EXHIBIT 20.2
LETTER OF INTENT
August 18, 1998
Mediconsult.com, Inc.
33 Reid Street
4th Floor
Hamilton HM 12
Bermuda
Attention: Robert H. Jennings
Re: Project Contact
Dear Rob:
This letter is intended to summarize the principal terms of the proposed
business combination of Accent Health, Inc., a Florida corporation ("Accent"),
and Mediconsult.com, Inc., a Delaware corporation ("MCNS"). In this letter, (i)
MCNS and Accent are referred to individually as a "Party" and collectively as
the "Parties," (ii) the term "MCNS" shall be deemed to include MCNS and all of
its subsidiaries, (iii) MCNS's possible acquisition of the stock of Accent is
sometimes called the "Possible Acquisition," and (iv) the term "NewCo" shall be
deemed to refer to MCNS as the surviving parent entity after the Possible
Acquisition has taken place.
PART ONE
The Parties wish to commence negotiating a definitive written acquisition
agreement providing for the Possible Acquisition (a "Merger Agreement"). To
facilitate the negotiation of a Merger Agreement, the Parties shall direct their
counsel to prepare an initial draft. The execution of any such Merger Agreement
will be subject to (i) the satisfactory completion of MCNS's ongoing
investigation of the business of Accent, (ii) the satisfactory completion of
Accent's ongoing investigation of the business of MCNS, and (3) the approval by
the respective boards of directors and shareholders of Accent and MCNS.
Based on the information currently known to Accent and MCNS, it is proposed
that the Merger Agreement include the following terms:
1. BASIC TRANSACTION
A newly formed subsidiary of MCNS will merge into Accent in a reverse
triangular merger (the "Merger"). The closing of this transaction (the
"Closing") will occur as soon as possible after approval of the Merger by the
shareholders of Accent and MCNS and after the termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), if applicable. It is intended that the transaction will (i) be
treated as a stock purchase and (ii) be tax-free to the shareholders of Accent,
except for cash issued in lieu of fractional shares.
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August 18, 1998
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2. EXCHANGE RATIO
(a) COMMON STOCK. The transaction will be structured on a fixed exchange
ratio basis, subject to certain conditions. Based on Accent's
fully-diluted capitalization as of August 12, 1998, the exchange ratio
will be fixed at approximately 5.74 shares of MCNS common stock for
each share of Accent common stock such that the post-Merger
fully-diluted ownership (excluding the option pool described below,
but including previously committed performance-based securities,
license fees and other issuances in respect of rights or property
previously acquired, other than the PIK on the Series A Preferred
Stock of Accent and the 1999 Turner shares) is allocated 41.0% to MCNS
and 59.0% to Accent (including the effect of the option pool results
in allocation of approximately 37.0% to MCNS and 53.0% to Accent). If
the average reported last trade price of MCNS's common stock during
the ten consecutive days preceding the day prior to completion of this
transaction (the "Average Price") is less than $1.05, then either
Party may elect, without penalty, to renegotiate the terms of the
transaction or terminate the Merger Agreement.
(b) SERIES A PREFERRED STOCK. Accent's Series A Preferred Stock will be
exchanged for a like series of MCNS preferred stock with its
conversion rate changed to reflect the above exchange ratio and with
protective and other provisions suitable for a Company such as NewCo,
as agreed to by MCNS, Accent and the requisite holders of Accent's
Series A Preferred Stock. MCNS's Non-Cumulative Preferred Stock shall
be modified to provide for an accruing dividend at the rate of 8.0%
per annum, and conversion into MCNS common stock at any time prior to
a Qualified Public Offering (as defined in the Series A documentation)
at a conversion price of $1.20. Upon a Qualified Public Offering,
MCNS's Non-Cumulative Preferred, as well as the NewCo preferred stock
into which the Series A Preferred Stock of Accent is to be exchanged
in the Merger, shall automatically convert into common stock at their
respective conversion price ("Automatic Conversion"). Dividends on
the existing MCNS preferred stock shall be payable in cash or stock
(as determined by the Non-Cumulative Preferred holders) upon Automatic
Conversion or, in the event of conversion prior to a Qualified Public
Offering, in cash or stock as determined by NewCo.
(c) OPTIONS AND WARRANTS. Outstanding options and warrants to purchase
shares of Accent common stock will be "rolled-over" on the same
exchange ratio basis as the common stock of Accent and the exercise
price(s) with respect thereto shall be adjusted on an equitable basis.
MCNS and Accent agree to increase the number of shares covered by
NewCo's stock option plan such that an amount representing 10.0% of
its fully-diluted shares outstanding post-Merger is unallocated in
order to provide an adequate unallocated option pool to support the
growth of NewCo for the foreseeable future. Allocations and issuances
from the unallocated option pool shall be governed by NewCo's
Compensation Committee, which shall include a designee of MCNS.
