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ASSET PURCHASE AGREEMENT
by and among
MEDSCAPE, INC.,
MEDSCAPE ENTERPRISES, INC.,
MEDICALOGIC/MEDSCAPE, INC.
and
WEBMD CORPORATION
Dated as of December 26, 2001
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS; CLOSING; ASSUMED
LIABILITIES; ALLOCATION OF PURCHASE PRICE...........................1
Section 1.01 Acquired Assets.........................................1
Section 1.02 Excluded Assets.........................................1
Section 1.03 Purchase Price; Escrow Amount; Certain Payments.........2
Section 1.04 Ancillary Agreements....................................2
Section 1.05 Closing.................................................3
Section 1.06 Liabilities Assumed by Purchaser........................3
Section 1.07 Liabilities Not Assumed by Purchaser....................3
Section 1.08 Allocation of Purchase Price............................3
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING
MEDSCAPE AND THE BUSINESS...........................................4
Section 2.01 Organization, Qualifications and Corporate Power;
Subsidiary...........................................4
Section 2.02 Authorization of Agreements, Etc........................5
Section 2.03 Validity................................................5
Section 2.04 Medscape's Financial Statements.........................5
Section 2.05 Absence of Certain Changes or Events....................6
Section 2.06 Consents and Approvals; Permits.........................8
Section 2.07 Title to Properties, Absence of Liens and
Encumbrances.........................................8
Section 2.08 Intellectual Property...................................9
Section 2.09 Material Contracts.....................................10
Section 2.10 Litigation, Etc........................................12
Section 2.11 Taxes..................................................12
Section 2.12 Compliance with Law....................................14
Section 2.13 Labor Matters..........................................14
Section 2.14 Insurance..............................................15
Section 2.15 Employee Benefit Plans.................................15
Section 2.16 Brokers' or Finders' Fees..............................17
Section 2.17 Certain Information Relating to the Business...........18
Section 2.18 Transactions with Certain Persons......................18
Section 2.19 Condition and Sufficiency of Assets....................18
Section 2.20 Employees..............................................18
Section 2.21 Real Property..........................................19
Section 2.22 Environmental Compliance...............................20
Section 2.23 Books and Records......................................20
Section 2.24 No Other Liabilities or Contingencies..................20
Section 2.25 Customers..............................................21
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Section 2.26 Vendors................................................21
Section 2.27 Bank Accounts..........................................21
Section 2.28 Solvency...............................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING PARENT AND ENTERPRISES..21
Section 3.01 Parent Organization, Qualifications and Corporate
Power...............................................22
Section 3.02 Authorization of Agreements, Etc. With Respect To
Parent..............................................22
Section 3.03 Validity With Respect To Parent........................22
Section 3.04 Consents and Approvals With Respect To Parent..........22
Section 3.05 Brokers' or Finders' Fees With Respect To Parent.......23
Section 3.06 Tax Matters With Respect To Parent.....................23
Section 3.07 Enterprises Organization, Qualifications and
Corporate Power.....................................23
Section 3.08 Authorization of Agreements, Etc. With Respect To
Enterprises.........................................23
Section 3.09 Validity With Respect To Enterprises...................24
Section 3.10 Consents and Approvals With Respect To Enterprises.....24
Section 3.11 Brokers' or Finders' Fees With Respect To Enterprises..24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................24
Section 4.01 Power and Authority....................................24
Section 4.02 Authorization of Agreements, Etc.......................25
Section 4.03 Validity...............................................25
Section 4.04 Governmental Approvals.................................25
Section 4.05 Brokers' or Finders' Fees..............................25
Section 4.06 Litigation.............................................25
ARTICLE V COVENANTS..........................................................26
Section 5.01 No Solicitation........................................26
Section 5.02 Employee Matters.......................................27
Section 5.03 Sellers Non-Compete....................................27
Section 5.04 Miscellaneous..........................................28
Section 5.05 Confidentiality........................................29
Section 5.06 Matters Related to Subsidiary..........................30
Section 5.07 Privacy Policies.......................................30
Section 5.08 Release................................................31
ARTICLE VI SURVIVAL; INDEMNITY...............................................31
Section 6.01 Survival...............................................31
Section 6.02 Limits on Claims.......................................31
Section 6.03 Indemnification by Sellers.............................32
Section 6.04 Indemnification by Purchaser...........................34
Section 6.05 Indemnification Procedure..............................35
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Section 6.06 Mitigation; Exclusivity of Remedy......................36
Section 6.07 Survival of Article VI.................................37
ARTICLE VII ACTIONS AT AND AFTER THE CLOSING DATE............................37
Section 7.01 Actions After the Closing Date.........................37
Section 7.02 Certain Tax Matters....................................39
Section 7.03 Intellectual Property Matters..........................41
Section 7.04 Public Announcements...................................42
Section 7.05 Outstanding Liens......................................42
Section 7.06 Post-Closing Reimbursements............................42
ARTICLE VIII MISCELLANEOUS...................................................43
Section 8.01 Specific Performance...................................43
Section 8.02 Expenses, Etc..........................................43
Section 8.03 Execution in Counterparts..............................43
Section 8.04 Notices................................................43
Section 8.05 Waivers................................................45
Section 8.06 Amendments, Supplements, Etc...........................45
Section 8.07 Entire Agreement.......................................45
Section 8.08 Headings...............................................45
Section 8.09 Severability...........................................45
Section 8.10 Interpretation.........................................46
Section 8.11 Binding Effect; Benefits...............................46
Section 8.12 Assignability..........................................46
Section 8.13 Governing Law; Submission to Jurisdiction; Waivers.....46
Section 8.14 Survival of Article VIII...............................47
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INDEX TO EXHIBITS AND SCHEDULES
Schedule Description
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2.01(a) Qualified Jurisdictions; Subsidiary; Investments
2.01(c) Subsidiary Equity Securities
2.01(d) Subsidiary Investments
2.02 Agreements
2.04(a)(i) Balance Sheet and Pro-Forma Balance Sheet
2.04(a)(ii) Management Operations Statements
2.04(a)(iii) Parent Financial Statements
2.05 Certain Changes or Events
2.05(f) Changes in Employee Benefit Plans
2.06(a) Consents
2.06(b) Permits
2.07(a) Good And Valid Title
2.08 Intellectual Property
2.08(c) Infringing Sellers or Subsidiary Intellectual Property
2.08(e) Infringing Third Party Intellectual Property
2.09 Material Contracts
2.10 Litigation
2.11(a) Tax Returns
2.11(b) Audits
2.11(c) Tax Return Extensions
2.11(d) Tax Sharing/Allocations
2.14 Insurance
2.15 Employee Benefit Plans
2.15(m) Additional Employee Benefit Plans
2.17 Web Site Performance Statistics
2.18 Transactions with Certain Persons
2.19 Sufficiency of Assets
2.21(b) Leased Property
2.21(c) Improvements
2.24 Liabilities
2.25(a) Clients and Sponsors
2.25(b) Backlog Orders
2.26 Vendors
2.27 Bank Accounts
5.02(c) Assumed Employment Agreements
6.03(b) Accounts Receivable
7.01(d) Nonassignable Contracts
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Exhibit Description
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A Definitions
B Acquired Assets
B-1 Acquired Intellectual Property
C Excluded Assets
D Wire Transfer Instructions of Medscape
D-1 Wire Transfer Instructions of Escrow Agent
E Excluded Liabilities
F-1 Affected Employees
F-2 Retained Employees
G Cash Contribution Amount and Severance Reimbursement Amount
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of December 26,
2001, is made by and among MEDSCAPE, INC., a Delaware corporation ("Medscape"),
MEDICALOGIC/MEDSCAPE, INC., an Oregon corporation ("Parent"), MEDSCAPE
ENTERPRISES, INC., a Delaware corporation and wholly-owned subsidiary of Parent
("Enterprises" and, together with Parent and Medscape, "Sellers"), and WEBMD
CORPORATION, a Delaware corporation ("Purchaser").
RECITALS:
WHEREAS, on the terms set forth herein, Sellers desire to sell, transfer
and assign to Purchaser, and Purchaser desires to purchase and acquire from
Sellers, certain of the assets of Sellers relating to the Business (as defined
in Exhibit A);
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS; CLOSING; ASSUMED
LIABILITIES; ALLOCATION OF PURCHASE PRICE
Section 1.01 Acquired Assets. On the Closing Date (as defined below),
subject to the terms and conditions of this Agreement, Sellers will sell,
transfer, convey, assign, and deliver to Purchaser all right, title and interest
in, and Purchaser will purchase and pay for, Sellers' right, title and interest
in, to and under the assets set forth on Exhibit B and all other assets and
properties of Sellers used or held for use primarily in connection with the
conduct of the Business, except for Excluded Assets (as defined below) (such
assets and properties of Sellers are collectively, the "Acquired Assets").
Section 1.02 Excluded Assets. Notwithstanding anything contained in Section
1.01 hereof to the contrary, Sellers are not selling, and Purchaser is not
purchasing, any of the following assets (collectively, the "Excluded Assets"):
(a) Medscape's minute books, seals, stock record books, stock
certificates and other similar corporate documents that are not necessary for
Purchaser to operate the Business, and returns of taxes, including all
supporting schedules, attachments, work papers and similar documents, for taxes
accruing on or before the Closing Date, provided, that upon request Purchaser
may have copies thereof;
(b) any cash, cash equivalents, deposit accounts, checks received by
Medscape upon which collection has not been made (except any of the foregoing
that relate to the Accounts Receivable (as defined below)) and long and short
term securities owned by Medscape as of the Closing Date;
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(c) the consideration to be delivered to Medscape, and the rights
which accrue or will accrue to Medscape, under this Agreement;
(d) intercompany accounts between Medscape, on the one hand, and
Parent or any of Parent's Affiliates (other than Subsidiary) on the other hand,
and all rights related thereto; and
(e) each of the assets set forth on Exhibit C hereto.
Section 1.03 Purchase Price; Escrow Amount; Certain Payments. The purchase
price for the Acquired Assets shall be in the aggregate amount of $10,000,000
(the "Purchase Price"). The portion of the Purchase Price to be put into escrow
(the "Escrow Amount") shall be $1,500,000. On the Closing Date, Purchaser shall
pay and deliver to: (a) Medscape, in immediately available funds via wire
transfer to the account of Medscape set forth in Exhibit D, (i) the sum of (A)
the Purchase Price, plus (B) the Severance Reimbursement Amount in satisfaction
of Purchaser's obligations under Section 5.04(c), less (ii) the sum of (A) the
Escrow Amount, plus (B) the Cash Contribution Amount in satisfaction of Sellers'
obligations under Section 5.04(b); and (b) the Escrow Agent (as defined below),
in immediately available funds via wire transfer to the account of the Escrow
Agent set forth in Exhibit D-1 (the "Escrow Account"), the Escrow Amount. Upon
notice to, and approval of, Purchaser in accordance with the Escrow Agreement,
the balance remaining in the Escrow Account that is not the subject of an
outstanding claim (and provided that such release shall not affect Sellers'
indemnification obligations pursuant to Article VI) under Article VI hereof
shall be released to Medscape (or to such other entity as Sellers shall
designate in writing) upon the earlier of (A) twelve (12) months after the
Closing or (B) the closing of an acquisition involving the sale of all or
substantially all of the stock or assets of the MDLI Business by a company that
(i) expressly accepts and agrees, in writing, to guarantee payment and
performance of Sellers' indemnification obligations pursuant to Article VI and
(ii) is rated an investment grade credit rating on a subordinated basis by
either Standard & Poor's or Moody's.
Section 1.04 Ancillary Agreements. Concurrently with the execution of this
Agreement, the respective parties referred to below are taking the following
actions:
(a) Sellers and Purchaser are entering into one or more Assignment and
Assumption Agreements providing for the transfer and assumption of the Acquired
Contracts (as defined below) by Purchaser;
(b) Sellers and Purchaser are entering into such agreements and other
instruments as may be required for Purchaser to assume the Assumed Liabilities
(as defined below);
(c) Sellers are delivering one or more bills of sale and assignment
(the "Bills of Sale") covering the items of personal property included in the
Acquired Assets;
(d) Sellers, Subsidiary, and Purchaser, if necessary, are entering
into a Transition Services Agreement (the "Transition Services Agreement");
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(e) Sellers and Purchaser and Wells Fargo Bank Minnesota, National
Association, as escrow agent (the "Escrow Agent") are entering into an escrow
agreement (the "Escrow Agreement");
(f) Sellers and Purchaser are entering into one or more Intellectual
Property Assignment Agreements;
(g) Parent and Subsidiary are entering into a License Agreement (the
"License Agreement"), in a form reasonably satisfactory to Purchaser, granting
Subsidiary and its current and future affiliates a perpetual, nonexclusive,
irrevocable, worldwide, royalty-free license to certain Medscape Terminology
Portal Subset data; and
(h) the parties are also entering into such other agreements and
delivering such other items as mutually agreed.
Section 1.05 Closing. The closing of the purchase and sale of the Acquired
Assets (the "Closing") shall take place at the offices of Gibson, Dunn &
Crutcher LLP, 200 Park Avenue, New York, New York 10166, or at such other
location as the parties mutually agree, at 10:00 AM, local time, on the date
hereof (the "Closing Date"), or at such other time and on such other date as the
parties mutually agree. The Closing shall be deemed to be effective for tax and
accounting purposes as of the close of business on the Closing Date.
Section 1.06 Liabilities Assumed by Purchaser. As further consideration for
consummation of the transactions contemplated hereby, Purchaser, without further
action by any party, hereby assumes and agrees to pay when due the following and
only the following liabilities of Sellers: (a) all liabilities reflected on the
Pro-Forma Balance Sheet (as defined in Exhibit A) that have not been satisfied
prior to the date of this Agreement and all ordinary course payables and other
ordinary course liabilities incurred in connection with the operation of the
Business after November 30, 2001 (so long as such payables and liabilities are
of the same kind and nature as those included in the Pro-Forma Balance Sheet),
except to the extent that any such payables and other liabilities are Excluded
Liabilities (as defined below); (b) all obligations and liabilities under the
Acquired Contracts (as defined below), except to the extent that any such
liabilities are Excluded Liabilities; and (c) liabilities related to the
Affected Employees (as defined below) in accordance with the provisions of
Section 5.02, except to the extent that any such liabilities are Excluded
Liabilities (collectively, the "Assumed Liabilities").
Section 1.07 Liabilities Not Assumed by Purchaser. Purchaser shall not
assume any debts, obligations or liabilities of Sellers other than the Assumed
Liabilities. Further, notwithstanding Section 1.06, Purchaser shall not assume
any of the debts, obligations or liabilities of Sellers set forth on Exhibit E
(the "Excluded Liabilities"), which shall remain the sole responsibility and
liability of Sellers.
Section 1.08 Allocation of Purchase Price. Not later than 90 days after the
Closing, Purchaser shall provide to Sellers an allocation of the Purchase Price
and the Assumed Liabilities that are liabilities for federal income tax purposes
among the Acquired Assets and the non-compete described in Section 5.03 for
Sellers' review and approval, such approval not to be unreasonably withheld or
delayed. Such allocation, as ultimately agreed (the "Purchase Price
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Allocation Schedule") shall be prepared in a manner required by Section 1060 of
the Code and other applicable law. The Purchase Price Allocation Schedule shall
separately provide an allocation of the Purchase Price allocable to the capital
stock of the Subsidiary and the amount of the liabilities of Subsidiary that are
liabilities for federal income tax purposes among the assets of Subsidiary. The
parties shall each prepare mutually acceptable and substantially identical
initial and supplemental IRS Forms 8594 "Asset Acquisition Statements Under
Section 1060" consistent with the Purchase Price Allocation Schedule which the
parties shall use to report the transactions contemplated by this Agreement to
the applicable Taxing Authorities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING
MEDSCAPE AND THE BUSINESS
Sellers hereby jointly and severally represent and warrant to Purchaser as
follows:
Section 2.01 Organization, Qualifications and Corporate Power; Subsidiary.
