
liquidation of the Corporation.
5. Acceleration of Vesting. Upon the occurrence of a Change in
Control, all restrictions on outstanding Restricted Shares shall lapse;
provided, however that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change in Control transaction
that (i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
6. Delivery of Shares. The Shares will be issued in the name of
the Grantee as Restricted Stock and will be held by the Corporation during the
Restricted Period. Stock certificates shall be delivered as soon as practicable
after vesting of the Shares, but may be postponed for such period as may be
required for the Corporation with reasonable diligence to comply if deemed
advisable by the Corporation, with registration requirements under the
Securities Act, listing requirements under the rules of any stock exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of the Shares. Each certificate for Restricted Shares issued to the
Grantee under this Agreement shall be registered in the name of the Grantee and
shall bear a legend in substantially the following form:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and restrictions
against transfer) contained in a Restricted Stock Award Agreement dated January
1, 2000 between the registered owner of the shares represented hereby and
MD2patient, Inc. Release from such terms and conditions shall be made only in
accordance with the provisions of such Agreement, copies of which are on file
in the office of MD2patient, Inc.
7. Voting and Dividend Rights. The Grantee, as beneficial owner
of the Shares, shall have full voting and dividend rights with respect to the
Shares during the Restricted Period.
8. Restrictions on Transfer and Pledge. The Restricted Shares
may not be pledged, encumbered, or hypothecated to or in favor of any party
other than the Corporation or a Parent or Subsidiary, or be subject to any
lien, obligation, or liability of the Grantee to any other party other than the
Corporation or a Parent or Subsidiary. The Restricted Shares are not assignable
or transferable by the Grantee other than by will or the laws of descent and
distribution.
9. Changes in Capital Structure. In the event a stock dividend is
declared upon the Stock, the shares of Stock then subject to this Agreement
shall be increased proportionately. In the event the Stock shall be changed
into or exchanged for a different number or class of shares of stock or
securities of the Corporation or of another corporation, whether through
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, merger or consolidation, there shall be substituted for each
- 4 -
<PAGE> 5
such share of Stock then subject to this Agreement the number and class of
shares into which each outstanding share of Stock shall be so exchanged.
10. No Right of Continued Employment. Nothing in this Agreement
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate the Grantee's employment at any time, nor
confer upon the Grantee any right to continue in the employ of the Corporation
or any Parent or Subsidiary.
11. Payment of Taxes.
(a) The Grantee upon issuance of the Shares hereunder,
shall be authorized to make an election to be taxed upon such award under
Section 83(b) of the Internal Revenue Code of 1986, as amended. To effect such
election, the Grantee may file an appropriate election with Internal Revenue
Service within thirty (30) days after award of the Shares and otherwise in
accordance with applicable Treasury Regulations.
(b) The Grantee will, no later than the date as of which
any amount related to the Shares first becomes includable in the Grantee's
gross income for federal income tax purposes, pay to the Corporation, or make
other arrangements satisfactory to the Committee regarding payment of, any
federal, state and local taxes of any kind required by law to be withheld with
respect to such amount. The obligations of the Corporation under this Agreement
will be conditional on such payment or arrangements, and the Corporation, and,
where applicable, its Subsidiaries will, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the Grantee.
12. Amendment. The Committee may amend, modify or terminate this
Agreement without approval of the Grantee; provided, however, that such
amendment, modification or termination shall not, without the Grantee's
consent, reduce or diminish the value of this award determined as if it had
been fully vested on the date of such amendment or termination.
13. Successors. This Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Agreement.
14. Severability. If any one or more of the provisions contained
in this Agreement are invalid, illegal or unenforceable, the other provisions
of this Agreement will be construed and enforced as if the invalid, illegal or
unenforceable provision had never been included.
15. Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or
certified United States mail, return receipt requested, postage prepaid.
Notices to the Corporation must be addressed to:
- 5 -
<PAGE> 6
MD2patient, Inc.
Attn: Chief Financial Officer
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
or any other address designated by the Corporation in a written notice to the
Grantee. Notices to the Grantee will be directed to the address of the Grantee
then currently on file with the Corporation, or at any other address given by
the Grantee in a written notice to the Corporation.
IN WITNESS WHEREOF, MD2patient, Inc., acting by and through its duly
authorized officers, has caused this Agreement to be executed, and the Grantee
has executed this Agreement, all as of the day and year first above written.