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(d) POST-CLOSING CAPITALIZATION. In accordance with the preceding, the
estimated post-Merger capitalization of NewCo shall be as follows:
Owner Shares Owned % of F.D. Ownership
-------------------------------------- ------------- --------------------
Existing MCNS Shareholders (1) 18,057,400 29.55%
MCNS Non-Cumulative Preferred (2) 3,583,333 5.86%
MCNS Outstanding Options/Warrants (3) 900,000 1.47%
Existing Accent Shareholders 16,080,199 26.31%
Accent Outstanding Options 3,761,117 6.15%
Series A Preferred 12,621,910 20.65%
NewCo Option Pool 6,111,551 10.0%
------------ --------------------
Total 61,115,510 100.0%
============ ====================
(1) Based on shares outstanding as of August 5, 1998.
(2) Based on outstanding options as of August 5, 1998. Includes 500,000
additional options expected to be issued prior to Closing.
3. POST-MERGER EXECUTIVE MANAGEMENT AND BOARD REPRESENTATION
Accent's current Chairman of the Board will continue as Chairman
post-Merger; MCNS's Chief Executive Officer will become Vice-Chairman; Accent's
President and Chief Executive Officer will continue as President and Chief
Executive Officer post-Merger.
The post-Merger Board of Directors will be composed of seven total members,
represented by three MCNS Directors (Jennings, Sutcliffe and Treacy), two
Directors designated by the Series A Preferred Shareholders (Chadwick and
Taylor), one Director designated by existing Accent shareholders (Berg), and one
Director designated by NewCo (Wrenn). It is contemplated that two independent
outside directors will be recruited as soon as possible and, when such
individuals are identified, MCNS agrees to grant two of its seats to such
outside directors subject to approval by the majority shareholder of MCNS of the
independent outside directors. Such MCNS approval shall not be unreasonably
withheld and such approval rights shall expire upon six months following the
Closing of the Merger.
4. EMPLOYMENT, CONSULTING AND NON-COMPETITION AGREEMENTS
NewCo will enter into employment, consulting, and non-competition
agreements prior to Closing with certain key employees of Accent and MCNS on
terms to be mutually agreed upon. Specifically, however, Ian Sutcliffe and
Debora A. Falk will enter two-year employment/non-competition agreements
post-Merger and Grover Wrenn, Richard Ruth, and Mary Webb Walker shall have
entered into a similar such agreement in connection with the Series A financing.
In addition, Robert Jennings and Jeff Berg will enter into two-year
non-competition agreements. Further, an assessment will be made prior to the
execution of a Merger Agreement regarding the need for such related agreements
with other key MCNS and Accent personnel.
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5. PRE-CLOSING LOCK-UP
Certain MCNS and Accent directors, officers, and significant holders will
agree not to sell or otherwise dispose of any MCNS or Accent shares prior to
Closing.
6. POST-CLOSING LOCK-UP
Certain NewCo directors, officers, and significant holders of NewCo common
stock will agree not to sell or otherwise dispose of any shares of NewCo common
stock for a period of two years after Closing of the transaction subject to
certain "piggyback" rights. This will be in addition to resale restrictions
under Rule 145.
7. DUE DILIGENCE
Accent and MCNS will complete, to each Party's satisfaction, its due
diligence investigation of the business, assets, liabilities,
employment/consulting relationships, and future prospects of the other Party,
including any legal due diligence and documentation. Accent and MCNS will use
their best efforts to analyze and resolve any matters which may arise during the
due diligence process.
8. MERGER AGREEMENT
The parties will negotiate and execute a definitive merger agreement (the
"Merger Agreement") containing representations and warranties, covenants,
conditions to the obligations of Accent and MCNS, and certain other terms of the
transaction in a form that is satisfactory to both parties. Without limiting
the generality of the foregoing, the Merger Agreement shall provide that the
Parties' obligations to consummate the transactions contemplated thereby shall
be subject to the satisfaction of the following conditions (as applicable to
each respective Party):
(a) FAIRNESS OPINION. The MCNS Board shall receive an opinion regarding
the fairness of the transaction, from a financial point of view, to
the shareholders of MCNS.
(b) BOARD AND OTHER APPROVAL. The Boards of Accent and MCNS will approve
the Merger Agreement and recommend that shareholders of the respective
companies vote in favor of the transaction. Accent will also be
required to obtain the approval of the Series A Preferred Shareholders
and certain other major shareholders (the identity of which to be
agreed upon by MCNS and Accent) prior to execution of the Merger
Agreement.