(a) Both Medscape and Subsidiary are corporations duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Except as set forth on Schedule 2.01(a), each of Medscape and Subsidiary is duly
licensed or qualified as a foreign corporation to do business and is in good
standing, in each jurisdiction in which it owns or leases any real property or
in which the character and location of its properties and assets owned or leased
or the nature of its activities makes such licensing or qualification necessary.
Each of Medscape and Subsidiary has all requisite corporate power and authority
to own or lease and operate its properties and assets and to carry on its
business as of the Closing Date.
(b) Medscape has previously made available to Purchaser or its counsel
complete and correct copies of the Certificates of Incorporation and Bylaws of
Medscape and Subsidiary, each as in effect on the date hereof. Neither Medscape
nor Subsidiary is in default in the performance, observance or fulfillment of
any provision of its Certificate of Incorporation or Bylaws.
(c) The authorized capital stock of Subsidiary and number of shares of
capital stock of Subsidiary outstanding (the "Subsidiary Equity Securities") are
set forth on Schedule 2.01(c). All of the Subsidiary Equity Securities are
validly issued, fully paid and nonassessable and are owned beneficially and of
record by Medscape free and clear of any liens, pledges, security interests,
mortgages, charges or other encumbrances or adverse claims ("Liens"), and there
are no proxies outstanding or restrictions on voting with respect to any such
shares. There are no contracts, agreements, commitments or arrangements of
Medscape or any of its subsidiaries obligating Medscape (other than pursuant to
this Agreement) to sell or to offer to sell any Subsidiary Equity Securities or
to redeem, purchase or otherwise acquire, or create or impose any Lien on, any
Subsidiary Equity Securities.
(d) Except as set forth on Schedule 2.01(d), Medscape has no
subsidiaries or investments in any Person other than Subsidiary. Except as set
forth on Schedule 2.01(d), none of the subsidiaries named on Schedule 2.01 holds
or controls any assets used in the Business.
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(e) Neither Medscape nor Subsidiary is obligated to make any
investments in any Person.
Section 2.02 Authorization of Agreements, Etc.
(a) Medscape has all requisite corporate power and authority to
execute and deliver (i) this Agreement and (ii) all related documents,
certificates, instruments and agreements to be delivered at Closing or otherwise
in connection with this Agreement to which it is a party (collectively, the
"Ancillary Agreements"), and to perform its obligations hereunder and
thereunder.
(b) The execution, delivery and performance of this Agreement,
including the sale and transfer of the Acquired Assets hereunder, by Medscape
has been duly authorized by all requisite corporate action on the part of
Medscape (including all requisite action of the Board of Directors of Medscape).
Except as set forth on Schedule 2.02, neither the execution and delivery by
Medscape of this Agreement and the Ancillary Agreements to which it is party nor
the performance by Medscape of its obligations hereunder and thereunder,
including the sale and transfer of the Acquired Assets hereunder, will (A)
violate: (i) any provision of Law (as defined below) that is applicable to
Medscape or Subsidiary; (ii) the Certificate of Incorporation or Bylaws of
Medscape or Subsidiary, each as amended and/or restated; or (iii) any Order
applicable to Medscape or Subsidiary, or (B) conflict with, give rise to a right
of acceleration or termination under, result in any payment or benefit becoming
due thereunder, result in the increase of any payment or benefit due thereunder,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any Material Contract (as defined below), note, indenture,
agreement, lease or other material instrument, or (C) result in the creation or
imposition of any Lien upon any Acquired Assets, except for any Permitted Liens
(as defined below).
Section 2.03 Validity. This Agreement and each of the Ancillary Agreements
and other agreements contemplated by this Agreement to which Medscape is a party
have been duly executed and delivered by Medscape and constitute the legal,
valid and binding obligations of Medscape, enforceable against it in accordance
with their respective terms.
Section 2.04 Medscape's Financial Statements.
(a) The following are attached as schedules to this Section 2.04: (i)
a true and correct copy of the Balance Sheet as of November 30, 2001 (the
"Balance Sheet Date") is set forth on Schedule 2.04(a)(i); (ii)a true and
correct copy of the related management operations statements for the Business
with respect to the Balance Sheet as of the Balance Sheet Date is set forth on
Schedule 204(a)(ii); and (iii) Schedule 2.04(a)(iii) sets forth a true and
correct copy of the audited consolidated balance sheet of Parent as of December
31, 2000 and the related audited consolidated statements of operations, changes
in stockholders' equity (deficit) and cash flows for the year then ended,
together with the report thereon of KPMG, LLP, Parent's independent certified
public accountants for the year then ended ((i), (ii) and (iii) collectively,
the "Medscape Financial Statements"). The Medscape Financial Statements, (x) are
in accordance with the Books and Records; (y) have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP"),
applied on a consistent basis in accordance with the
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historical methods, policies, practices, estimations, and judgments of the
Business, consistently applied throughout the periods covered thereby (subject,
in the case of the Balance Sheet and management operations statement set forth
in (i) above, to normal, recurring year-end adjustments); and (z) present fairly
and accurately throughout the periods covered, the assets, liabilities
(including, without limitation, all reserves) and financial condition of the
Business as of the respective dates thereof and the results of operations for
the periods covered thereby. The Pro-Forma Balance Sheet reflects, except as
would not, in the aggregate, materially reduce the amount of assets thereon or
materially increase the amount of liabilities thereon: (1) only the Assumed
Liabilities included on the Balance Sheet (and not the Excluded Liabilities
included on the Balance Sheet), and (2) only the Acquired Assets included on the
Balance Sheet (and not the Excluded Assets included on the Balance Sheet).A
balance sheet of the Business immediately following the Closing, prepared
consistently with the prior policies and practices of the Business, would
reflect liabilities in an aggregate amount that does not exceed 120% of the
highest amount of Total Pro-Forma Liabilities during the period from November
30, 2000 through November 30, 2001. As used in this paragraph, the term "Total
Pro-Forma Liabilities" means the total liabilities that would be reflected on a
balance sheet of the Business as of the last day of any calendar month, in each
case, on a pro-forma basis giving effect to the same types of eliminations and
other adjustments as were made to the Balance Sheet in the preparation of the
Pro-Forma Balance Sheet.
(b) The aggregate amount of liabilities of $1,495,855 (the "COGS
Accrual") reflected on the Pro-Forma Balance Sheet for "Accrued Cost of Sales"
equals or exceeds the amount that Purchaser will be required to pay with respect
to the payables classified under the line item "Accrued Cost of Sales" of the
Business as of November 30, 2001 that it is assuming.
Section 2.05 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.05, since the Balance Sheet Date, Sellers have used commercially
reasonable efforts to preserve the business organization of the Business intact,
to keep available to the Business the services of all current officers and
employees and to preserve the goodwill of the suppliers, customers, employees
and others having business relations with the Business. Except as set forth on
Schedule 2.05, since the Balance Sheet Date, Sellers have (i) conducted the
Business in the ordinary course; (ii) continued to make payments with respect to
obligations of the Business in the ordinary course in accordance with past
practice; and (iii) maintained its assets and properties in at least as good
order and condition as existed on the Balance Sheet Date (other than wear and
tear as may be accounted for by reasonable use) and as is necessary to continue
to conduct the Business. Without limiting the generality of the foregoing,
except as set forth on Schedule 2.05, since the Balance Sheet Date, there has
not been:
(a) individually or in the aggregate, a Material Adverse Effect;
(b) any acquisition by merger, consolidation or purchase of any
business or Person by Medscape or Subsidiary, including by purchase of all or
substantially all of the assets or any material assets or business of any
Person;
(c) any material change in any method of accounting or accounting
practice by the Business except for any such change required by reason of a
concurrent change in GAAP;
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(d) any declaration or payment of any dividends on any shares of
capital stock of Medscape or Subsidiary;
(e) except for such retention incentives between a Seller and
individuals assisting with the transactions contemplated by this Agreement that
are disclosed in letter provided by Medscape to Purchaser dated as of the
Closing Date (the "Retention Incentives") or with respect to any employee of
Sellers that is not an Affected Employee, any: (i) increase in the compensation
payable or to become payable by Sellers or Subsidiary to any Affected Employees
(as defined below) whose total compensation is currently at an annual rate of
more than $75,000 (except for normal periodic increases in the ordinary course
of business consistent with past practice); (ii) bonus, incentive compensation,
service award or other like benefit granted, made or accrued, contingently or
otherwise, for or to the credit of any of the Affected Employees; or (iii) entry
into or amendment of any employment, severance, termination, non-competition,
non-solicitation or confidentiality or similar agreement with any Affected
Employee;
(f) except as set forth in Schedule 2.05(f) or with respect to any
employee other than an Affected Employee, adoption of any new Employee Benefit
Plan (as defined below), except as may be required by applicable law, or
amendment of any existing Employee Benefit Plan in any material respect, except
for changes which are less favorable to participants in such plans or as may be
required by applicable law;
(g) any sale, lease, assignment, transfer or other disposition of any
material assets or material properties of the Business other than in the
ordinary course of the Business;
(h) any cancellation of any material indebtedness or waiver of any
claims or rights of substantial value to Medscape or Subsidiary (or by Parent or
Enterprises, with respect to the Business), or mortgage, pledge or imposition of
any Liens on any material asset or property of Medscape or Subsidiary (or by
Parent or Enterprises, with respect to the Business), or group of assets or
properties that are material in the aggregate;
(i) any amendment, cancellation or termination of any Contract, that,
if in effect on the date hereof, would constitute a Material Contract (as
defined below) (other than any termination of any such Contract upon expiration
of its stated term) or entry into any Contract which is not in the ordinary
course of the Business;
(j) any capital expenditure or the execution of any lease or any
incurring of liability therefor by Medscape or Subsidiary (or by Parent or
Enterprises, with respect to the Business), involving payments in excess of
$10,000 individually or $50,000 in the aggregate;
(k) any revaluation of any of assets of the Business, including
without limitation, writing off notes or accounts receivable or inventory in any
case in excess of reserves;
(l) any damage, destruction or loss (whether or not covered by
insurance) of any material asset or property of the Business adversely affecting
the properties of the Business;
(m) any new, or changes in existing, tax elections for Subsidiary;
7
(n) any creation, assumption, incurrence or guarantee of any
indebtedness for borrowed money;
(o) any delay in paying the obligations of the Business beyond the
corresponding due dates for such payments (except with respect to items being
disputed in good faith in the ordinary course consistent with past practices);
or
(p) any agreement, whether oral or written, by Sellers or Subsidiary
to do any of the foregoing.
Section 2.06 Consents and Approvals; Permits.
(a) Except as set forth on Schedule 2.06(a), no consent, waiver,
agreement, approval, or authorization of, or declaration, filing, notice or
registration to or with, any federal, state, local or foreign government or any
agency, bureau, board, commission, authority, body, court, department, official,
political subdivision, tribunal, non-governmental self-regulatory or
standard-setting authority or other instrumentality ("Governmental Authority")
or other Person or entity (i) is required for the execution, delivery and
performance by Medscape of this Agreement or any of the Ancillary Agreements to
which Medscape is a party, (ii) is necessary in order to ensure the legality,
validity, binding effect or enforceability against Sellers of this Agreement or
any Ancillary Agreement or the consummation of the transactions contemplated
hereby and thereby or (iii) is necessary in order that the Business be conducted
following the Closing Date substantially in the same manner as the Business is
conducted as of the date hereof, other than those consents, waivers, agreements,
approvals, authorizations, declarations, filings, notices or registrations, that
have been obtained or made, as set forth on Schedule 2.06(a).
(b) Sellers and Subsidiary have all material Permits necessary in
order that the Business be conducted following the Closing Date substantially in
the same manner the Business is conducted as of the date hereof. All such
Permits are valid and in full force and effect and are listed on Schedule
2.06(b). Except as would not have, individually or in the aggregate, a Material
Adverse Effect, Medscape and Subsidiary have not violated and are in compliance
with all such Permits.
Section 2.07 Title to Properties, Absence of Liens and Encumbrances.
(a) Except as set forth on Schedule 2.07(a), Sellers have good and
valid title to the Acquired Assets, in each case free and clear of all Liens
other than (w) liens for taxes not yet due and payable, (x) imperfections of
title that do not materially detract from the value or impair the use of the
property subject thereto and (y) liens imposed by law, such as materialmen's,
mechanics', workers', vendors' and (z) other similar liens incurred in the
ordinary course of business for amounts which are not due and payable and as
applicable to any of (w), (x), (y) or (z), which would not, individually or in
the aggregate, have a Material Adverse Effect (the Liens described in clauses
(w), (x), (y) and (z) above being referred to herein as "Permitted Liens").
Subject to the terms of the Assignment and Assumption Agreement entered into
between Sellers and Purchaser, upon consummation of the transactions
contemplated hereby, Purchaser will have acquired good and valid title in and
to, or a valid leasehold interest in, each of the Acquired Assets, free and
clear of all Liens, except for Permitted Liens.
8
(b) Medscape has good and marketable title to the Subsidiary Equity
Securities free and clear of any Liens. Upon consummation of the transactions
contemplated hereby, Purchaser will acquire good and marketable title to the
Subsidiary Equity Securities, free and clear of any Liens (other than any
created by Purchaser).
Section 2.08 Intellectual Property. Except as set forth on Schedule 2.08:
(a) Sellers or Subsidiary solely own all right, title and interest in
and to, or have valid license to use, free and clear of any Liens, the Acquired
Intellectual Property (as defined on Exhibit B);
(b) to the Knowledge of Medscape Parties: (i) all of the Acquired
Intellectual Property used or held for use in the Business is valid and
enforceable; and (ii) neither the conduct of the Business, nor the use of any
Acquired Intellectual Property in the Business, conflicts with or infringes the
Intellectual Property or other rights of any other Person;
(c) except as set forth on Schedule 2.08(c), neither Sellers nor
Subsidiary has received any written notice of any claim or other assertion by
any other Person (A) that (i) has not been resolved or (ii) with respect to
material matters that have been resolved within six (6) months prior to the
Closing, and (B) (x) that the conduct of the Business, or the use of any
Acquired Intellectual Property in the Business, conflicts with or infringes the
Intellectual Property or other rights of any Person; (y) that any conduct of the
Business, other than as currently conducted, or any use of any Acquired
Intellectual Property used in the Business, other than the current use, would
conflict with or infringe the Intellectual Property or other rights of any
Person; or (z) alleging that any Acquired Intellectual Property is restricted in
its use, invalid or unenforceable;
(d) after giving effect to the Transition Services Agreement and the
License Agreement were in effect neither the execution of this Agreement or the
Ancillary Agreements, nor the consummation of the transactions contemplated
hereby and thereby, will materially alter or impair any Acquired Intellectual
Property or any rights associated with such Acquired Intellectual Property;
(e) except as set forth on Schedule 2.08(e), to the Knowledge of
Medscape Parties, no other Person is currently interfering with, infringing
upon, misappropriating, or violating or threatening actions that would interfere
with, infringe upon, misappropriate or violate, any Acquired Intellectual
Property and since six (6) months prior to Closing, no such matter that,
individually or in the aggregate, would have had a Materially Adverse Effect on
the Business has been resolved by the Company;
(f) to the Knowledge of Medscape Parties, Sellers and Subsidiary are
in material compliance with all agreements entered into with other Persons with
respect to Acquired Intellectual Property;
(g) all payments due as of the Closing Date with respect to any
Acquired Intellectual Property, including without limitation any patent or
trademark maintenance or prosecution fees, have been made, and Sellers and
Subsidiary are fully current with respect to any such payments;
9
(h) Sellers and Subsidiary have taken all commercially reasonable
steps (including measures to protect secrecy and confidentiality) to protect
Sellers' and Subsidiary's right, title and interest in and to all Acquired
Intellectual Property, and to assure that any of their employees who have access
to confidential or proprietary information of the Business have a contractual or
legal obligation of confidentiality to Sellers or Subsidiary with respect to
such information, and have an obligation to transfer rights for no additional
consideration in inventions, and authored works, whether or not patented,
patentable, copyrighted or otherwise protectable under the law, made during the
course of their employment using resources of Sellers, or Subsidiary and
primarily relating to the Business; and
(i) With respect to privacy policies, (i) Sellers and Subsidiary are
in compliance in all material respects with the web site privacy policies
concerning the Business existing as of the Closing Date, and at all times prior
to the Closing Date have used commercially reasonable efforts to comply with the
then-existing versions of such web site privacy policies (collectively, the
"Privacy Policies"); (ii) provided that Purchaser complies with its covenant in
Section 5.07 of this Agreement with respect to the Privacy Policies, the
transactions contemplated by this Agreement and the Ancillary Agreements will
not violate any of the Privacy Policies; (iii) there have been no material
changes in any Privacy Policies during the one (1) year prior to the Closing
Date; (iv) neither Sellers nor Subsidiary have received inquiries from the
Federal Trade Commission or any other federal or state governmental agencies
regarding the Privacy Policies, or compliance with the Privacy Policies; (v)
Sellers and Subsidiary have as soon as practicable investigated and resolved any
written (including email) complaints from any web site user regarding the
Privacy Policies, or compliance with the Privacy Policies; and (vi) the Privacy
Policies have not been rejected by any privacy policy certification organization
to which any such Privacy Policy has been submitted.