MD2PATIENT, INC.
By: /s/ James G. Petway, Jr.
----------------------------------
Name: James G. Petway, Jr.
----------------------------------
Title: Executive Vice President
----------------------------------
I hereby accept the above Shares grant in accordance with and subject
to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance
with applicable securities laws.
GRANTEE:
/s/ John E. Blount
----------------------------------
John E. Blount
- 6 -
<PAGE> 1
EXHIBIT 10.8
RESTRICTED STOCK AWARD AGREEMENT
Grantee: Thomas A. Gallagher
Number of Shares: 2,000,000
Date of Grant: January 14, 2000
1. Grant of Shares. MD2patient, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), as inducement for
employment, and subject to the restrictions and the other terms and conditions
set forth in this agreement (this "Agreement"), the number of shares indicated
above of the Corporation's $.01 par value common stock (the "Shares").
2. Defined Terms. The following capitalized terms used herein
and not otherwise defined shall have the following meanings.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Company Voting Securities,
(ii) any acquisition directly from the Corporation, (iii) any
acquisition by the Corporation, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled
by the Corporation, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial
<PAGE> 2
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of
the Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all
of the Corporation's assets either directly or through one or
more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, and
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination.
"Committee" means the Compensation Committee of the Board of
Directors of the Corporation.
"Corporation" means MD2patient, Inc., a Georgia corporation.
"Disability" shall mean any illness or other physical or
mental condition of a Grantee that renders the Grantee incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Grantee's
condition.
- 2 -
<PAGE> 3
"Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Section 9.
"Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
3. Restrictions. The Shares are subject to each of the following
restrictions. "Restricted Shares" mean those Shares which are subject to the
restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged,
assigned, pledged, hypothecated or otherwise encumbered. If the Grantee's
employment with the Corporation or any Subsidiary terminates for any reason
other than as set forth in any of paragraphs (b) and (c) of Section 4 hereof,
then the Grantee shall forfeit all of the Grantee's right, title and interest
in and to the Restricted Shares as of the date of employment termination.
The restrictions imposed under this Section shall apply to all shares
of the Corporation's Stock or other securities issued with respect to
Restricted Shares hereunder in connection with any merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure affecting the common stock of the Corporation.
4. Expiration and Termination of Restrictions. The restrictions
imposed under Section 3 will expire or terminate on the earliest to occur of
the following:
(a) As to the Restricted Shares awarded
hereunder (adjusted proportionately in the event of any change in the
total numbers of Restricted Shares), at the rate of 1/60 of the
Restricted Shares on the first day of each calendar month beginning on
February 1, 2000; or
(b) On the first day of the calendar month next
following the termination of the Grantee's employment with the
Corporation or any Subsidiary because of his or her death or
Disability; or
- 3 -
<PAGE> 4
(c) On the effective date of the dissolution or
liquidation of the Corporation.
5. Acceleration of Vesting. Upon the occurrence of a Change in
Control, all restrictions on outstanding Restricted Shares shall lapse;
provided, however that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change in Control transaction
that (i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
6. Delivery of Shares. The Shares will be issued in the name of
the Grantee as Restricted Stock and will be held by the Corporation during the
Restricted Period. Stock certificates shall be delivered as soon as practicable
after vesting of the Shares, but may be postponed for such period as may be
required for the Corporation with reasonable diligence to comply if deemed
advisable by the Corporation, with registration requirements under the
Securities Act, listing requirements under the rules of any stock exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of the Shares. Each certificate for Restricted Shares issued to the
Grantee under this Agreement shall be registered in the name of the Grantee and
shall bear a legend in substantially the following form:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and restrictions
against transfer) contained in a Restricted Stock Award Agreement dated January
1, 2000 between the registered owner of the shares represented hereby and
MD2patient, Inc. Release from such terms and conditions shall be made only in
accordance with the provisions of such Agreement, copies of which are on file
in the office of MD2patient, Inc.
7. Voting and Dividend Rights. The Grantee, as beneficial owner
of the Shares, shall have full voting and dividend rights with respect to the
Shares during the Restricted Period.
8. Restrictions on Transfer and Pledge. The Restricted Shares
may not be pledged, encumbered, or hypothecated to or in favor of any party
other than the Corporation or a Parent or Subsidiary, or be subject to any
lien, obligation, or liability of the Grantee to any other party other than the
Corporation or a Parent or Subsidiary. The Restricted Shares are not assignable
or transferable by the Grantee other than by will or the laws of descent and
distribution.