(c) IRREVOCABLE PROXIES. Certain officers, directors, and significant
shareholders of Accent will grant irrevocable proxies to MCNS to vote
their shares of Accent common stock in favor of the transaction.
Certain officers, directors, and significant shareholders of MCNS will
grant irrevocable proxies to Accent to vote their shares of MCNS
common stock in favor of the transaction.
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(d) DISPOSITION AND DISSENTERS RIGHTS. Certain affiliates of Accent will
execute agreements prohibiting such affiliate from disposing of such
affiliate's stock prior to the consummation of the Merger or
exercising such shareholder's dissenter rights in connection with the
Merger.
(e) REGISTRATION OF SHARES. Accent and MCNS will prepare a joint proxy
statement and S-4 registration statement to register the shares of
MCNS common stock to be issued to Accent shareholders. The SEC will
declare the registration statement effective prior to a shareholder
vote and Closing.
(f) HART-SCOTT-RODINO. If necessary, Accent and MCNS will each furnish
information to the Federal Trade Commission and the Antitrust Division
of the Justice Department under the HSR Act.
(g) TAX OPINION LETTERS. Counsel for each Party will issue opinions that
the transaction will be tax-free to Accent shareholders except for
cash issued in lieu of fractional shares.
(h) CONSENTS AND APPROVALS. Each Party will obtain all relevant consents,
approvals, and assignments from lenders or other contracted parties.
(i) ABSENCE OF MATERIAL ADVERSE CHANGE. There will be no material adverse
change in the business of MCNS or Accent prior to Closing. In the
Merger Agreement, either Party may more particularly specify certain
events that it deems to constitute a material adverse change.
(j) SHAREHOLDER APPROVAL. Accent and MCNS will mail joint proxy and S-4
registration statements to their respective shareholders and will
receive their affirmative votes in favor of the transaction.
9. CONSENTS
Upon signing the Merger Agreement, MCNS and Accent will cooperate with each
other and proceed, as promptly as is reasonably practical, to prepare and to
file the notifications required by the HSR Act.
10. TRANSITION PLANNING
As soon as practicable after entering into the Letter of Intent, Accent and
MCNS will establish a Transition Planning Committee, chaired by NewCo's CEO and
including additional representatives as determined by MCNS's and Accent's CEOs,
to develop a transition plan for combining the operations of Accent and MCNS,
assessing the organizational structures and hiring requirements of the Parties,
accelerating integration activities, and to position NewCo to take advantage of
market opportunities. An assessment of branding and positioning strategy shall
be
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made by the Transition Planning Committee regarding the use of existing or
possible new identities for the NewCo's internet business.
11. WORKING CAPITAL ADVANCES
Upon signing the Merger Agreement, and on the 15th day of each month
thereafter until the Closing date, Accent will advance to MCNS $300,000, such
monies to be spent to fund ordinary course of business of MCNS, and such monies
shall be repaid within fifteen (15) days of the Termination Date, with interest
and other terms to be determined, by MCNS to Accent should the transaction not
close.
12. BREAK-UP FEE
In recognition of the impact that a termination could have on MCNS
post-announcement and the opportunity costs which Accent will experience related
to its Internet development efforts, if either Board were to terminate the
transaction without cause subsequent to the execution of the Merger Agreement
but prior to Closing, the terminating Party will pay the other Party a
termination fee of $1,000,000.
PART TWO
The following paragraphs of this letter (the "Binding Provisions") are the
legally binding and enforceable agreements of MCNS and Accent.
1. ACCESS
During the period from the date this letter is signed by MCNS (the "Signing
Date") until the date on which either Party provides the other Party with
written notice that negotiations toward a Merger Agreement are terminated (the
"Termination Date"), each Party will afford to the other Party full and free
access to its personnel, properties, contracts, books and records, and all other
documents and data. Each Party acknowledges that its receipt of information
regarding the other Party is subject to the terms and provisions of the
Non-Disclosure Agreement (as defined below).
2. NON-SOLICITATION PROVISION
Until the earlier of (i) 120 days after the Signing Date or (ii) the
Termination Date, Accent and MCNS agree not to solicit or facilitate an
acquisition proposal from a third party to acquire its business; provided, each
Party may conduct any discussions with a third party interested in acquiring its
business only at the direction of its Board of Directors in order to fulfill
fiduciary duties. Such Party will give notice of such discussions to the other
Party within twenty-four hours. his provision shall not eliminate the ability
of MCNS to seek outside financing to meet its working capital requirements.
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3. CONDUCT OF BUSINESS
During the period from the Signing Date until the Termination Date, each
Party shall operate its business in the ordinary course and shall refrain from
any extraordinary transactions.