Section 2.09 Material Contracts. Schedule 2.09 sets forth a complete and
accurate list of all Contracts to which either a Seller or Subsidiary is a party
in the following categories:
(a) each Contract (or with respect to a particular customer, each
group of related Contracts) concerning the Business for the furnishing of
services or the receipt of sponsorship grants by Sellers or Subsidiary involving
annual revenues of more than $75,000 to Sellers, excluding open purchase orders,
or groups of related open purchase orders, from customers of less than $10,000
singly or in the aggregate;
(b) each Contract (or group of related Contracts) concerning the
Business concerning a partnership or joint venture with, or any other investment
in (whether through the acquisition of an equity interest, the making of a loan
or advance or otherwise), any Person;
(c) each Contract (or group of related Contracts) concerning the
Business (A) under which Sellers or Subsidiary have created, incurred, assumed
or guaranteed (or may create, incur, assume or guarantee) indebtedness for
borrowed money, (B) constituting capitalized lease obligations, (C) under which
Sellers or Subsidiary has granted (or may grant) a Lien on any of the Acquired
Assets, other than a Permitted Lien, or (D) under which Sellers or Subsidiary
have incurred any obligations for any performance bonds, payment bonds, bid
bonds, surety bonds, letters of credit, guarantees or similar instruments;
10
(d) each Contract (or group of related Contracts) concerning the
Business with any of the Affected Employees (as defined below), any Affiliate of
Sellers or Subsidiary or any member of any such person's immediate family (A) to
employ or terminate executive officers or other Affected Employees and other
Contracts concerning the Business with present or former officers, directors or
shareholders or other corporate Affected Employees or (B) that will result in
the payment by, or the creation of any commitment or obligation (absolute or
contingent, matured or unmatured) to pay on behalf of Sellers or Subsidiary or
any Affiliate of Sellers or Subsidiary, any severance, termination, "golden
parachute" or other similar payments to any present or former Employee following
termination of employment or otherwise as a result of the consummation of the
transactions contemplated hereby;
(e) each Contract (or group of related Contracts) concerning the
Business under which the consequences of a default or termination could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(f) each Contract (or with respect to a particular vendor, each group
of related Contracts) concerning the Business providing for payments in excess
of $75,000 over the life of such Contract, except for such Contracts that are
cancelable on not more than sixty (60) days' notice by Sellers or Subsidiary
without penalty or increased cost;
(g) each distribution, franchise, sales, commission, consulting agency
or advertising Contract concerning the Business, except for such Contracts that
are cancelable on not more than sixty (60) days' notice by Sellers or Subsidiary
without penalty or increased cost;
(h) each Contract (or group of related Contracts) concerning the
Business, other than the Ancillary Agreements, containing covenants restraining
or limiting the freedom of Sellers or Subsidiary or any officer, director,
shareholder or Affiliate thereof to engage in any line of business or compete
with any person including, without limitation, by restraining or limiting the
right to solicit customers or that could, giving effect to the Closing, restrain
or limit the freedom of Purchaser or any officer, director, shareholder or
Affiliate thereof to engage in any line of business or compete with any person;
(i) each Contract that provides for the Business to be the exclusive
or a preferred provider of any product or service to any Person or recipient of
any product or services of any Person during any period of time or that
otherwise involve the granting by any Person to the Business of exclusive or
preferred rights of any kind or that could, giving effect to the Closing, so
provide with respect to the Purchaser or its Affiliates;
(j) each Contract that provides for any Person to be the exclusive or
a preferred provider of any product or service to the Business or the exclusive
or a preferred recipient of any product or service of the Business during any
period of time or that otherwise involves the granting by the Business of
exclusive or preferred rights of any kind or that could, giving effect to the
Closing, so provide with respect to the Purchaser or its Affiliates;
(k) each option with respect to any property, real or personal, used
or intended for use in the Business whether either Seller or Subsidiary is a
grantor or grantee thereunder;
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(l) each Contract (or group of related Contracts) concerning the
Business relating to commission arrangements with individuals other than
employees of Sellers or Subsidiary;
(m) each Contract (or group of related Contracts) concerning the
Business with any Governmental Authority;
(n) except for standard confidentiality and assignment of invention
agreements that do not include any continuing obligations owed to the assignors,
each Contract concerning the Business the subject matter of which is employment,
consulting, severance, collective bargaining or labor unions;
(o) each other Contract (or group of related Contracts) concerning the
Business not entered into in the ordinary course of business, consistent with
past practice;
(p) any other Contract concerning the Business to which a Seller or
Subsidiary is bound or subject and which represents an aggregate future
liability or right of a Seller or Subsidiary in excess of $75,000 in any one
fiscal year; and
(q) any other Contract providing for sharing, or payments based on, or
measured by, some or all of revenues of the Business.
All of the foregoing, including all amendments or modifications thereto,
are "Material Contracts." Except where otherwise set forth on Schedule 2.09: (i)
each Material Contract is valid, binding and in full force and effect; and is
enforceable against Sellers and, to the Knowledge of Medscape Parties, against
each other party thereto in accordance with its terms, except as the
enforceability thereof may be limited by (A) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally or (B) general
principles of equity, whether considered in a proceeding at law or in equity and
(ii) there is no event which has occurred, exists, or, to the Knowledge of
Medscape Parties, is contemplated, which constitutes or which, with notice, the
happening of any event or the passage of time, would constitute a default or
breach under such Contract by Sellers or any other party thereto, or would cause
the acceleration of any obligation of any party thereto, or would give rise to
any right of termination, modification, acceleration or cancellation thereof.
None of Sellers has received any notice that the parties to any Material
Contract will not fulfill their obligations thereunder in all material respects.
Sellers have made available to Purchaser a true and correct copy of each written
Contract set forth on Schedule 2.09.
Section 2.10 Litigation, Etc. Except as listed on Schedule 2.10, no Action
or Order is pending before any arbitrator or Governmental Authority, or, to the
Knowledge of Medscape Parties, is threatened against or relating to Medscape,
Subsidiary or (solely to the extent such Action or Order could reasonably be
expected to affect the Business) Parent, their respective officers or directors
in their capacities as such or the Acquired Assets.
Section 2.11 Taxes.
(a) Except as set forth on Schedule 2.11(a), (i) each of Sellers and
Subsidiary have duly and timely filed all material returns, declarations,
reports, estimates, and statements
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("Returns") required to be filed by or with respect to Sellers and Subsidiary in
respect of Taxes (or such Returns have been duly and timely filed on behalf of
Sellers and Subsidiary), including, without limitation, any Return required to
be filed by any affiliated group (within the meaning of Section 1504(a) of the
Code or any similar group defined under a similar provision of state, local, or
foreign law) with respect to which Sellers or Subsidiary was a member, for all
periods ending after May 19, 2000 and, to the Knowledge of Medscape Parties, for
all prior periods; (ii) all such Returns for periods ending after May 19, 2000
and, to the Knowledge of Medscape Parties, for all prior periods, were correct
and complete in all material respects as filed (or as subsequently amended);
(iii) all Taxes (as defined below) due and payable for which Sellers or
Subsidiary are liable were paid, or an adequate reserve was established,
consistent with past practice, if any, on the books and records of Sellers or
Subsidiary for the payment of Taxes not yet due and payable; and (iv) Sellers
and Subsidiary have complied with all applicable Laws relating to the payment
and withholding of Taxes and have timely withheld from employee wages and paid
over to the proper governmental authorities when due all amounts required to be
so withheld and paid over.
For purposes of this Agreement, "Taxes" means (i) any federal, state,
local, or foreign net income, alternative or add-on minimum tax, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, license, withholding, payroll, employment, excise, rental, severance,
stamp, occupation, premium, property, or windfall profits taxes, or custom
duties or other taxes, together with any interest or any penalty, addition to
tax or additional amount imposed on or in respect of Sellers or Subsidiary by
any governmental authority responsible for the imposition of any such taxes
("Taxing Authorities"); (ii) liability for the payment of any amounts of the
type described in (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability for payments of such amounts was determined or
taken into account with reference to the liability of any other Person for any
period prior to the Closing Date; and (iii) liability with respect to the
payment of any amounts described in (i) as a result of any express or implied
obligation to indemnify any other Person.
(b) Except as set forth on Schedule 2.11(b), no Return pertaining to
Sellers or Subsidiary is currently being audited or examined by any Taxing
Authority. All assessments made as a result of any examinations of any Returns
pertaining to Sellers or Subsidiary have been fully paid.
(c) Except as set forth on Schedule 2.11(c), (i) no extensions of time
have been granted to Sellers or Subsidiary to file any Return; (ii) no
deficiency or adjustment for any Taxes has been proposed, asserted or assessed
against Sellers or Subsidiary; and (iii) no waiver or consent extending any
statute of limitations for the assessment or collection of Taxes owed by Sellers
or Subsidiary has been executed by Sellers or Subsidiary or on behalf of Sellers
or Subsidiary, nor are any requests for such waivers or consents pending.
(d) Except as set forth on Schedule 2.11(d), Subsidiary is not a party
to any Tax sharing or allocation agreement.
(e) Medscape is not a foreign person within the meaning of Section
1445(f)(3) of the Code.
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(f) Neither Sellers nor Subsidiary has received notice from any
Governmental Authority in a jurisdiction in which the applicable entity does not
file a Return stating that such entity is or may be subject to taxation by that
jurisdiction.
(g) None of the Acquired Assets or the assets of Subsidiary is
property required to be treated as being owned by any other person pursuant to
the "safe harbor lease" provisions of former Section 168(f)(8) of the Code.
(h) None of the Acquired Assets or the assets of Subsidiary directly
or indirectly secures any debt the interest on which is Tax-exempt under Section
103(a) of the Code.
(i) None of the Acquired Assets or the assets of Subsidiary is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(j) Subsidiary has not filed a consent pursuant to Section 341(f) of
the Code, nor agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section 341(f)
of the Code) owned by it.
(k) Subsidiary has not agreed nor is it required to make any
adjustment pursuant to Section 481(a) of the Code by reason of a change in the
accounting method initiated by such entity, and no such entity has knowledge
that the IRS has proposed any such adjustment or change in accounting method.
Section 2.12 Compliance with Law. Except as would not be expected to have,
individually or in the aggregate, a Material Adverse Effect, Sellers and
Subsidiary have complied, and are in compliance with: (a) all applicable laws,
statutes, ordinances, regulations, rules and orders of every Governmental
Authority (collectively "Laws"); and (b) any Orders relating to the Acquired
Assets, business or operations of the Business. Neither any Seller nor
Subsidiary has received any written notice from any Governmental Authority or
any other third party that any Seller or Subsidiary is not currently in
compliance with any applicable Laws or Orders related to the Business.
Section 2.13 Labor Matters.
(a) Neither any Seller nor Subsidiary is a party to or a participant
in any negotiation of any labor or collective bargaining agreement, and there
are no labor or collective bargaining agreements that pertain to any current or
former employee of any Seller who is providing or has provided services to the
Business, or any current or former employee of Subsidiary. No current or former
employee of any Seller who is providing or has provided services to the
Business, or any current or former employee of Subsidiary, is represented by any
labor organization. No labor organization or group of employees of any Seller or
Subsidiary has made a pending demand for recognition on behalf of any current or
former employee of any Seller who is providing or has provided services to the
Business, or any current or former employee of Subsidiary, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Knowledge of Medscape Parties, threatened in
writing to be brought or filed with the National Labor Relations Board or other
labor relations tribunal with respect to any such employee. There is no
organizing activity
14
involving any current or former employee of any Seller who is providing or has
provided services to the Business, or any current or former employee of
Subsidiary, pending or, to the Knowledge of Medscape Parties, threatened in
writing by any labor organization or group of employees of any Seller or
Subsidiary. There are no (x) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (y) material grievances or other material labor disputes pending
or, to the Knowledge of Medscape Parties, threatened against any Seller or
Subsidiary or involving any current or former employee of any Seller who is
providing or has provided services to the Business, or any current or former
employee of Subsidiary. There are no unfair labor practice charges, grievances
or complaints pending or, to the Knowledge of Medscape Parties, threatened
against or involving Sellers or Subsidiary in relation to or by any group of
current or former employees of any Seller who is providing or has provided
services to the Business, or any current or former employee of Subsidiary. There
are no complaints, charges or claims against Sellers or Subsidiary pending or,
to the Knowledge of Medscape Parties, threatened in writing to be brought or
filed with any Governmental Authority based on, arising out of, in connection
with, or otherwise relating to the employment of any individual in relation to
the Business, including any claim for workers' compensation or with respect to
discrimination (and, to the Knowledge of Medscape Parties there are no facts or
information which would give rise thereto). Hours worked by and payments made to
any current or former employees of any Seller who are providing or have provided
services to the Business, or any current or former employee of Subsidiary, have
not been in violation of the federal Fair Labor Standards Act or any other law
dealing with such matters.
(b) Sellers and Subsidiary have complied in all material respects with
all Laws and Orders relating to the hiring and retention of all employees,
leased employees and independent contractors of the Business relating to wages,
hours, labor, employment and employment practices, terms and conditions of
employment, equal employment opportunity, collective bargaining and the payment
of social security and other employment taxes.
(c) The Subsidiary neither employs nor otherwise retains any employees
other than the Subsidiary Employees. Other than the Subsidiary Employees, all
persons who were employees, directors or officers of the Subsidiary on or prior
to the date hereof have been terminated from service with the Subsidiary or
transferred to a Seller on or prior to the date hereof and the Subsidiary has no
further employment relationship, including, without limitation, liability for
severance benefits, with respect to such persons.