9. Changes in Capital Structure. In the event a stock dividend
is declared upon the Stock, the shares of Stock then subject to this Agreement
shall be increased proportionately. In the event the Stock shall be changed
into or exchanged for a different number or class of shares of stock or
securities of the Corporation or of another corporation, whether through
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, merger or consolidation, there shall be substituted for each
- 4 -
<PAGE> 5
such share of Stock then subject to this Agreement the number and class of
shares into which each outstanding share of Stock shall be so exchanged.
10. No Right of Continued Employment. Nothing in this Agreement
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate the Grantee's employment at any time, nor
confer upon the Grantee any right to continue in the employ of the Corporation
or any Parent or Subsidiary.
11. Payment of Taxes.
(a) The Grantee upon issuance of the Shares hereunder,
shall be authorized to make an election to be taxed upon such award under
Section 83(b) of the Internal Revenue Code of 1986, as amended. To effect such
election, the Grantee may file an appropriate election with Internal Revenue
Service within thirty (30) days after award of the Shares and otherwise in
accordance with applicable Treasury Regulations.
(b) The Grantee will, no later than the date as of which
any amount related to the Shares first becomes includable in the Grantee's
gross income for federal income tax purposes, pay to the Corporation, or make
other arrangements satisfactory to the Committee regarding payment of, any
federal, state and local taxes of any kind required by law to be withheld with
respect to such amount. The obligations of the Corporation under this Agreement
will be conditional on such payment or arrangements, and the Corporation, and,
where applicable, its Subsidiaries will, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the Grantee.
12. Amendment. The Committee may amend, modify or terminate this
Agreement without approval of the Grantee; provided, however, that such
amendment, modification or termination shall not, without the Grantee's
consent, reduce or diminish the value of this award determined as if it had
been fully vested on the date of such amendment or termination.
13. Successors. This Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Agreement.
14. Severability. If any one or more of the provisions contained
in this Agreement are invalid, illegal or unenforceable, the other provisions
of this Agreement will be construed and enforced as if the invalid, illegal or
unenforceable provision had never been included.
15. Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or
certified United States mail, return receipt requested, postage prepaid.
Notices to the Corporation must be addressed to:
- 5 -
<PAGE> 6
MD2patient, Inc.
Attn: President
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
or any other address designated by the Corporation in a written notice to the
Grantee. Notices to the Grantee will be directed to the address of the Grantee
then currently on file with the Corporation, or at any other address given by
the Grantee in a written notice to the Corporation.
IN WITNESS WHEREOF, MD2patient, Inc., acting by and through its duly
authorized officers, has caused this Agreement to be executed, and the Grantee
has executed this Agreement, all as of the day and year first above written.
MD2PATIENT, INC.
By: /s/ John E. Blount
------------------------------
Name: John E. Blount
----------------------------
Title: President
---------------------------
I hereby accept the above Shares grant in accordance with and subject
to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance
with applicable securities laws.
GRANTEE:
/s/ Thomas A. Gallagher
---------------------------------
Thomas A. Gallagher
- 6 -
<PAGE> 1
EXHIBIT 10.9
RESTRICTED STOCK AWARD AGREEMENT
Grantee: Albert Rodewald
Number of Shares: 2,000,000
Date of Grant: January 14, 2000
1. Grant of Shares. MD2patient, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), as inducement for
employment, and subject to the restrictions and the other terms and conditions
set forth in this agreement (this "Agreement"), the number of shares indicated
above of the Corporation's $.01 par value common stock (the "Shares").
2. Defined Terms. The following capitalized terms used herein
and not otherwise defined shall have the following meanings.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Company Voting Securities,
(ii) any acquisition directly from the Corporation, (iii) any
acquisition by the Corporation, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled
by the Corporation, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Corporation's shareholders,
was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election
<PAGE> 2
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of
the Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all
of the Corporation's assets either directly or through one or
more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, and
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination.
"Committee" means the Compensation Committee of the Board of
Directors of the Corporation.
"Corporation" means MD2patient, Inc., a Georgia corporation.
"Disability" shall mean any illness or other physical or
mental condition of a Grantee that renders the Grantee incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Grantee's
condition.
- 2 -
<PAGE> 3
"Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Section 9.
"Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
3. Restrictions. The Shares are subject to each of the following
restrictions. "Restricted Shares" mean those Shares which are subject to the
restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged,
assigned, pledged, hypothecated or otherwise encumbered. If the Grantee's
employment with the Corporation or any Subsidiary terminates for any reason
other than as set forth in any of paragraphs (b) and (c) of Section 4 hereof,
then the Grantee shall forfeit all of the Grantee's right, title and interest
in and to the Restricted Shares as of the date of employment termination.
The restrictions imposed under this Section shall apply to all shares
of the Corporation's Stock or other securities issued with respect to
Restricted Shares hereunder in connection with any merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure affecting the common stock of the Corporation.
4. Expiration and Termination of Restrictions. The restrictions
imposed under Section 3 will expire or terminate on the earliest to occur of
the following:
(a) As to the Restricted Shares awarded
hereunder (adjusted proportionately in the event of any change in the
total numbers of Restricted Shares) at the rate of 1/60 of the
Restricted Shares on the first day of each calendar month beginning
February 1, 2000; or
(b) On the first day of the calendar month next
following the termination of the Grantee's employment with the
Corporation or any Subsidiary because of his or her death or
Disability; or
- 3 -
<PAGE> 4
(c) On the effective date of the dissolution or
liquidation of the Corporation.
5. Acceleration of Vesting. Upon the occurrence of a Change in
Control, all restrictions on outstanding Restricted Shares shall lapse;
provided, however that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change in Control transaction
that (i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
6. Delivery of Shares. The Shares will be issued in the name of
the Grantee as Restricted Stock and will be held by the Corporation during the
Restricted Period. Stock certificates shall be delivered as soon as practicable
after vesting of the Shares, but may be postponed for such period as may be
required for the Corporation with reasonable diligence to comply if deemed
advisable by the Corporation, with registration requirements under the
Securities Act, listing requirements under the rules of any stock exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of the Shares. Each certificate for Restricted Shares issued to the
Grantee under this Agreement shall be registered in the name of the Grantee and
shall bear a legend in substantially the following form:
This certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture and restrictions
against transfer) contained in a Restricted Stock Award Agreement dated January
1, 2000 between the registered owner of the shares represented hereby and
MD2patient, Inc. Release from such terms and conditions shall be made only in
accordance with the provisions of such Agreement, copies of which are on file
in the office of MD2patient, Inc.
7. Voting and Dividend Rights. The Grantee, as beneficial owner
of the Shares, shall have full voting and dividend rights with respect to the
Shares during the Restricted Period.
8. Restrictions on Transfer and Pledge. The Restricted Shares
may not be pledged, encumbered, or hypothecated to or in favor of any party
other than the Corporation or a Parent or Subsidiary, or be subject to any
lien, obligation, or liability of the Grantee to any other party other than the
Corporation or a Parent or Subsidiary. The Restricted Shares are not assignable
or transferable by the Grantee other than by will or the laws of descent and
distribution.
9. Changes in Capital Structure. In the event a stock dividend is
declared upon the Stock, the shares of Stock then subject to this Agreement
shall be increased proportionately. In the event the Stock shall be changed
into or exchanged for a different number or class of shares of stock or
securities of the Corporation or of another corporation, whether through
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, merger or consolidation, there shall be substituted for each
- 4 -
<PAGE> 5
such share of Stock then subject to this Agreement the number and class of
shares into which each outstanding share of Stock shall be so exchanged.
10. No Right of Continued Employment. Nothing in this Agreement
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate the Grantee's employment at any time, nor
confer upon the Grantee any right to continue in the employ of the Corporation
or any Parent or Subsidiary.
11. Payment of Taxes.
(a) The Grantee upon issuance of the Shares hereunder,
shall be authorized to make an election to be taxed upon such award under
Section 83(b) of the Internal Revenue Code of 1986, as amended. To effect such
election, the Grantee may file an appropriate election with Internal Revenue
Service within thirty (30) days after award of the Shares and otherwise in
accordance with applicable Treasury Regulations.
(b) The Grantee will, no later than the date as of which
any amount related to the Shares first becomes includable in the Grantee's
gross income for federal income tax purposes, pay to the Corporation, or make
other arrangements satisfactory to the Committee regarding payment of, any
federal, state and local taxes of any kind required by law to be withheld with
respect to such amount. The obligations of the Corporation under this Agreement
will be conditional on such payment or arrangements, and the Corporation, and,
where applicable, its Subsidiaries will, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise due
to the Grantee.