4. CONFIDENTIALITY
All of the terms and provisions of that certain non-disclosure letter dated
June 26, 1998, between MCNS and Accent, as supplemented by that certain letter
agreement dated July 29, 1998, between the Parties (the "Non-Disclosure
Agreement"), are hereby ratified, confirmed and approved. Without limiting the
foregoing, the Confidential Information (as such term is defined in the
Non-Disclosure Agreement), including any copy or reproduction thereof, is and
will remain the property of the disclosing Party. If the Possible Acquisition
is not consummated or if a Party so requests, the receiving Party promptly will
return to the disclosing Party all copies of the Confidential Information,
whether or not then in its possession or in the possession of any of its
representatives, and any copies, notes or extracts thereof; PROVIDED, HOWEVER,
that notwithstanding the foregoing to the contrary, the portion of the
Confidential Information that consists of notes, analyses, compilations, studies
or other documents, data or records prepared by the receiving Party or its
representatives may be held by the receiving Party and kept confidential
pursuant to the terms of the Non-Disclosure Agreement or will be destroyed by
the receiving Party.
5. DISCLOSURE
Except as and to the extent required by law or the applicable rules of any
national securities exchange or market system, without the prior written consent
of the other Party, neither MCNS nor Accent will, and each will direct its
representatives not to make, directly or indirectly, any public comment,
statement, or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding, a possible
transaction between the Parties or any of the terms, conditions, or other
aspects of the transaction proposed in this letter. If a Party is required by
law to make any such disclosure, it must first provide to the other Party the
content of the proposed disclosure, the reasons that such disclosure is required
by law, and the estimated time and place that the disclosure will be made, for
comments of such Party. Any press release issued by MCNS from the time of
signing of the Letter of Intent through Closing which mentions Accent must
receive prior approval from Accent's CEO before being disseminated.
6. COSTS
MCNS and Accent each will be responsible for and bear all of its own costs
and expenses (including any broker's or finder's fees and the expenses of its
representatives) incurred at any time in connection with pursuing or
consummating the Possible Acquisition. Notwithstanding the preceding sentence,
MCNS will pay one-half and Accent will pay one-half of the HSR Act filing fee
(which filing will be made after execution of the Merger Agreement).
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7. ENTIRE AGREEMENT
The Binding Provisions and the Non-Disclosure Agreement constitute the
entire agreement between the parties, and supersede all prior oral or written
agreements, understandings, representations and warranties, and courses of
conduct and dealing between the parties on the subject matter hereof. Except as
otherwise provided herein, the Binding Provisions and the Non-Disclosure
Agreement may be amended or modified only by a writing executed by all of the
parties.
8. GOVERNING LAW
The Binding Provisions will be governed by and construed under the laws of
the State of Florida without regard to conflicts of laws principles.
9. TERMINATION
The Binding Provisions will automatically terminate upon the earlier of (i)
120 days after the Signing Date or (ii) the Termination Date (it being
understood that either Party may terminate the Binding Provisions upon written
notice by to the other Party unilaterally, for any reason or no reason, with or
without cause, at any time); provided, however, that the termination of the
Binding Provisions will not affect the liability of a Party for breach of any of
the Binding Provisions prior to the termination. Upon termination of the
Binding Provisions, the parties will have no further obligations hereunder,
except as stated in Paragraphs 4, 5, 6 and 11 of this Part Two, which will
survive any such termination.
10. COUNTERPARTS
This Letter may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Letter and all of which, when taken
together, will be deemed to constitute one and the same agreement.
11. NO LIABILITY
The paragraphs and provisions of Part One of this letter do not constitute
and will not give rise to any legally binding obligation on the part of any of
the Parties. Moreover, except as expressly provided in the Binding Provisions
and the Non-Disclosure Agreement (or as expressly provided in any binding
written agreement that the Parties may enter into in the future), no past or
future action, course of conduct, or failure to act relating to the Possible
Acquisition, or relating to the negotiation of the terms of the Possible
Acquisition or any Merger Agreement, will give rise to or serve as a basis for
any obligation or other liability on the part of the Parties.
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If you are in agreement with the foregoing, please sign and return one copy
of this letter agreement, which thereupon will constitute our agreement in
principle with respect to its subject matter.
Very truly yours,
ACCENT HEALTH, INC.:
By: /s/ Grover C. Wrenn
--------------------------------
Name: Grover C. Wrenn
------------------------------
Title: Chief Executive Officer
-----------------------------
Duly executed and agreed as to the Binding
Provisions on AUGUST 18, 1998.
MEDICONSULT.COM, INC.:
By: /s/ Robert Jennings
--------------------------------
Name: Robert Jennings
------------------------------
Title: Chief Executive Officer
-----------------------------
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