Section 2.14 Insurance. All policies of fire, liability, workers'
compensation and other forms of insurance providing insurance coverage for the
Business are listed on Schedule 2.14 hereto, and: (i) a Seller, or Subsidiary,
is a named insured under all such policies; (ii) all premiums with respect
thereto covering all periods up to the Closing Date have been paid; (iii)
neither Sellers nor Subsidiary is in any material default under any of such
policies; and (iv) no notice of cancellation or termination has been received
with respect to any such policy. All such policies are in full force and effect
and will remain in full force and effect until the Closing Date.
Section 2.15 Employee Benefit Plans.
15
(a) Schedule 2.15 lists all pension, retirement, profit sharing,
deferred compensation, bonus, commission, incentive compensation (including
cash, stock and option plans or arrangements), life insurance, health and
disability insurance, hospitalization and all other employee benefit plans,
agreements or arrangements (including, without limitation, any contracts or
agreements with trustees, insurance companies or others relating to any such
employee benefit plans or arrangements) established, maintained or contributed
to by Sellers, Subsidiary or any ERISA Affiliate, or with respect to which any
Seller, Subsidiary or any ERISA Affiliate could have liability, in each case
with respect to the current or former employees, directors or consultants of
Subsidiary or with respect to any current or former employees of any Seller who
are providing or have provided services to the Business (the "Employee Benefit
Plans"). "ERISA Affiliate" shall mean any entity (whether or not incorporated)
which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of an "affiliated
service group" with any Seller or Subsidiary, each as defined in Section 414(b),
(c), (m) or (o) of the Code, or under "common control" with any Seller or
Subsidiary, within the meaning of Section 4001(b)(1) of ERISA.
(b) Medscape has made available to Purchaser or Purchaser's counsel
(i) a true and complete copy of each Employee Benefit Plan, (ii) any employment
agreements and any procedures and policies relating to the employees, directors,
officers or consultants of Subsidiary or any employees of any Seller who are
providing services with respect to the Business, (iii) any procedures and
policies relating to the use of temporary employees and independent contractors
by any Seller or Subsidiary and (iv) any material consulting agreements relating
to any consultants of any Seller or Subsidiary who are providing services
primarily with respect to the Business, the termination of which in any case
requires more than 30 days' notice to such consultant.
(c) The Employee Benefit Plans are and have been maintained in all
material respects in compliance with their terms and the requirements of all
applicable law.
(d) Neither Medscape, Parent, Subsidiary, nor any ERISA Affiliate (i)
maintains or has ever maintained an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) which was (or is) subject to Title IV of ERISA or
Section 412 of the Code or (ii) has ever contributed to, or withdrawn in a
partial or complete withdrawal from, any "multiemployer plan" as defined in
Section 4001(a)(3) or Section 3(37) of ERISA or has any fixed or contingent
liability under Section 4204 of ERISA.
(e) Each Employee Benefit Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and Section 4980B of the
Code at all times.
(f) Neither the execution and delivery of this Agreement or the
Ancillary Agreements by Medscape nor the consummation of the transactions
contemplated hereby or any related transactions will result in any liability to
Purchaser under or with respect to any Employee Benefit Plan except as set forth
in Section 5.02 with respect to the Assumed Employment Agreements.
16
(g) The Employee Benefit Plans were established and administered by
Parent or Medscape and coverage under such plans was extended to employees of
Subsidiary.
(h) As of and including the Closing, Seller, Subsidiary, Parent or any
ERISA Affiliate shall have made all contributions and payments required to be
made by each of them up to and including the Closing with respect to each
Employee Benefit Plan.
(i) None of the Employee Benefit Plans, their related trusts or any
trustee, investment manager or administrator thereof has engaged in a nonexempt
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code.
(j) No Employee Benefit Plan is a "multiple employer plan" as
described in Section 3(40) of ERISA or Section 413(c) of the Code.
(k) Each Employee Benefit Plan and each related trust agreement,
annuity contract or other funding instrument which is intended to be qualified
and tax-exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) has been so qualified during the period from its
adoption to date.
(l) There is no action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitral action,
governmental audit or investigation relating to or seeking benefits under any
Employee Benefit Plan that is pending, threatened or anticipated against any
Seller, Subsidiary, any ERISA Affiliate or any Employee Benefit Plan, and to the
knowledge of Seller, there exist no facts or circumstances that could give rise
to any such action, writ injunction, judgment, decree, claim, suit, litigation,
proceeding, arbitral action, audit or investigation.
(m) Except as set forth on Schedule 2.15(m), none of any Seller,
Subsidiary, or any ERISA Affiliate has any announced plan or legally binding
commitment to create any additional Employee Benefit Plans or to amend or modify
any existing Employee Benefit Plan, except as required by law.
(n) Neither the execution and delivery of this Agreement by the
Sellers, nor the consummation of the transactions contemplated hereby will
result in the acceleration or creation of any rights of any Affected Employee
under any Employee Benefit Plan (including, without limitation, the acceleration
of the vesting or exercisability of any stock options, the acceleration of the
vesting of any restricted stock, the acceleration of the accrual or vesting of
any benefits under any Employee Benefit Plan or the acceleration or creation of
any rights under any severance, parachute or change in control agreement).
(o) Medscape's Operations Committee or its successor has determined
that no employee bonuses are or will be payable to the Hired Employees under any
Employee Benefit Plan, including, without limitation, the bonus program set
forth in that certain document entitled "2001 Bonus Program" dated March 19,
2001.
Section 2.16 Brokers' or Finders' Fees. Sellers have not taken any actions
that would give rise to a claim for fees against Purchaser (or its stockholders)
or Subsidiary on the
17
part of Sellers' professional advisers, including but not limited to Lazard
Freres & Co. LLC (whose fees and expenses are the sole responsibility of
Parent).
Section 2.17 Certain Information Relating to the Business.
(a) The number of users in the United States and outside the United
States of the Medscape.com web site who were registered as physicians as of
November 30, 2001 and for each of the three most recent monthly periods for
which records are available, the number of users in the United States and
outside the United States of the Medscape.com web site registered as physicians
who returned to the Medscape.com web site during that month are set forth on
Schedule 2.17.
(b) The two public web sites of the Business, Medscape.com and
CBSHealthwatch.com (now known as MedscapeHealth.com), have met the performance
statistics set forth on Schedule 2.17 over the time period indicated in that
Schedule.
Section 2.18 Transactions with Certain Persons. Except as set forth on
Schedule 2.18 and as set forth in the Report of Parent to the Securities and
Exchange Commission on Form 10-K for the fiscal year ended December 31, 2000,
Part III, Item 13, and except for regular compensation and remuneration relating
to employment or directorship in the ordinary course of business: (a) no
officer, director or shareholder of Sellers or Subsidiary nor any member of any
such Person's immediate family is currently, or within the last three years has
been, a party to any transaction with Medscape or Subsidiary and (b) no employee
of Medscape or Subsidiary (or any other Affected Employee) nor any member of any
such employee's immediate family is currently, or within the last three years
has been, a party to any material transaction with Medscape or Subsidiary, in
each case, including, without limitation, any Contract or Assumed Lease (as
defined below) (i) providing for the furnishing of services by, (ii) providing
for the rental of real or personal property from or (iii) otherwise requiring
payments to (other than for dividends or distributions to any shareholder of
Medscape or Subsidiary in his or her capacity as such or for services as
officers, directors or employees of Medscape or Subsidiary), any such Person or
any corporation, partnership, trust or other entity in which any such Person has
an interest as a shareholder, officer, director, trustee or partner.
Section 2.19 Condition and Sufficiency of Assets. Except as set forth on
Schedule 2.19 and after giving effect to the Transition Services Agreement and
License Agreement, the Acquired Assets are sufficient for the continued conduct
of the Business after the Closing Date in the same manner the Business is
conducted as of the date hereof. Except as set forth on Schedule 2.19, there are
no assets held by or services performed by Parent or its Affiliates (other than
Medscape or Subsidiary) that relate to the Business. The Acquired Assets in the
aggregate are in such operating condition and repair as is reasonably necessary
for the continued conduct of the Business after the Closing Date in
substantially the same manner as conducted as of the date hereof.
Section 2.20 Employees. Exhibit F-1 identifies all Affected Employees and
separately identifies which Affected Employees are Subsidiary Employees and
which are Seller Employees. Exhibit F-2 identifies the Retained Employees who
are primarily engaged in the Business or who, for the avoidance of doubt, it is
necessary to list as Retained Employees.
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Section 2.21 Real Property.
(a) Neither Medscape nor Subsidiary owns any real property.
(b) Schedule 2.21(b) lists all real property (including all land and
buildings) which is leased by Medscape or Subsidiary as lessee or sublessee (the
"Leased Property"). Medscape or Subsidiary have delivered or made available to
Purchaser complete and accurate copies of the written leases and subleases for
all Leased Property, including all amendments and modifications pursuant to
which Medscape or Subsidiary leases the Leased Property (the "Assumed Leases").
Except as disclosed in Schedule 2.21(b), none of Sellers nor Subsidiary has
received notice of, or has knowledge of, condemnation or eminent domain
proceedings pending or threatened against any Leased Property. Other than for
exceptions to the following which are set forth on Schedule 2.21(b):
(c) Medscape or Subsidiary has good and valid leasehold title to the
Leased Property pursuant to the Assumed Leases, the Assumed Leases are in full
force and effect and are valid, binding and enforceable in accordance with their
respective terms;
(d) No material amount payable under any Assumed Lease is past due
beyond any applicable cure period except those contested as due and owing under
a lease;
(e) Medscape and Subsidiary are in compliance in all material respects
with all covenants, commitments and obligations on their part to be performed or
observed under the Assumed Leases and, to the Knowledge of Medscape Parties,
there is no failure by any other party to such Assumed Leases to comply in all
material respects with all of its commitments and obligations;
(f) None of Sellers or Subsidiary has received any written notice of a
material default (which has not been cured), offset or counterclaim under any
Assumed Lease; and
(g) Neither Medscape nor Subsidiary has subleased, assigned,
mortgaged, pledged or otherwise encumbered its interest under any Assumed Lease
or entered into any license, sublease or occupancy agreement with respect to any
Leased Property, nor has Medscape or Subsidiary entered into any agreement or
commitment to take any such action.
(h) The Leased Property is all of the real property used in the
Business as currently conducted.
(i) Except as set forth on Schedule 2.21(c), all Improvements owned,
leased, or used by Medscape or Subsidiary on the Leased Property are in
reasonably good condition and repair in all material respects (normal wear and
tear excepted), and such Improvements (including their rooftops and building
systems) are, to the Knowledge of Medscape Parties, free from material
structural defects.
(j) Except as set forth on Schedule 2.21(c), the Leased Property is
sufficiently supplied in all material respects with utilities and other services
as necessary for the operation of the Leased Property as currently operated,
including adequate water, storm and sanitary sewer,
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gas, and electricity. No Improvement or portion thereof is dependent for its
access, operation or utility on any land, building or other Improvement not
included in the Leased Property.
(k) Except as set forth on Schedule 2.21(c), neither Medscape nor
Subsidiary is a party to or otherwise bound by any leasing commission or
brokerage agreements with respect to any Assumed Leases for which Medscape or
Subsidiary or any of their Affiliates will have any liability.
(l) Except as disclosed in Schedule 2.21(c), Medscape and Subsidiary
with respect to the Leased Property are in material compliance with all material
zoning, building, fire, health and other similar codes or ordinances.
Section 2.22 Environmental Compliance. Sellers are in and have at all times
been in compliance in all respects with all applicable Laws and Orders
(including Permit requirements) relating to the protection of health or the
environment in connection with the ownership, operation and condition of the
Acquired Assets and the Business ("Environmental Laws") except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the Knowledge of Medscape Parties, there are no present facts
or circumstances which would adversely affect or render significantly more
costly in the future compliance of the Business with existing Environmental
Laws.
Section 2.23 Books and Records. Sellers and Subsidiary have made and kept
Books and Records and accounts which, in reasonable detail, accurately and
fairly reflect the activities of the Business in all material respects. The
minute books of Medscape and Subsidiary are true, correct and complete and
contain copies of the minutes and records of, and accurately and adequately
reflect, all meetings and actions taken by written consent of the boards of
directors, committees of the boards of directors and shareholders of Medscape
and Subsidiary. The copies of the stock record books and the stock certificate
books of Medscape and Subsidiary are true, correct and complete and accurately
and adequately reflect all transactions in connection with Medscape's and
Subsidiary's capital stock through and including the date hereof.
Section 2.24 No Other Liabilities or Contingencies. There exist no
liabilities, obligations or commitments of any nature (whether direct or
indirect, known or unknown, absolute or contingent, liquidated or nonliquidated,
due or to become due, accrued or unaccrued, matured or unmatured), of either
Medscape or Subsidiary, or of Parent that relate to the Business, except
liabilities: (i) reflected on the Pro-Forma Balance Sheet as at the Balance
Sheet Date; (ii) that were incurred after the Balance Sheet Date in the ordinary
course of business, consistent with past practice or under the Acquired
Contracts (none of which relates to (A) breach of a Contract to which a Seller
or Subsidiary is a party, (B) breach of warranty, (C) tort, (D) infringement,
(E) violation of any Law or Order, or (F) any Action); (iii) related to the
Affected Employees in accordance with the provisions of Section 5.02, except to
the extent such liabilities are Excluded Liabilities; and (iv) that are set
forth on Schedule 2.24. There are no outstanding obligations of either Medscape
or Subsidiary, or of Parent or Enterprises that relate to the Business, to any
person: (x) to provide promotional services, advertising or other media services
other than on the internet portals of Medscape.com and MedscapeHeath.com
(previously CBSHealthwatch.com) or (y) that are unable to be fulfilled due to
the termination of
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that certain Advertising and Promotion Agreement (and all ancillary agreements
thereto), between Medscape and CBS Corporation, dated as of August 3, 1999.
Section 2.25 Customers. Set forth on Schedule 2.25(a) are the names of the
ultimate parent entities of the ten (10) largest customers of the Business
ranked by the revenue from each ultimate parent entity and its subsidiaries,
recognized by the Business during the fiscal year ended December 30, 2000 and
during the nine-month period ended September 30, 2001, and the corresponding
amount of revenue Sellers recognized during such time as reflected on the
Medscape Financial Statements. As of December 6, 2001, Medscape or Subsidiary
has (i) entered into signed contracts or (ii) received firm commitments,
including oral commitments, for orders resulting in revenue expected to be
recognized by the Business in the fiscal year 2002 from the customers as set
forth on Schedule 2.25(b). The total revenue, as of December 6, 2001, expected
to be recognized for each customer during the three month periods in the year
2002 ending March 31, June 30, September 30, and December 31, respectively, are
set forth on Schedule 2.25(b). Neither Sellers nor Subsidiary has received any
actual notice that any of the customers set forth on Schedule 2.25(b) do not
intend to pay to Sellers or Subsidiary the full amount of revenue set forth on
Schedule 2.25(b).
Section 2.26 Vendors. Set forth on Schedule 2.26 are the names and
addresses of the ten (10) vendors from whom the Business purchased the most (as
measured by transactions processed through Accounts Payable) goods or services
during the fiscal year ended December 31, 2000, and during the nine-month period
ended September 30, 2001 and the approximate dollar amounts involved related to
each vendor (see notes set forth on Schedule 2.26 for clarification). Except as
disclosed on Schedule 2.26, none of Sellers or Subsidiary has received any
actual notice that any such vendors will not sell services, supplies,
merchandise and other goods to the Business at any time after the Closing Date
on terms and conditions substantially similar to those currently in effect,
subject only to general and customary price increases.
Section 2.27 Bank Accounts. Set forth on Schedule 2.27 is an accurate and
complete list showing the name and address of each bank, trust company, savings
and loan association and brokerage firm in which Medscape or Subsidiary has an
account or safe deposit box, the number of any such account or box and the names
of all persons authorized to draw thereon or to have access thereto.