12. Amendment. The Committee may amend, modify or terminate this
Agreement without approval of the Grantee; provided, however, that such
amendment, modification or termination shall not, without the Grantee's
consent, reduce or diminish the value of this award determined as if it had
been fully vested on the date of such amendment or termination.
13. Successors. This Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Agreement.
14. Severability. If any one or more of the provisions contained
in this Agreement are invalid, illegal or unenforceable, the other provisions
of this Agreement will be construed and enforced as if the invalid, illegal or
unenforceable provision had never been included.
15. Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or
certified United States mail, return receipt requested, postage prepaid.
Notices to the Corporation must be addressed to:
- 5 -
<PAGE> 6
MD2patient, Inc.
Attn: President
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
or any other address designated by the Corporation in a written notice to the
Grantee. Notices to the Grantee will be directed to the address of the Grantee
then currently on file with the Corporation, or at any other address given by
the Grantee in a written notice to the Corporation.
IN WITNESS WHEREOF, MD2patient, Inc., acting by and through its duly
authorized officers, has caused this Agreement to be executed, and the Grantee
has executed this Agreement, all as of the day and year first above written.
MD2PATIENT, INC.
By: /s/ John E. Blount
------------------------------------
Name: John E. Blount
----------------------------------
Title: President
---------------------------------
I hereby accept the above Shares grant in accordance with and subject
to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance
with applicable securities laws.
GRANTEE:
/s/ Albert Rodewald
--------------------------------------
Albert Rodewald
- 6 -
<PAGE> 1
EXHIBIT 10.10
RESTRICTED STOCK AWARD AGREEMENT
Grantee: James G. Petway, Jr.
Number of Shares: 2,000,000
Date of Grant: January 14, 2000
1. Grant of Shares. MD2patient, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), as inducement for employment,
and subject to the restrictions and the other terms and conditions set forth in
this agreement (this "Agreement"), the number of shares indicated above of the
Corporation's $.01 par value common stock (the "Shares").
2. Defined Terms. The following capitalized terms used herein and
not otherwise defined shall have the following meanings.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Company Voting Securities,
(ii) any acquisition directly from the Corporation, (iii) any
acquisition by the Corporation, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by
the Corporation, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of
<PAGE> 2
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination.
"Committee" means the Compensation Committee of the Board of
Directors of the Corporation.
"Corporation" means MD2patient, Inc., a Georgia corporation.
"Disability" shall mean any illness or other physical or
mental condition of a Grantee that renders the Grantee incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the
-2-
<PAGE> 3
Committee, is permanent and continuous in nature. The Committee may
require such medical or other evidence as it deems necessary to judge
the nature and permanency of the Grantee's condition.
"Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Section 9.
"Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
3. Restrictions. The Shares are subject to each of the following
restrictions. "Restricted Shares" mean those Shares which are subject to the
restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged, assigned,
pledged, hypothecated or otherwise encumbered. If the Grantee's employment with
the Corporation or any Subsidiary terminates for any reason other than as set
forth in any of paragraphs (b) and (c) of Section 4 hereof, then the Grantee
shall forfeit all of the Grantee's right, title and interest in and to the
Restricted Shares as of the date of employment termination.
The restrictions imposed under this Section shall apply to all shares
of the Corporation's Stock or other securities issued with respect to Restricted
Shares hereunder in connection with any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the common stock of the Corporation.
4. Expiration and Termination of Restrictions. The restrictions
imposed under Section 3 will expire or terminate on the earliest to occur of the
following:
(a) As to the Restricted Shares awarded
hereunder (adjusted proportionately in the event of any change in the
total numbers of Restricted Shares), at the rate of 1/60 of the
Restricted Shares on the first day of each calendar month beginning
February 1, 2000;
(b) On the first day of the calendar month next
following the termination of the Grantee's employment with the
Corporation or any Subsidiary because of his or her death or
Disability; or
(c) On the effective date of the dissolution or
liquidation of the Corporation.