Section 2.28 Solvency. Each of the Sellers represents and warrants that it
is Solvent as of the Closing, both before and after giving effect to the
transactions contemplated by this Agreement. Each of the Sellers further
represents and warrants that it has received reasonably equivalent value and
consideration that is fair under the circumstances in exchange for the
consideration provided to it by Purchaser pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING PARENT AND ENTERPRISES
Sellers hereby jointly and severally represent and warrant to Purchaser as
follows:
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Section 3.01 Parent Organization, Qualifications and Corporate Power.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oregon.
(b) Parent has previously made available to Purchaser or its counsel
complete and correct copies of its Certificate of Incorporation and Bylaws, each
as in effect on the date hereof. Parent is not in default in the performance,
observance or fulfillment of any provision of its Certificate of Incorporation
or Bylaws.
Section 3.02 Authorization of Agreements, Etc. With Respect To Parent
(a) Parent has all requisite corporate power and authority to execute
and deliver (i) this Agreement and (ii) all Ancillary Agreements to which it is
a party, and to perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance of this Agreement by
Parent, including the sale of the Acquired Assets hereunder, has been duly
authorized by all requisite corporate action on the part of Parent (including
all requisite action of the Board of Directors of Parent). Neither the execution
and delivery by Parent of this Agreement and the Ancillary Agreements to which
it is party nor the performance by Parent of its obligations hereunder and
thereunder, including the sale and transfer of the Acquired Assets by Sellers
hereunder, will: (A) violate: (i) any provision of Law that is applicable to
Parent; (ii) the Certificate of Incorporation or Bylaws of Parent, each as
amended and/or restated; or (iii) any Order applicable to Parent except as would
not have, individually or in the aggregate, a Material Adverse Effect; (B)
conflict with or result in the increase of any payment or benefit due
thereunder, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contract, note, indenture, agreement, lease or
other instrument to which Parent is a party except as would not have,
individually or in the aggregate, a Material Adverse Effect; or (C) result in
the creation or imposition of any Lien (except for any Permitted Liens) upon (1)
any of the properties or assets of Parent, except as would not have,
individually or in the aggregate, a Material Adverse Effect or (2) the Acquired
Assets.
Section 3.03 Validity With Respect To Parent. This Agreement and each of
the Ancillary Agreements and other agreements contemplated by this Agreement to
which Parent is a party have been duly executed and delivered by Parent and
constitute the legal, valid and binding obligations of Parent, enforceable
against it in accordance with their respective terms except where the
enforceability thereof may be limited by (A) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally or (B) general
principles of equity, whether considered in a proceeding at law or in equity.
Section 3.04 Consents and Approvals With Respect To Parent. Except as set
forth on Schedule 2.06(a), no consent, waiver, agreement, approval or
authorization of, or declaration, filing, notice or registration to or with, any
Governmental Authority or any other Person or entity (i) is required for the
execution, delivery and performance by Parent of this Agreement or any of the
Ancillary Agreements to which Parent is a party, (ii) is necessary in
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order to ensure the legality, validity, binding effect or enforceability against
Parent of this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby and thereby or (iii) is necessary in order that
the Business be conducted following the Closing Date substantially in the same
manner as the Business is conducted as of the date hereof, other than those
consents, waivers, agreements, approvals, authorizations, declarations, filings,
notices or registrations, that have been obtained or made, as set forth on
Schedule 2.06(a).
Section 3.05 Brokers' or Finders' Fees With Respect To Parent. Sellers have
not taken any actions that would give rise to a claim for fees against Purchaser
(or its stockholders) or Subsidiary on the part of Sellers' professional
advisers, including but not limited to Lazard Freres & Co. LLC (whose fees and
expenses are the sole responsibility of Parent).
Section 3.06 Tax Matters With Respect To Parent. Parent is the common
parent of the affiliated group (within the meaning of Section 1504(a) of the
Code) that includes Enterprises, Medscape and Subsidiary.
Section 3.07 Enterprises Organization, Qualifications and Corporate Power.
(a) Enterprises is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) Enterprises has previously made available to Purchaser or its
counsel complete and correct copies of its Certificate of Incorporation and
Bylaws, each as in effect on the date hereof. Enterprises is not in default in
the performance, observance or fulfillment of any provision of its Certificate
of Incorporation or Bylaws.
Section 3.08 Authorization of Agreements, Etc. With Respect To Enterprises.
(a) Enterprises has all requisite corporate power and authority to
execute and deliver (i) this Agreement and (ii) all Ancillary Agreements to
which it is a party, and to perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance of this Agreement by
Enterprises, including the sale of the Acquired Assets hereunder, has been duly
authorized by all requisite corporate action on the part of Enterprises
(including all requisite action of the Board of Directors of Enterprises).
Neither the execution and delivery by Enterprises of this Agreement and the
Ancillary Agreements to which it is party nor the performance by Enterprises of
its obligations hereunder and thereunder, including the sale and transfer of the
Acquired Assets by Sellers hereunder, will: (A) violate: (i) any provision of
Law that is applicable to Enterprises; (ii) the Certificate of Incorporation or
Bylaws of Enterprises, each as amended and/or restated; or (iii) any Order
applicable to Enterprises except as would not have, individually or in the
aggregate, a Material Adverse Effect; (B) conflict with or result in the
increase of any payment or benefit due thereunder, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contract, note, indenture, agreement, lease or other instrument to which
Enterprises is a party except as would not have, individually or in the
aggregate, a Material Adverse Effect; or (C) result in the creation or
imposition of any Lien (except for any
23
Permitted Liens) upon (1) any of the properties or assets of Enterprises, except
as would not have, individually or in the aggregate, a Material Adverse Effect
or (2) the Acquired Assets.
Section 3.09 Validity With Respect To Enterprises. This Agreement and each
of the Ancillary Agreements and other agreements contemplated by this Agreement
to which Enterprises is a party have been duly executed and delivered by
Enterprises and constitute the legal, valid and binding obligations of
Enterprises, enforceable against it in accordance with their respective terms
except where the enforceability thereof may be limited by (A) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or
similar laws in effect which affect the enforcement of creditors' rights
generally or (B) general principles of equity, whether considered in a
proceeding at law or in equity.
Section 3.10 Consents and Approvals With Respect To Enterprises. Except as
set forth on Schedule 2.06(a), no consent, waiver, agreement, approval or
authorization of, or declaration, filing, notice or registration to or with, any
Governmental Authority or any other Person or entity (i) is required for the
execution, delivery and performance by Enterprises of this Agreement or any of
the Ancillary Agreements to which Enterprises is a party, (ii) is necessary in
order to ensure the legality, validity, binding effect or enforceability against
Enterprises of this Agreement or any Ancillary Agreement or the consummation of
the transactions contemplated hereby and thereby or (iii) is necessary in order
that the Business be conducted following the Closing Date substantially in the
same manner as the Business is conducted as of the date hereof, other than those
consents, waivers, agreements, approvals, authorizations, declarations, filings,
notices or registrations, that have been obtained or made, as set forth on
Schedule 2.06(a).
Section 3.11 Brokers' or Finders' Fees With Respect To Enterprises.
Enterprises has not taken any actions that would give rise to a claim for fees
against Purchaser (or its stockholders) or Subsidiary on the part of
Enterprises' professional advisers, including but not limited to Lazard Freres &
Co. LLC (whose fees and expenses are the sole responsibility of Parent).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
Section 4.01 Power and Authority.
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
(b) Purchaser has previously made available to Sellers or their
counsel complete and correct copies of its Certificate of Incorporation and
Bylaws, each as in effect on the date hereof. Purchaser is not in default in the
performance, observance or fulfillment of any provision of its Certificate of
Incorporation or Bylaws.
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(c) Purchaser has full power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party, and to perform
its obligations hereunder and thereunder.
Section 4.02 Authorization of Agreements, Etc. The execution, delivery and
performance of this Agreement by Purchaser has been duly authorized by all
requisite action on the part of Purchaser. Neither the execution and delivery by
Purchaser of this Agreement and the Ancillary Agreements to which Purchaser is a
party nor the performance by Purchaser of its obligations hereunder and
thereunder will (A) violate: (i) any provision of Law that is applicable to
Purchaser; (ii) the Certificate of Incorporation or Bylaws of Purchaser, each as
amended and/or restated; or (iii) any Order applicable to Purchaser except as
would not have, individually or in the aggregate, a material adverse effect on
Purchaser's ability to complete the transactions contemplated hereby; (B)
conflict with or result in the increase of any payment or benefit due
thereunder, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any note, indenture, agreement, lease or other
instrument to which Purchaser is a party except as would not have, individually
or in the aggregate, a material adverse effect on Purchaser's ability to
complete the transactions contemplated hereby; or (C) result in the creation or
imposition of any lien upon any of the properties or assets of Purchaser except
as would not have, individually or in the aggregate, a material adverse effect
on Purchaser's ability to complete the transactions contemplated hereby.
Section 4.03 Validity. This Agreement and the Ancillary Agreements and
other agreements contemplated by this Agreement to which Purchaser is a party
have been duly executed and delivered by Purchaser and constitute the legal,
valid and binding obligation of Purchaser, enforceable against it in accordance
with their respective terms except where the enforceability thereof may be
limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar laws in effect which affect the enforcement of
creditors' rights generally or (B) general principles of equity, whether
considered in a proceeding at law or in equity.
Section 4.04 Governmental Approvals. No order, authorization, approval or
consent from, or filing with, any Governmental Authority or other authority
having jurisdiction over Purchaser is required for the execution, delivery and
performance by Purchaser of this Agreement or any Ancillary Agreement to which
Purchaser is a party or is necessary in order to ensure the legality, validity,
binding effect or enforceability against Purchaser of this Agreement or any such
Ancillary Agreement.
Section 4.05 Brokers' or Finders' Fees. Purchaser has not taken any actions
that would give rise to a claim for fees against Sellers (or their stockholders)
on the part of Purchaser's professional advisers.
Section 4.06 Litigation. There is no Action or Order pending before any
arbitrator or Governmental Authority, or, to the knowledge of Purchaser, is
threatened against or affecting Purchaser which might enjoin or prevent the
consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements.
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ARTICLE V
COVENANTS
Section 5.01 No Solicitation.
(a) (i) Until the earlier of: (A) thirty-six (36) months after the
Closing Date or (B) six (6) months after a Change of Control of Parent, Sellers
agree that they shall not (and shall not permit their respective Representatives
or Affiliates on their behalf to), directly or indirectly: (AA) induce or
attempt to induce any of the Affected Employees to leave the employ of, or
violate the terms of their contracts or any employment arrangements with
Purchaser or Subsidiary, provided, however, that following a Change of Control
of Parent, Parent (and its Representatives and Affiliates) may employ an
Affected Employee who contacts Parent on his or her own initiative or as a
result of a general solicitation to the public or a general advertising or from
the use of an independent employment agency or search firm whose efforts are not
specifically directed at such Affected Employee and (BB) (1) interfere with the
business of any Person with respect to the Business, where to the Knowledge of
Medscape Parties such Person is a client or sponsor of the Business, whether or
not Sellers had personal contact with such Person or (2) knowingly, after due
inquiry, induce or attempt to induce any client or sponsor of the Business, or
any supplier, licensee, vendor, or Person having a business relation with the
Business, to cease doing business with Purchaser or in any way interfere or
attempt to interfere with the relationship between Purchaser and any such
customer, supplier, licensee, vendor, or Person having a business relation with
the Business.
(ii) Until the earlier of (A) six months after the Closing Date
and (B) an occurrence of a Change of Control of Parent, Purchaser agrees that it
shall not (and shall not permit its Representatives or Affiliates on their
behalf to), directly or indirectly induce or attempt to induce any of the
officers or employees of Parent to leave the employ of, or violate the terms of
their contracts or any employment arrangements with Parent; provided, however,
that Purchaser may employ any Person who contacts Purchaser on his or her own
initiative or as a result of a general solicitation to the public or general
advertising or from the use of an independent employment agency or search firm
whose efforts are not specifically directed at such Persons and provided further
that Purchaser may employ the Affected Employees as set forth herein.
(b) In the event the agreements in Sections 5.01(a)(i) or (a)(ii), as
the case may be, shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its extending for too great a period of time or by
reason of its being too extensive in any other respect, it shall be interpreted
to extend only over the maximum period of time for which it may be enforceable,
and/or to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
(c) The parties acknowledge that provisions of this Section 5.01 are
reasonable in time and scope and necessary to protect the interests of such
parties, and any breach of the covenants contained in this Section 5.01 will
cause irreparable damage to such parties, the exact amount of which will be
difficult to ascertain, and that the remedies at law for any such breach will be
inadequate. Accordingly, the parties agree that if either party breaches the
covenant contained in this Section 5.01, in addition to any other remedy which
may be available at law or
26
in equity, such party shall be entitled to specific performance and injunctive
relief, without posting bond or other security, and without the necessity of
proving actual damages.
Section 5.02 Employee Matters.
(a) On and effective as of the Closing, Purchaser shall become the
employer of all of the employees of the Subsidiary set forth on Exhibit F-1 (the
"Subsidiary Employees") and shall make offers of employment to the employees of
Sellers set forth on Exhibit F-1 (such employees of Sellers, the "Seller
Employees" and together with the Subsidiary Employees, the "Affected
Employees"), at base wages and salaries no less favorable than the base wages
and salaries paid by a Seller to such employees as of the Closing and, effective
January 1, 2002 with employee benefit plans and arrangements which provide
benefits which are no less favorable in the aggregate to the Affected Employees
than those employee benefit plans and arrangements provided to employees of
Purchaser which are similarly situated to the Affected Employees. Nothing in
this Agreement shall (x) prevent Purchaser from altering the terms, salary,
wages or benefits after the Closing of any Seller Employee who accepts such
offer of employment or of any Subsidiary Employee (such Seller Employees who
accept such offers of employment and Subsidiary Employees collectively, the
"Hired Employees"), except as specifically provided herein or (y) create any
obligation on the part of Purchaser to continue the employment of any Hired
Employee for any definite period of time following the Closing.
(b) For purposes of determining eligibility to participate or vesting
(but not for purposes of benefit accrual) where length of service is relevant
under any employee benefit plan or arrangement of Purchaser, Hired Employees
shall receive credit for service with Sellers and Subsidiary to the same extent
such credit was granted under the plans of any Seller, except where such credit
would result in duplication of benefits. Hired Employees shall not be subjected
to waiting periods, pre-existing condition exclusions, or similar limitations in
coverage under any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) or similar arrangement of Purchaser to the extent the conditions or
requirements for coverage were satisfied with respect to Sellers' or
Subsidiary's plans or arrangements as of the Closing Date.
(c) Sellers shall assign to Purchaser (or one of its subsidiaries) the
employment agreements set forth on Schedule 5.02(c) (the "Assumed Employment
Agreements"). Sellers shall each act in good faith and use its commercially
reasonable efforts to ensure that the Seller Employees accept Purchaser's offer
of employment.
(d) As soon as practicable after the Closing Date, the Sellers shall
transfer all employment and personnel files relating to the Hired Employees.
(e) Notwithstanding anything to the contrary in this Agreement, the
obligations under this Section 5.02 shall survive the Closing indefinitely.
Section 5.03 Sellers Non-Compete.
(a) In consideration of, among other things, the Purchase Price,
except for activities anticipated by the Transition Services Agreement and
License Agreement (as defined below) and the businesses of Parent included in
MDLI Business, for the period from the date hereof through the third anniversary
of the date hereof, Sellers shall not (and shall not permit
27
their subsidiaries to) directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing, or control of, be employed by or lend credit to any
business, firm, corporation, partnership, association, joint venture or other
entity that engages in or conducts a business based in any country worldwide
that competes with or is in the same business as the Business (the "Competing
Business"); provided, however, that Sellers may own, collectively, less than
five percent (5%) of the outstanding shares of any class of securities of any
enterprise (but without otherwise participating in the activities of such
enterprise) if such securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended. Notwithstanding this Section 5.03, in the event of a
merger, sale of assets, sale or business combination involving Parent and an
unrelated third party, the surviving entity of such merger, sale of assets, sale
or business combination shall not be obligated by the provisions of this Section
5.03; provided, however, that such merger, sale of assets, sale or business
combination shall have been a bona fide transaction not undertaken for the
purpose of avoiding the provisions of this Section 5.03.
(b) In the event the agreement in this Section 5.03 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
(c) Sellers acknowledge that provisions of this Section 5.03 are
reasonable in time and scope and necessary to protect the interests of
Purchaser, and any breach of the covenants contained in this Section 5.03 will
cause irreparable damage to Purchaser or the Business, the exact amount of which
will be difficult to ascertain, and that the remedies at law for any such breach
will be inadequate. Accordingly, Sellers agree that if Parent or Medscape
breaches the covenant contained in this Section 5.03, in addition to any other
remedy which may be available at law or in equity, Purchaser shall be entitled
to specific performance and injunctive relief, without posting bond or other
security, and without the necessity of proving actual damages.
Section 5.04 Miscellaneous.
(a) Immediately prior to the Closing, the principal amount of any note
payable and all other intercompany receivables, together with any accrued
interest payable by the Subsidiary to Medscape or Parent (or any of their
Affiliates) shall be cancelled.
(b) On or prior to the Closing Date, Sellers shall contribute to
Subsidiary cash in the amount set forth on Exhibit G (the "Cash Contribution
Amount").
(c) On or prior to the Closing Date, Purchaser shall reimburse Sellers
for certain severance payments to be made by Sellers in the amount set forth on
Exhibit G ("the Severance Reimbursement Amount").
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Section 5.05 Confidentiality.
(a) Sellers.
(i) Sellers acknowledge that, in connection with the operation of
the Business prior to Closing, Sellers had access to confidential information
relating to the Business, including technical, manufacturing, financial or
marketing information, lists of vendors, suppliers and customers, ideas,
methods, developments, inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by Sellers or
Subsidiary or their respective Representatives which contain or otherwise
reflect or are generated from such information ("Confidential Information").
(ii) For three (3) years after the Closing Date or in perpetuity
for any confidential Information that constitutes a trade secret under
applicable law, Sellers shall treat all Confidential Information as
confidential, preserve the confidentiality thereof and not use or disclose any
Confidential Information, except to their respective Representatives and
Affiliates who need to know such Confidential Information in connection with the
transactions contemplated hereby including the activities anticipated by the
Transition Services Agreement and License Agreement. Sellers shall use their
respective commercially reasonable efforts to cause their Representatives to
treat all Confidential Information as confidential, preserve the confidentiality
thereof and not use or disclose any Confidential Information. Sellers shall be
responsible for any breach of this Agreement by any of their respective
Representatives or Affiliates. If, however, Confidential Information is
disclosed, Sellers shall immediately notify Purchaser in writing and take all
reasonable steps required to prevent further disclosure.
(iii) Notwithstanding the provisions of this Section 5.05(a),
Sellers shall be permitted to disclose any Confidential Information pursuant to
the requirement or request of a Governmental Authority to the extent such
disclosure is required by a valid Law or Order and prompt notice is given by
Sellers to Purchaser of any such requirement or request. Sellers shall
reasonably cooperate with Purchaser (at Purchaser's expense) in seeking a
protective order or exemption from such requirement or request. Confidential
Information shall not include information that is or becomes publicly available
without fault of Sellers or their respective Representatives.
(b) Purchaser.
(i) Purchaser acknowledges that, in connection with its
investigation of the operation of the Business prior to Closing, Purchaser may
have had access to confidential information relating to the MDLI Business,
including technical, manufacturing, financial or marketing information, lists of
vendors, suppliers and customers, ideas, methods, developments, inventions,
improvements, business plans, trade secrets, scientific or statistical data,
diagrams, drawings, specifications or other proprietary information relating
thereto, together with all analyses, compilations, studies or other documents,
records or data prepared by Parent or its Representatives or Affiliates which
contain or otherwise reflect or are generated from such information ("Parent
Confidential Information").
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(ii) For three (3) years from after the Closing Date, or in
perpetuity for any Parent Confidential Information that constitutes a trade
secret under applicable law, Purchaser shall treat all Parent Confidential
Information as confidential, preserve the confidentiality thereof and not use or
disclose any Parent Confidential Information, except to its Representatives and
Affiliates who need to know such Parent Confidential Information in connection
with the transactions contemplated hereby including the activities anticipated
by the Transition Services Agreement and License Agreement. Purchaser shall use
commercially reasonable efforts to cause its Representatives to treat all Parent
Confidential Information as confidential, preserve the confidentiality thereof
and not use or disclose any Parent Confidential Information. Purchaser shall be
responsible for any breach of this Agreement by any of its Representatives or
Affiliates. If, however, Parent Confidential Information is disclosed, Purchaser
shall immediately notify Parent in writing and take all reasonable steps
required to prevent further disclosure.
(iii) Notwithstanding the provisions of this Section 5.05(b),
Purchaser shall be permitted to disclose any Parent Confidential Information
pursuant to the requirement or request of a Governmental Authority to the extent
such disclosure is required by a valid Law or Order and prompt notice is given
by Purchaser to Parent of any such requirement or request. Purchaser shall
reasonably cooperate with Parent (at Parent's expense) in seeking a protective
order or exemption from such requirement or request. Parent Confidential
Information shall not include (i) information that is or becomes publicly
available without fault of Purchaser or its Representatives; (ii) was or becomes
available to Purchaser on a non-confidential basis from a source other than
Parent, provided that such source is not known to Purchaser to be making such
disclosure in violation of a confidentiality obligation to Parent; or (iii) is
independently developed by Purchaser, without reference to the Parent
Confidential Information.
(c) Acknowledgement. Each party hereto acknowledges that the other
parties and their subsidiaries are engaged in businesses similar to or
competitive with those of such party. Nothing in this Agreement (other than the
provisions of Section 5.03) shall limit or restrict any party hereto from
engaging in such businesses or competing with the other parties and its
subsidiaries except that the parties shall be bound by their agreements herein
as they relate to the Confidential Material and Parent Confidential Material, as
applicable.
Section 5.06 Matters Related to Subsidiary.
(a) Immediately prior to the Closing, Subsidiary and Medscape shall
have entered into (i) one or more Bills of Sale covering certain Excluded Assets
to be transferred by Subsidiary to Medscape (the "Portals Bill of Sale") and
(ii) such agreements and other instruments as may be required for Sellers to
assume certain Excluded Liabilities (the "Portals Assignment and Assumption
Agreement").
(b) Prior to the Closing Date, all right, title and interest in and to
the trademarks and service marks listed on Exhibit B-1, including without
limitation the goodwill symbolized thereby and all applications and
registrations therefor, worldwide, shall be assigned by Medscape or Parent, as
applicable, to Subsidiary.
Section 5.07 Privacy Policies. From and immediately after the Closing,
Purchaser shall comply with the applicable provisions of the Privacy Policies
(unless and until
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amended), including without limitation those portions applicable to a transfer
of information as part of a sale of assets and those portions applicable to an
amendment of such Privacy Policies. Notwithstanding anything to the contrary in
this Agreement, the obligations of Purchaser under this section shall survive
the Closing indefinitely.
Section 5.08 Release. Effective as of the Closing, the Sellers and their
Affiliates each release Subsidiary from any and all claims, liabilities,
obligations, damages, expenses and other amounts of every kind or description
arising or existing prior to the Closing Date.
ARTICLE VI
SURVIVAL; INDEMNITY
Section 6.01 Survival. The representations and warranties contained herein
and in the Ancillary Agreements shall survive (notwithstanding any investigation
made at any time by or on behalf of the other party) until the date that is
twelve (12) months after the Closing Date; provided that: (a) the
representations and warranties contained in Sections 2.01 (Organization,
Qualifications and Corporate Power; Subsidiary), 2.02 (Authorization of
Agreements, Etc.) (other than Sections 2.02(b)(B) and (C)), 2.03 (Validity),
2.04(b) (Medscape's Financial Statements), 2.07(b) (Title to Properties, Absence
of Liens and Encumbrances) and 2.16 (Brokers' or Finders' Fees), Article III
(Representations and Warranties Regarding Parent and Enterprises) (other than
Sections 3.02(b)(B) and (C), 3.04 (Consents and Approvals With Respect To
Parent), 3.08(b)(B) and (C) and 3.10 (Consents and Approvals With Respect To
Enterprises), and Article IV (Representations and Warranties of Purchaser)
(other than Section 4.04 (Government Approvals)) and claims arising out of fraud
(each an "Unlimited Representation Claim") shall survive the Closing
indefinitely; (b) the representations and warranties contained in Sections 2.11
(Taxes), 2.15 (Employee Benefit Plans), 3.06 (Tax Matters With Respect to
Parent) and the covenants and agreements contained in Section 7.02 (Certain Tax
Matters) (each a "Statute Claim" and, together with the Unlimited Representation
Claims, the "Unlimited Claims") shall survive until the expiration of any
applicable statute of limitations (including all extensions thereof) with
respect to the underlying matters plus sixty days and (c) any claim with respect
to which specific written notice is provided to the indemnifying party as set
forth in Section 6.05 prior to the applicable times of termination described in
this Section 6.01 shall survive such termination times. All covenants and
agreements contained herein and in the Ancillary Agreements not otherwise
referenced in this Section 6.01 shall survive (notwithstanding any investigation
made at any time by or on behalf of the other party) in accordance with their
terms or, if no survival period is specified, for twelve (12) months after
Closing.
Section 6.02 Limits on Claims.
(a) Purchaser shall not be entitled to recover any Damages (as defined
below) pursuant to Sections 6.03(a)(i) or 6.03(a)(iv) (except that such
limitation shall not apply to any Unlimited Representation Claim or any claim
arising out of or relating to a breach of Sections 2.11 (Taxes), 3.06 (Tax
Matters With Respect to Parent) and 7.02 (Certain Tax Matters)) until the
aggregate amount of the Damages which would otherwise be owing to Purchaser, in
the aggregate, pursuant to such Sections 6.03(a)(i) and 6.03(a)(iv) exceeds
$100,000 (the "Purchaser
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Deductible"), at which time Purchaser shall be entitled to receive Damages to
the extent and only to the extent that the aggregate Damages which would
otherwise be owing pursuant to Sections 6.03(a)(i) and 6.03(a)(iv) exceed
$100,000. Purchaser shall not be entitled to recover any further Damages
pursuant to Sections 6.03(a)(i) or 6.03(a)(iv), as soon as the amount of Damages
recovered by Purchaser, in the aggregate, pursuant to such Sections meets or
exceeds $1,500,000, except that such limitation shall not apply to any Unlimited
Representation Claim or any Claim arising out of or relating to a breach of
Sections 2.11 (Taxes), 3.06 (Tax Matters With Respect to Parent) and 7.02
(Certain Tax Matters).
(b) Sellers shall not be entitled to recover any Damages pursuant to
Section 6.04(a) (except that such limitation shall not apply to any Unlimited
Claim) until the aggregate amount of the Damages which would otherwise be owing
to Sellers, in the aggregate, pursuant to Section 6.04(a) exceeds $100,000 (the
"Medscape Deductible"), at which time Sellers shall be entitled to receive
Damages to the extent and only to the extent that the aggregate Damages pursuant
to Section 6.04 (a) exceed $100,000. Sellers shall not be entitled to recover
any further Damages pursuant to Section 6.04(a) as soon as the amount of Damages
recovered by Sellers, in the aggregate, pursuant to Section 6.04(a) meets or
exceeds $1,500,000, except that such limitation shall not apply to any Unlimited
Claim.
Section 6.03 Indemnification by Sellers.
(a) Subject to any applicable limitations set forth in Sections 6.01
and 6.02, Sellers jointly and severally hereby indemnify and hold Purchaser and
its Affiliates and Representatives harmless from and against all claims,
liabilities, diminutions in value, obligations, costs, damages (actual or
consequential), losses and expenses of any nature, whether or not arising out of
a Third-Party Claim (as defined below) (including attorneys' fees and all
amounts paid in investigation, defense or settlement of any of the foregoing)
("Damages") arising out of or relating to:
(i) any breach of the representations or warranties of Sellers in
this Agreement or the Ancillary Agreements, as applicable;
(ii) any breach of the covenants or agreements of Sellers in this
Agreement or the Ancillary Agreements, as applicable;
(iii) any Excluded Liability (including liabilities of Subsidiary
that are not Assumed Liabilities) or any other liability that is not an Assumed
Liability;
(iv) the Bulk Transfer Laws; and
(v) all Taxes due or payable with respect to Subsidiary for
periods (or portions thereof) ending on or prior to the Closing Date, except to
the extent such Taxes of Subsidiary constitute Assumed Taxes.
(b) (i) Schedule 6.03(b) sets forth all of the trade accounts
receivable related to the Business as of December 21, 2001 (each, an "Account
Receivable" and collectively, the "Accounts Receivable"). The aggregate amount
of the Accounts Receivable is $4,776,392. All of such Accounts Receivable (A)
have arisen from the sale of services or
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products in the ordinary course of business to Persons that are not Affiliates
of Sellers and (B) constitute valid and undisputed claims that Sellers believe
in good faith shall be paid in the ordinary course of business, except those
Accounts Receivable identified on Schedule 6.03(b) with respect to which either
Seller has received notice from an account debtor that such amounts or items are
in dispute (a "Disputed Receivable"). The aggregate amount of the Accounts
Receivable, net of the agreed upon reserve of $700,000, is $4,076,392 (the
"Initial Amount").
(ii) Purchaser shall use commercially reasonable efforts in
accordance with its past accounts receivable collection practices to collect the
Accounts Receivable. Purchaser shall apply amounts collected from the specific
account debtors by matching payments to invoice numbers and applying payments
without an invoice reference to the oldest Account Receivable; provided, that
(A) no application shall be made to a Disputed Receivable unless and until said
dispute has been resolved and payment therefore received by Purchaser, and (B)
if following the Closing Date any account debtor with respect to an Account
Receivable indicates that it disputes any amount or specific invoice of an
Account Receivable, the amount or item then in dispute shall thereupon be
treated for all purposes as a Disputed Receivable.
(iii) Purchaser may, on any one occasion beginning on the 180th
day after the Closing Date, but no later than the 365th day after the Closing
Date, deliver a notice to Sellers (a "Section 6.03(b) Notice") of Purchaser's
election to seek the payment described in Section 6.03(b)(iv). The Section
6.03(b) Notice shall include the following information: the Final Calculation
Date (as defined below); the Deficiency Amount (as defined below) and reasonable
support for the calculation of such amount; and information regarding the bank
account of Purchaser to which the Deficiency Amount (as defined below) shall be
delivered by Sellers.