-3-
<PAGE> 4
5. Acceleration of Vesting. Upon the occurrence of a Change in
Control, all restrictions on outstanding Restricted Shares shall lapse;
provided, however that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change in Control transaction
that (i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
6. Delivery of Shares. The Shares will be issued in the name of
the Grantee as Restricted Stock and will be held by the Corporation during the
Restricted Period. Stock certificates shall be delivered as soon as practicable
after vesting of the Shares, but may be postponed for such period as may be
required for the Corporation with reasonable diligence to comply if deemed
advisable by the Corporation, with registration requirements under the
Securities Act, listing requirements under the rules of any stock exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of the Shares. Each certificate for Restricted Shares issued to the
Grantee under this Agreement shall be registered in the name of the Grantee and
shall bear a legend in substantially the following form:
This certificate and the shares of stock represented hereby are subject
to the terms and conditions (including forfeiture and restrictions against
transfer) contained in a Restricted Stock Award Agreement dated January 1, 2000
between the registered owner of the shares represented hereby and MD2patient,
Inc. Release from such terms and conditions shall be made only in accordance
with the provisions of such Agreement, copies of which are on file in the office
of MD2patient, Inc.
7. Voting and Dividend Rights. The Grantee, as beneficial owner
of the Shares, shall have full voting and dividend rights with respect to the
Shares during the Restricted Period.
8. Restrictions on Transfer and Pledge. The Restricted Shares may
not be pledged, encumbered, or hypothecated to or in favor of any party other
than the Corporation or a Parent or Subsidiary, or be subject to any lien,
obligation, or liability of the Grantee to any other party other than the
Corporation or a Parent or Subsidiary. The Restricted Shares are not assignable
or transferable by the Grantee other than by will or the laws of descent and
distribution.
9. Changes in Capital Structure. In the event a stock dividend is
declared upon the Stock, the shares of Stock then subject to this Agreement
shall be increased proportionately. In the event the Stock shall be changed into
or exchanged for a different number or class of shares of stock or securities of
the Corporation or of another corporation, whether through reorganization,
recapitalization, reclassification, stock split-up, combination of shares,
merger or consolidation, there shall be substituted for each such share of Stock
then subject
-4-
<PAGE> 5
to this Agreement the number and class of shares into which each outstanding
share of Stock shall be so exchanged.
10. No Right of Continued Employment. Nothing in this Agreement
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate the Grantee's employment at any time, nor
confer upon the Grantee any right to continue in the employ of the Corporation
or any Parent or Subsidiary.
11. Payment of Taxes.
(a) The Grantee upon issuance of the Shares hereunder,
shall be authorized to make an election to be taxed upon such award under
Section 83(b) of the Internal Revenue Code of 1986, as amended. To effect such
election, the Grantee may file an appropriate election with Internal Revenue
Service within thirty (30) days after award of the Shares and otherwise in
accordance with applicable Treasury Regulations.
(b) The Grantee will, no later than the date as of which
any amount related to the Shares first becomes includable in the Grantee's gross
income for federal income tax purposes, pay to the Corporation, or make other
arrangements satisfactory to the Committee regarding payment of, any federal,
state and local taxes of any kind required by law to be withheld with respect to
such amount. The obligations of the Corporation under this Agreement will be
conditional on such payment or arrangements, and the Corporation, and, where
applicable, its Subsidiaries will, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Grantee.
12. Amendment. The Committee may amend, modify or terminate this
Agreement without approval of the Grantee; provided, however, that such
amendment, modification or termination shall not, without the Grantee's consent,
reduce or diminish the value of this award determined as if it had been fully
vested on the date of such amendment or termination.
13. Successors. This Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Agreement.
14. Severability. If any one or more of the provisions contained
in this Agreement are invalid, illegal or unenforceable, the other provisions of
this Agreement will be construed and enforced as if the invalid, illegal or
unenforceable provision had never been included.
15. Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or certified
-5-
<PAGE> 6
United States mail, return receipt requested, postage prepaid. Notices to the
Corporation must be addressed to:
MD2patient, Inc.
Attn: President
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
or any other address designated by the Corporation in a written notice to the
Grantee. Notices to the Grantee will be directed to the address of the Grantee
then currently on file with the Corporation, or at any other address given by
the Grantee in a written notice to the Corporation.
IN WITNESS WHEREOF, MD2patient, Inc., acting by and through its duly
authorized officers, has caused this Agreement to be executed, and the Grantee
has executed this Agreement, all as of the day and year first above written.
MD2PATIENT, Inc.
By: /s/ John E. Blount
------------------------------------
Name: John E. Blount
----------------------------------
Title: President
---------------------------------
I hereby accept the above Shares grant in accordance with and subject
to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance with
applicable securities laws.
GRANTEE:
/s/ James G. Petway, Jr.
---------------------------------------
James G. Petway, Jr.
-6-
<PAGE> 1
EXHIBIT 10.11
RESTRICTED STOCK AWARD AGREEMENT
Grantee: Rock A. Morphis
Number of Shares: 2,000,000
Date of Grant: January 14, 2000
1. Grant of Shares. MD2patient, Inc. (the "Corporation") hereby
grants to the Grantee named above (the "Grantee"), as inducement for serving as
a director, and subject to the restrictions and the other terms and conditions
set forth in this agreement (this "Agreement"), the number of shares indicated
above of the Corporation's $.01 par value common stock (the "Shares").
2. Defined Terms. The following capitalized terms used herein and
not otherwise defined shall have the following meanings.
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Company Voting Securities,
(ii) any acquisition directly from the Corporation, (iii) any
acquisition by the Corporation, (iv) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by
the Corporation, or (v) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of
<PAGE> 2
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination.
"Committee" means the Compensation Committee of the Board of
Directors of the Corporation.
"Corporation" means MD2patient, Inc., a Georgia corporation.
"Disability" shall mean any illness or other physical or
mental condition of a Grantee that renders the Grantee incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the
-2-
<PAGE> 3
Committee, is permanent and continuous in nature. The Committee may
require such medical or other evidence as it deems necessary to judge
the nature and permanency of the Grantee's condition.
"Stock" means the $.01 par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Section 9.
"Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding
voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
3. Restrictions. The Shares are subject to each of the following
restrictions. "Restricted Shares" mean those Shares which are subject to the
restrictions imposed hereunder which restrictions have not then expired or
terminated. Restricted Shares may not be sold, transferred, exchanged, assigned,
pledged, hypothecated or otherwise encumbered. If the Grantee's employment with
the Corporation or any Subsidiary terminates for any reason other than as set
forth in any of paragraphs (b) and (c) of Section 4 hereof, then the Grantee
shall forfeit all of the Grantee's right, title and interest in and to the
Restricted Shares as of the date of employment termination.
The restrictions imposed under this Section shall apply to all shares
of the Corporation's Stock or other securities issued with respect to Restricted
Shares hereunder in connection with any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the common stock of the Corporation.
4. Expiration and Termination of Restrictions. The restrictions
imposed under Section 3 will expire or terminate on the earliest to occur of the
following:
(a) As to the Restricted Shares awarded hereunder
(adjusted proportionately in the event of any change in the total
numbers of Restricted Shares), at the rate of 1/60 of the Restricted
Shares on the first day of each calendar month beginning February 1,
2000;
(b) On the first day of the calendar month next following
the termination of the Grantee's employment with the Corporation or any
Subsidiary because of his or her death or Disability; or
(c) On the effective date of the dissolution or
liquidation of the Corporation.
-3-
<PAGE> 4
5. Acceleration of Vesting. Upon the occurrence of a Change in
Control, all restrictions on outstanding Restricted Shares shall lapse;
provided, however that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change in Control transaction
that (i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
6. Delivery of Shares. The Shares will be issued in the name of
the Grantee as Restricted Stock and will be held by the Corporation during the
Restricted Period. Stock certificates shall be delivered as soon as practicable
after vesting of the Shares, but may be postponed for such period as may be
required for the Corporation with reasonable diligence to comply if deemed
advisable by the Corporation, with registration requirements under the
Securities Act, listing requirements under the rules of any stock exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of the Shares. Each certificate for Restricted Shares issued to the
Grantee under this Agreement shall be registered in the name of the Grantee and
shall bear a legend in substantially the following form:
This certificate and the shares of stock represented hereby are subject
to the terms and conditions (including forfeiture and restrictions against
transfer) contained in a Restricted Stock Award Agreement dated January 1, 2000
between the registered owner of the shares represented hereby and MD2patient,
Inc. Release from such terms and conditions shall be made only in accordance
with the provisions of such Agreement, copies of which are on file in the office
of MD2patient, Inc.
7. Voting and Dividend Rights. The Grantee, as beneficial owner
of the Shares, shall have full voting and dividend rights with respect to the
Shares during the Restricted Period.
8. Restrictions on Transfer and Pledge. The Restricted Shares may
not be pledged, encumbered, or hypothecated to or in favor of any party other
than the Corporation or a Parent or Subsidiary, or be subject to any lien,
obligation, or liability of the Grantee to any other party other than the
Corporation or a Parent or Subsidiary. The Restricted Shares are not assignable
or transferable by the Grantee other than by will or the laws of descent and
distribution.