(iv) Within ten (10) business days of receipt of the Section
6.03(b) Notice, Sellers shall pay, or have paid, to Purchaser, by wire transfer
to the bank account identified in the Section 6.03(b) Notice, an amount (the
"Deficiency Amount") equal to the difference, if positive, between (A) the
Initial Amount and (B) the sum of (1) the amounts actually collected by
Purchaser on the Accounts Receivable on or prior to the Final Calculation Date
(net of Purchaser's reasonable out-of-pocket costs of collection, documentation
of which shall be provided to Sellers by Purchaser) and (2) the unpaid amount,
as of the close of business on the Final Calculation Date, of any Accounts
Receivable that Purchaser elects, in the Section 6.03(b) Notice, to be treated
as if Purchaser had received payment therefor (the "Excluded Receivables"). The
"Final Calculation Date" shall be any date within ten business days prior to the
date of the Section 6.03(b) Notice. Upon notice to Purchaser and in accordance
with the Escrow Agreement, to the extent there are funds in the Escrow Account
that are not the subject of any outstanding claims, Sellers may direct the
Escrow Agent to release the Deficiency Amount, or a portion thereof, from the
Escrow Account to Purchaser. To the extent the funds remaining in the Escrow
Account that are not the subject of any outstanding claims are insufficient to
cover the Deficiency Amount, Sellers shall pay such amount directly to
Purchaser.
(v) Upon the Purchaser's receipt of the Deficiency Amount, the
Purchaser shall assign or cause to be assigned to Medscape, pursuant to
instruments of transfer reasonably satisfactory to Medscape, the Accounts
Receivable then in existence in respect of which the Deficiency Amount has been
paid (which shall not include any of the Excluded Receivables) and
33
shall turn over to Medscape amounts collected by Purchaser after the Final
Calculation Date with respect to the Accounts Receivable being assigned to
Medscape. Sellers covenant and agree that any attempts to collect such Accounts
Receivable will be made in accordance with the past practices of the Business
and all applicable Laws.
(vi) The parties agree that clauses (i) through (v) of this
Section 6.03(b) provide Purchaser's sole remedy for any breach of the
representations set forth in Section 6.03(b)(i) or the failure of any Accounts
Receivable to be collected.
(vii) As used in this Section 6.03(b)(vii), the term "Net
Accounts Receivable" means, at any relevant time, the Initial Amount reduced, on
a dollar-for-dollar basis, by the aggregate amount that has been collected by
Purchaser with respect to the Accounts Receivable and the term "Excess COGS"
means, at any relevant time, the amount, if positive, equal to (A) the aggregate
amounts paid with respect to obligations of the Business classified under the
line item "Accrued Cost of Sales" incurred on or prior to November 30, 2001,
less (B) the COGS Accrual. The amount of "Net Accounts Receivable" and the
amount of "Excess COGS" will be determined by Purchaser as of the 120th day
immediately following the Closing Date, and again as of May 31, 2002 and the
last day of each calendar month thereafter (each such date of determination, a
"Determination Date"), and communicated to Sellers as promptly as practicable
after each such Determination Date; provided, however, that the procedures
contemplated by this Section 6.03(b)(vii) shall cease on the Final Calculation
Date and the Escrow Amount shall not be reduced and no further amounts shall be
released from the Escrow Account to Medscape pursuant to this Section
6.03(b)(vii) after the Final Calculation Date. Once the amount of Net Accounts
Receivable, determined pursuant to the preceding sentence, has been reduced to
$1.5 million: (A) the Escrow Amount shall be reduced by the amount, if positive,
equal to (1) 50% of any additional reduction in the amount of Net Accounts
Receivable less (2) 100% of the amount of Excess COGS and (B) no later than 15
days following each Determination Date, Purchaser shall instruct the Escrow
Agent to release to Medscape the amount, if any, by which the funds in the
Escrow Account exceed the Escrow Amount as of such Determination Date determined
pursuant to clause (A) of this sentence. In no event shall the Escrow Amount be
reduced to below $750,000 pursuant to this Section 6.03(b)(vii).
(c) For purposes of this Section 6.03, the representations and
warranties of Sellers contained in this Agreement (other than those
representation and warranties a claim for which would not be subject to the
Purchaser Deductible) shall be deemed to have been made without any
qualification as to materiality and, accordingly, all references in such
representations and warranties to "material," "materially," "Material Adverse
Effect," and similar terms and phrases (including, without limitation,
references to the dollar thresholds therein) shall be deemed to be deleted
therefrom.
Section 6.04 Indemnification by Purchaser. Subject to any applicable
limitations set forth in Sections 6.01 and 6.02, Purchaser hereby indemnifies
and holds Sellers and their Affiliates and Representatives harmless from and
against all Damages arising out of or relating to:
(a) any breach of the representations or warranties of Purchaser set
forth in this Agreement or the Ancillary Agreements; and
34
(b) any breach of any covenants or agreements of Purchaser set forth
in this Agreement or the Ancillary Agreements, including without limitation any
claims or Damages relating to or arising out of the Assumed Liabilities.
(c) For purposes of this Section 6.04, the representations and
warranties of Purchaser contained in this Agreement (other than those
representation and warranties a claim for which would not be subject to the
Medscape Deductible) shall be deemed to have been made without any qualification
as to materiality and, accordingly, all references in such representations and
warranties to "material," "materially," "Material Adverse Effect," and similar
terms and phrases (including, without limitation, references to the dollar
thresholds therein) shall be deemed to be deleted therefrom.
Section 6.05 Indemnification Procedure.
(a) Third Party Claims.
(i) Each indemnified party shall, with reasonable promptness after
obtaining knowledge thereof, provide any indemnifying party against whom a claim
for indemnification is to be made under this Article VI with written notice of
all third party actions, suits, proceedings, claims, demands or assessments that
may be subject to the indemnification provisions of this Article VI
(collectively, "Third Party Claims"), including, in reasonable detail, the basis
for the claim, the nature of Damages and a good faith estimate of the amount of
Damages; provided that, such good faith estimate shall not be binding on the
indemnified party and provided further that, the lack of such prompt notice
shall not bar any claim hereunder unless, and only to the extent, the
indemnifying party was prejudiced by such lack of prompt notice.
(ii) Each indemnifying party shall have fifteen (15) calendar days
after its receipt of the claim notice to notify (the "Claim Notice") the
indemnified party in writing whether the indemnifying party elects, jointly with
any other indemnifying party notified under this Section to undertake, conduct
and control, through counsel of its choosing the good faith settlement and/or
defense of the Third Party Claim.
(iii) If within fifteen (15) calendar days after its receipt of
the Claim Notice an indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated to indemnify
the indemnifying party under the terms of its indemnity hereunder in connection
with such Third-Party Claim, then (A) the indemnifying party shall be entitled
and, if it so elects, shall be obligated at its own cost, risk and expense (1)
to take control of the defense and investigation of such Third-Party Claim and
(2) to pursue the defense thereof in good faith by appropriate actions or
proceedings promptly taken or instituted and diligently pursued, including,
without limitation, to employ and engage attorneys of its own choice and (B) the
indemnifying party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such consent not to be
unreasonably withheld. In the event the indemnifying party elects to assume
control of the defense and investigation of such lawsuit or other legal action
in accordance with this Section 6.05(a)(iii), the indemnified party may, at its
own cost and expense, participate in the investigation, trial and defense of
such Third-
35
Party Claim; provided, that if the named persons to a lawsuit or other legal
action include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing by counsel that there may be one
or more legal defenses available to such indemnified party that are different
from or additional to those available to the indemnifying party, the indemnified
party shall be entitled, at the indemnifying party's cost, risk and expense, to
separate counsel of its own choosing. Notwithstanding the foregoing, the
indemnified party shall have the right to pay or settle any Third Party Claim at
any time, provided, that in such event it waives any right to indemnification
therefore by the indemnifying party.
(iv) If the indemnifying party fails to assume the defense of such
Third-Party Claim in accordance with Section 6.05(a)(iii) within fifteen (15)
calendar days after receipt of the Claim Notice, the indemnified party against
which such Third-Party Claim has been asserted shall (upon delivering notice to
such effect to the indemnifying party) have the right to undertake, at the
indemnifying party's cost, risk and expense, the defense, compromise and
settlement of such Third-Party Claim on behalf of and for the account of the
indemnifying party; provided that such Third-Party Claim shall not be
compromised or settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event the indemnifying
party assumes the defense of the claim, the indemnifying party shall keep the
indemnified party reasonably informed of the progress of any such defense,
compromise or settlement, and in the event the indemnified party assumes the
defense of the claim, the indemnified party shall keep the indemnifying party
reasonably informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any settlement of any
Third Party Claim effected pursuant to and in accordance with this Section
6.05(c)(iv) and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless each indemnified party
from and against any and all Damages by reason of such settlement or judgment
(as the same may be limited by the limitations on indemnification set forth in
this Agreement).
(b) Non-Third Party Claims. Each indemnified party shall, with
reasonable promptness, deliver to any indemnifying party, against whom a claim
for indemnification is to be made under this Article VI, written notice of all
claims for indemnification under this Article VI, other than Third Party Claims,
including, in reasonable detail, the basis for the claim, the nature of Damages
and a good faith estimate of the amount of Damages; provided that, such good
faith estimate shall not be binding on the indemnified party and provided
further that, the lack of such prompt notice shall not bar any claim hereunder
unless, and only to the extent, the indemnifying party was prejudiced by such
lack of prompt notice.
Section 6.06 Mitigation; Exclusivity of Remedy.
(a) A party seeking indemnification shall utilize commercially
reasonable efforts to mitigate any Damages, after becoming aware of any event or
condition that would reasonably be expected to cause Damages.
(b) Except for actions grounded in fraud or deceit, the remedies in
this Article VI shall be the exclusive remedies of the parties with respect to
all disputes, controversies or claims arising out of or relating to this
Agreement or a breach hereof, except for (i) amounts payable by any of the
parties relating to Taxes as provided in Sections 2.11 and 7.02 hereof and
36
(ii) the remedies of specific performance, injunction and other equitable relief
in connection with the failure of any party to perform its agreements hereunder.
Section 6.07 Survival of Article VI. This Article VI shall survive until
the last to survive of the other provisions of this Agreement (other than
Article VIII).
ARTICLE VII
ACTIONS AT AND AFTER THE CLOSING DATE
Section 7.01 Actions After the Closing Date. The parties covenant to take
the following actions after the Closing Date:
(a) Cooperation. Subject to any limitations that are required to
preserve any applicable attorney-client privilege, for a period of five (5)
years from and after the Closing Date, each party agrees to furnish or cause to
be furnished to the other party, its counsel and accountants, upon reasonable
request during normal business hours, after not less than three (3) business
days prior written notice, such information and assistance relating to such
party or its business (including, without limitation, the cooperation of
officers and employees and reasonable access to books, records and other data
and the right to make copies and extracts therefrom) as is reasonably necessary
to: (a) facilitate the preparation for or the prosecution, defense or
disposition of any suit, action, litigation or administrative, arbitration or
other proceeding or investigation (other than one by or on behalf of one party
to this Agreement against another party hereto); and (b) prepare and file any
other documents required by governmental or regulatory bodies. The party
requesting such information and assistance shall reimburse the other party for
all reasonable out-of-pocket costs and expenses incurred by such party in
providing such information and assistance. In furtherance of the foregoing,
Seller shall, no later than January 4, 2002, prepare and deliver to Purchaser a
balance sheet (and related management operations statement covering the period
from November 30 to the Closing Date) of the Business as of the close of
business on the Closing Date and provide Purchaser with such other assistance
and information as Purchaser may reasonably require in order to include the
financial information of the Business in its financial statements.
(b) Further Assurances. Each of the parties agrees to work diligently,
expeditiously and in good faith to consummate the transactions contemplated by
this Agreement. From time to time after the Closing Date, Sellers shall execute
and deliver to Purchaser such instruments of sale, transfer, conveyance,
assignment, consent, assurance, power of attorney, and other such instruments as
may be reasonably requested by Purchaser in order to vest in Purchaser all
right, title, and interest in and to the Acquired Assets and the Business and
the parties hereto will execute and deliver such other instruments of sale,
transfer, conveyance, assignment, assurance, power of attorney and other such
instruments as may be reasonably required by the other parties hereto in order
to carry out the purpose and intent of this Agreement and all other agreements
to be executed in connection herewith. Purchaser and Sellers shall each provide
the other with such assistance as reasonably may be requested by the other in
connection with the preparation of any Tax return, an audit or examination of
any such return by any Taxing authority or any judicial or administrative
proceeding relating to liability for Taxes and shall each retain and provide the
other with any records or other information which may be relevant to such a
return, audit, examination or proceeding.
37
(c) Transition Assistance. From the date hereof, Sellers will not in
any manner take or cause to be taken any action which is designed, intended or
might reasonably be anticipated to have the effect of discouraging customers,
clients, sponsors, suppliers, vendors, lessors and other associates of the
Business from maintaining the same business relationships with Purchaser after
the date of this Agreement as were maintained with the Business prior to the
date of this Agreement.
(d) Nonassignable Contracts. Notwithstanding anything set forth herein
to the contrary, no contracts, properties, rights or other assets of Sellers
(other than those set forth on Schedule 7.01(d)) shall be deemed sold,
transferred or assigned to Purchaser pursuant to this Agreement if the attempted
sale, transfer or assignment thereof to Purchaser without the consent or
approval of another party or Governmental Authority would be ineffective or
would constitute a breach of contract or a violation of any law or regulation or
would in any other way materially and adversely affect the rights of Sellers (or
Purchaser as transferee or assignee) and such consent or approval is not
obtained on or prior to the Closing Date. In such case, to the extent possible:
(i) the beneficial interest in or to such contracts, properties or other assets
(collectively, the "Beneficial Rights") shall in any event pass as of the
Closing Date to Purchaser pursuant to this Agreement and (ii) Purchaser shall
assume or discharge the liabilities of Sellers under such Beneficial Rights (the
"Retained Liabilities") as agent for Sellers, and Sellers shall act as
Purchaser's agent in receipt of any benefits, rights or interests received from
the Beneficial Rights and in discharging any Retained Liabilities. Purchaser and
Sellers shall use reasonable efforts (and bear their respective costs) without
payment of any fees, penalties or other amounts to any third party to obtain or
secure consents or approvals for the contracts, properties, rights or other
assets of Sellers that may be necessary to effect the legal and valid sale,
transfer or assignment of contracts, properties, rights or other assets
underlying the Beneficial Rights and Retained Liabilities. Purchaser and Sellers
shall make or complete such transfers as soon as reasonably practicable and
cooperate with each other in any other reasonable arrangement designed to
provide for Purchaser the Beneficial Rights including enforcement at the cost
and for the account of Purchaser of any and all rights of Sellers against the
other party thereto, and to provide for the discharge by Purchaser of Retained
Liability under such contracts, properties or other assets.
(e) Insurance Matters. To the extent Parent or Medscape has existing
insurance policies (with respect to the Business) that cover an Assumed
Liability, Sellers agree to cooperate with Purchaser to provide Purchaser with
the benefit of such insurance policies pursuant to the provisions of this
Section 7.01(e). Upon written notice from Purchaser to Parent or Medscape that
Purchaser is subject to a claim that is covered by any such insurance policies,
Parent or Medscape, as applicable, will cooperate to submit such claim to
Medscape's or Parent's insurance company, provided that, Purchaser will pay all
of Medscape's or Parent's costs and expenses (including, without limitation, any
deductibles and administrative expenses paid by Medscape or Parent) in
connection with the submission of such claim. Any proceeds (net of any costs and
expenses to be reimbursed to Medscape or Parent) under such claim received by
Medscape or Parent shall be promptly remitted to Purchaser, provided that
Medscape or Parent may set off against such amount any indemnity payment
Medscape or Parent has made to Purchaser with respect to the subject matter of
such insurance claim. With respect to all existing policies that provide
coverage on a "claims-made" basis, Sellers have purchased, to the fullest extent
available, extended reporting period or "tail" coverage from the applicable
insurers.