9. Changes in Capital Structure. In the event a stock dividend is
declared upon the Stock, the shares of Stock then subject to this Agreement
shall be increased proportionately. In the event the Stock shall be changed into
or exchanged for a different number or class of shares of stock or securities of
the Corporation or of another corporation, whether through reorganization,
recapitalization, reclassification, stock split-up, combination of shares,
merger or consolidation, there shall be substituted for each such share of Stock
then subject
-4-
<PAGE> 5
to this Agreement the number and class of shares into which each outstanding
share of Stock shall be so exchanged.
10. No Right of Continued Employment. Nothing in this Agreement
shall interfere with or limit in any way the right of the Corporation or any
Parent or Subsidiary to terminate the Grantee's employment at any time, nor
confer upon the Grantee any right to continue in the employ of the Corporation
or any Parent or Subsidiary.
11. Payment of Taxes.
(a) The Grantee upon issuance of the Shares hereunder,
shall be authorized to make an election to be taxed upon such award under
Section 83(b) of the Internal Revenue Code of 1986, as amended. To effect such
election, the Grantee may file an appropriate election with Internal Revenue
Service within thirty (30) days after award of the Shares and otherwise in
accordance with applicable Treasury Regulations.
(b) The Grantee will, no later than the date as of which
any amount related to the Shares first becomes includable in the Grantee's gross
income for federal income tax purposes, pay to the Corporation, or make other
arrangements satisfactory to the Committee regarding payment of, any federal,
state and local taxes of any kind required by law to be withheld with respect to
such amount. The obligations of the Corporation under this Agreement will be
conditional on such payment or arrangements, and the Corporation, and, where
applicable, its Subsidiaries will, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Grantee.
12. Amendment. The Committee may amend, modify or terminate this
Agreement without approval of the Grantee; provided, however, that such
amendment, modification or termination shall not, without the Grantee's consent,
reduce or diminish the value of this award determined as if it had been fully
vested on the date of such amendment or termination.
13. Successors. This Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Agreement.
14. Severability. If any one or more of the provisions contained
in this Agreement are invalid, illegal or unenforceable, the other provisions of
this Agreement will be construed and enforced as if the invalid, illegal or
unenforceable provision had never been included.
15. Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or certified
-5-
<PAGE> 6
United States mail, return receipt requested, postage prepaid. Notices to the
Corporation must be addressed to:
MD2patient, Inc.
Attn: President
501 Corporate Centre Drive, Suite 200
Franklin, Tennessee 37067
or any other address designated by the Corporation in a written notice to the
Grantee. Notices to the Grantee will be directed to the address of the Grantee
then currently on file with the Corporation, or at any other address given by
the Grantee in a written notice to the Corporation.
IN WITNESS WHEREOF, MD2patient, Inc., acting by and through its duly
authorized officers, has caused this Agreement to be executed, and the Grantee
has executed this Agreement, all as of the day and year first above written.
MD2PATIENT, Inc.
By: /s/ John E. Blount
-----------------------------------------
Name: John E. Blount
---------------------------------------
Title: President
--------------------------------------
I hereby accept the above Shares grant in accordance with and subject
to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance with
applicable securities laws.
GRANTEE:
/s/ Rock A. Morphis
--------------------------------------------
Rock A. Morphis
-6-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS'
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 14, 2000, in Amendment No. 1 to the Registration
Statement (Form S-1 No. 333-91619) and related Prospectus of MD2patient, Inc.
dated January 14, 2000.
/s/ Ernst & Young LLP
January 14, 2000
Nashville, Tennessee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MD2PATIENT, INC. FINANCIAL STATEMENTS FOR THE PERIOD FROM JULY 30, 1999 THROUGH
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,025,058
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,132,226
<PP&E> 92,073
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,667,910
<CURRENT-LIABILITIES> 283,792
<BONDS> 0
0
50,000
<COMMON> 100,000
<OTHER-SE> 4,825,087
<TOTAL-LIABILITY-AND-EQUITY> 4,667,910
<SALES> 0
<TOTAL-REVENUES> 25,610
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 668,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (642,969)
<INCOME-TAX> 0
<INCOME-CONTINUING> (642,969)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (642,969)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