38
(f) All covenants and agreements in this Section 7.01 (other than those
in Section 7.01(a)) shall survive the Closing indefinitely.
Section 7.02 Certain Tax Matters.
(a) Purchaser and Sellers shall cause Subsidiary to join, for all
taxable periods of Subsidiary ending on or before the Closing Date (and with
respect to any taxable period that commences before but ends after the Closing
Date, for the portion of such period up to and including the Closing Date) for
which Subsidiary is eligible to do so, in all consolidated, combined, or unitary
Returns of Sellers. Sellers shall cause to be prepared and filed all such
consolidated, combined or unitary Returns, and shall pay or cause to be paid all
Taxes to which such Returns relate for all periods covered by such Returns.
(b) Sellers and Purchaser shall close the taxable period of Subsidiary
on the Closing Date, unless such action is prohibited by law. Sellers shall
prepare or cause to be prepared all Returns (other than consolidated, combined
or unitary returns) of Subsidiary for all periods ending on or prior to the
Closing Date except for Returns relating to Assumed Taxes described in
subsection (c) below. Provided that such Returns are prepared consistent with
applicable law, Purchaser shall cause such Returns to be executed and timely
filed, and shall pay all Taxes shown due on such Returns. Sellers shall pay
Purchaser the amount of such Taxes of Subsidiary with respect to such periods in
accordance with Section 7.06.
(c) Purchaser shall prepare or cause to be prepared and file or cause
to be filed (i) all Returns of Subsidiary relating to Assumed Taxes and (ii) all
other Returns of Subsidiary for taxable periods which begin before the Closing
Date and end after the Closing Date. Sellers shall pay or cause to be paid to
Purchaser in accordance with Section 7.06 an amount equal to the portion of such
Taxes which relates to the portion of such taxable period ending on the Closing
Date to the extent such Taxes are not Assumed Taxes. For purposes of this
Section, in the case of any Tax that is imposed on a periodic basis and is
payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date shall be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date, based
on an interim closing of the books. Any credits as of the Closing Date relating
to a taxable period that begins before and ends after the Closing Date shall be
taken into account as though the relevant taxable period ended on the Closing
Date. All determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of Subsidiary.
(d) From and after the Closing Date, Sellers, on the one hand, and
Purchaser and Subsidiary, on the other hand, shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Returns and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information that are reasonably relevant
to any such filing, audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any materials provided hereunder. Each party agrees to retain all
books and records with respect to Tax matters pertinent to Subsidiary relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by the other party, any
39
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any Taxing Authority.
(e) Any refunds or credits (except to the extent accrued as a
receivable on the Balance Sheet) of Taxes received by or credited to Subsidiary
attributable to taxable periods ending on or prior to the Closing Date shall be
for the benefit of Sellers, and Purchaser shall use its commercially reasonable
efforts to obtain any such refunds or credits and shall cause Subsidiary to pay
over to Sellers any such refunds or credits (net of any cost attributable to the
receipt of such refunds or credits, including any Tax cost, taking into account
the deductibility of state and local income Taxes for other income Tax
purposes), within five (5) days after receipt of such refunds or credits.
(f) Purchaser and Sellers agree to report all transactions not in the
ordinary course of business occurring on the Closing Date after Purchaser's
purchase of the capital stock of Subsidiary (the "Shares") on Purchaser's
federal income Tax return to the extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(ii)(B). Purchaser agrees to indemnify Sellers for any additional
Tax owed by Sellers resulting from any transaction entered into by Purchaser not
in the ordinary course of business occurring on the Closing Date after
Purchaser's purchase of the Shares.
(g) For purposes of this Agreement, a "Contest" is any audit, court
proceeding or other dispute with respect to any Tax matter that affects
Subsidiary. Unless Purchaser has previously received written notice from Sellers
of the existence of a Contest, Purchaser shall give written notice to Sellers of
the existence of any Contest relating to a Tax matter that is Sellers'
responsibility within twenty (20) days from the receipt by Purchaser of any
written notice of such Contest. Unless Sellers have previously received written
notice from Purchaser of the existence of a Contest, Sellers shall give or cause
to be given written notice to Purchaser of the existence of any Contest for
which Purchaser has responsibility within twenty (20) days from the receipt by
Parent or Sellers of any written notice of such Contest. Sellers shall, at its
election, have the right to represent the interests of Subsidiary in any Contest
relating to a Tax matter arising in a period ending on or before the Closing
Date, to employ counsel of its choice at its expense and to control the conduct
of such Contest, including settlement or other disposition thereof; provided,
however, that Purchaser shall have the right to consult with Sellers at
Purchaser's own expense regarding any such Contest and Sellers shall not settle
or otherwise resolve any Contest without Purchaser's written consent if such
Contest may affect Subsidiary for any periods ending after the Closing Date.
Purchaser shall have the right to control the conduct of any Contest with
respect to any Tax matter arising in a period ending after the Closing Date.
(h) All amounts paid pursuant to this Agreement by one party to another
party (other than interest payments) shall be treated by such parties as an
adjustment to the Purchase Price to the extent permitted by law.
(i) Purchaser and Parent shall jointly make a timely and effective
election under Section 338(h)(10) of the Code (the "Election") with respect to
the acquisition of Subsidiary. Purchaser shall prepare at its expense and
deliver, completed in draft form, an IRS Form 8023, together with all required
attachments, to Sellers for their review and approval at least 45 days
40
before the due date thereof. Such Form 8023 shall be prepared consistently with
the allocation on the Purchase Price Allocation Schedule. After review and
approval, which shall not unreasonably be withheld or delayed, Parent or
Medscape will execute and file the Form 8023 as prepared by Purchaser, attach a
copy of the Form 8023 to their federal income tax returns for the year including
the Closing Date, and take such other actions as Purchaser reasonably may
request in order to effectuate the Election.
The principles and procedures of this Section 7.02(i) set forth above
also shall apply with respect to any corresponding elections filed under state
or local law (to the extent permitted by such law) and to forms and related
documents to be filed pursuant thereto.
Purchaser and Sellers agree to cooperate, and to cause their respective
affiliates to cooperate, with the other in preparing, executing and filing any
Tax forms and other documents required under Section 338(h)(10) of the Code and
other applicable laws so that the Election will be made in a proper and timely
matter.
(j) If any Seller makes any Tax payment that includes Assumed Taxes,
Purchaser shall pay such Seller the amount of such Assumed Taxes in accordance
with Section 7.06.
Section 7.03 Intellectual Property Matters.
(a) Except as provided in the Transition Services Agreement and License
Agreement, Sellers shall cease, within thirty (30) calendar days after the
Closing Date, all use of the "Medscape" mark and name, and any mark or name that
includes the term "Medscape" or is confusingly similar thereto, including
without limitation any such use as a trademark, service mark, corporate name,
trade name, or domain name, or in any advertising, publications, letterhead,
invoices, business cards or other materials.
(b) Parent shall propose at the next shareholder meeting of Parent a
change in its corporate name such that the name "Medscape," or any name
confusingly similar thereto, is not included in Parent's corporate name, and
shall use its commercially reasonable efforts to promote the adoption of such
proposal by its shareholders.
(c) Except as provided in the Transition Services Agreement and License
Agreement, Parent shall, within thirty (30) days after the Closing Date, cause
its subsidiaries to change their corporate names, as applicable, such that the
name "Medscape," or any name confusingly similar thereto, is not included in
such subsidiary's corporate name.
(d) Except as provided in the Transition Services Agreement and License
Agreement, Parent shall within thirty (30) days after the Closing Date cease,
and shall cause its subsidiaries to cease, any and all use of the "Medscape"
mark and name, and any mark or name that includes the term "Medscape" or is
confusingly similar thereto, including without limitation any such use as a
trademark, service mark, corporate name, trade name, or domain name, or in any
advertising, publications, letterhead, invoices, business cards or other
materials; provided, however, that Parent may continue to use its current
corporate name only until such time as its shareholders adopt the proposal
referred to in subsection (b) above, and as soon as is practicable thereafter
shall cease all use of its current corporate name.
41
(e) Parent shall not, and shall cause its subsidiaries not to, seek to
register any corporate name, trade name, service mark, trademark or domain name
that includes or is confusingly similar to the "Medscape" name and mark. Parent
agrees that it will never, and it will cause its subsidiaries to never, directly
or indirectly challenge the validity or ownership of the "Medscape" name and
mark or any registration or application for registration thereof.
(f) Sellers shall not (and shall not permit their subsidiaries to)
directly or indirectly register or acquire any registration to any domain name
in any country worldwide that includes the words "Medscape" or that is
confusingly similar to any domain name or trademark transferred to Purchaser
pursuant to this Agreement.
(g) As promptly as practicable after Closing (but in any event no later
than thirty (30) days after Closing), Sellers shall provide Purchaser or its
designated counsel with all files for such trademark and service mark
applications and registrations as maintained in the regular course of business.
Each Seller hereby makes, constitutes and appoints Purchaser as its true and
lawful attorney-in-fact to execute and deliver for and on behalf of such Seller
all assignments and other instruments and documents, and to do any and all such
other acts, as may be necessary to effectuate the transfer to Subsidiary of each
of the trademarks, service marks and domain names included in the Acquired
Intellectual Property, and any applications and registrations therefor.
(h) Notwithstanding anything to the contrary in this Agreement, the
obligations under this Section 7.03 shall survive the Closing indefinitely.
Section 7.04 Public Announcements. The initial press releases related to
this Agreement shall be substantially in the form exchanged by the parties prior
to the execution of this Agreement. Unless otherwise required by applicable Law
or by obligations under any listing agreement with or rules of any securities
exchange or quotation system, no party to this Agreement shall make, or cause to
be made, any other press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media with respect thereto except to the extent such disclosure or
communication does not conflict with or contradict the information contained in
the press releases attached hereto. The parties shall cooperate as to the timing
and contents of any such additional press releases, public announcements or
communications that any party believes to be required.
Section 7.05 Outstanding Liens. Schedule 2.07(a) lists all of the Liens
encumbering the Acquired Assets as of the Closing Date. Sellers have repaid in
full all of the obligations underlying such Liens (collectively, the "Satisfied
Liens"). After the Closing, the Sellers shall cooperate with the Purchaser and
shall deliver to the Purchaser within 30 days following the Closing written
evidence reasonably satisfactory to the Purchaser that such Satisfied Liens have
been released, terminated or cancelled.
Section 7.06 Post-Closing Reimbursements. (a) If Sellers determine that
they have made payment, after the Closing, in respect of a liability that is the
responsibility of Purchaser under the terms of this Agreement, Sellers shall
provide a calculation of the amount thereof and reasonable support for such
calculation. If Purchaser determines that it has made payment, after the
Closing, in respect of a liability that is the responsibility of Sellers under
the
42
terms of this Agreement, Purchaser shall provide a calculation of the amount
thereof and reasonable support for such calculation. The parties shall reimburse
to each other any undisputed amounts presented pursuant to this Section 7.06(a)
as promptly as practicable and shall use their good faith efforts to resolve any
disputed items.
(b) Each party shall, upon receipt of bills, invoices or similar
documents that it believes should be the responsibility of the other party,
promptly forward a copy thereof to the other party. The parties shall cooperate
in good faith to determine proper responsibility therefor under the terms of
this Agreement and any payment made by a party with respect thereto pending such
determination shall be subject to the provisions of Section 7.06(a).
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 8.02 Expenses, Etc. All costs and expenses of Sellers and
Subsidiary, including fees and disbursements of counsel, advisors, accountants
and consultants, incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement, the Ancillary Agreements and the
closing of the transactions contemplated hereby and thereby (collectively,
"Expenses") shall be paid by Parent or Medscape. Expenses of Purchaser shall be
paid by Purchaser. All stamp, transfer, sales and use Taxes imposed upon or
incurred by any of the parties hereto in connection with the transfer of the
Acquired Assets to Purchaser under this Agreement, and any legal and other
expenses relating thereto, shall be shared equally by Medscape and Purchaser.
Purchaser shall, at its own expense, prepare and file all necessary Returns and
other documents with respect to all such stamp, transfer, sales and use Taxes;
provided, however, that in the event any such Return requires execution by
Parent or Medscape, (i) Purchaser shall prepare and deliver to Parent or
Medscape, as applicable, a copy of such Return, completed in draft form, for
review and approval of Parent or Medscape, as applicable, at least twenty (20)
days before the due date thereof; and (ii) Parent or Medscape, as applicable,
shall, following such approval, execute such Return and deliver it to Purchaser,
which shall cause it to be filed.
Section 8.03 Execution in Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 8.04 Notices. All notices, requests, instructions and other
documents that are required to be or may be given or delivered pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if delivered by hand or national overnight courier service, transmitted
by facsimile (confirmed by another method of delivery permitted hereunder) or
mailed by registered or certified mail, postage prepaid, as follows:
43
if to Medscape, Parent or Enterprises, to it at:
MedicaLogic/Medscape, Inc.
20500 NW Evergreen Parkway
Hillsboro, Oregon 97214-7111
Attention: Legal Department
with a copy to:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, Oregon 97204-1268
Attention: Todd Bauman
Facsimile: (503) 220-2480
Email: tabauman@stoel.com
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Steven R. Shoemate
Facsimile: (212) 351-4035
Email: sshoemate@gibsondunn.com
if to Purchaser, to it at:
WebMD Corporation
669 River Drive, Center 2
Elmwood Park, New Jersey 07407
Attention: General Counsel
Facsimile: (201) 703-3401
with a copy to:
WebMD Corporation
669 River Drive, Center 2
Elmwood Park, New Jersey 07407
Attention: Chief Financial Officer
Facsimile: (201) 703-3401
44
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Attention: Charles M. Nathan
Facsimile: (212) 751-4864
Email: charles.nathan@lw.com
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto. Such notices, requests,
instructions and other documents shall be deemed given or delivered: (i) five
business days following sending by registered or certified mail, postage
prepaid; (ii) one business day following sending by national overnight courier
service; (iii) when sent, if sent by facsimile (but only if such facsimile is
promptly confirmed by such other method of delivery); or (iv) when delivered, if
delivered by hand.
Section 8.05 Waivers. Sellers, on the one hand, and Purchaser on the other
hand, 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 under this
Agreement; (ii) waive any inaccuracies in the representations or warranties of
the other contained in this Agreement or in any document delivered pursuant to
this Agreement; (iii) waive performance of any of the obligations of the other
under this Agreement. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement, including without limitation any investigation
by or on behalf of Sellers, on the one hand, or Purchaser on the other hand,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties or agreements contained in this
Agreement. The waiver by Sellers on the one hand, or Purchaser on the other
hand, of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
Section 8.06 Amendments, Supplements, Etc. This Agreement may not be
amended, supplemented, or modified except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 8.07 Entire Agreement. This Agreement, its exhibits and schedules,
and the Ancillary Agreements constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, between the parties hereto with
respect to the subject matter hereof.
Section 8.08 Headings. Headings in this Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.
Section 8.09 Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
45
Section 8.10 Interpretation. As used herein, the words "hereof," "herein,"
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and the words "Article," "Section" and "Schedule"
references are to the articles, sections and schedules of this Agreement unless
otherwise specified. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". The definitions contained in this Agreement (including those
definitions contained in Exhibit A) are applicable to the singular as well as
the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms. Any agreement, instrument or statute defined
or referred to herein means such agreement, instrument or statute as from time
to time amended, qualified or supplemented, including (in the case of agreements
and instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes. References to a Person are also to
its successors and permitted assigns.
Section 8.11 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns and nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 8.12 Assignability. Neither this Agreement nor any of the parties'
rights hereunder shall be assignable by any party hereto without the prior
written consent of the other parties hereto; provided, however, that each of
Purchaser, Medscape, Enterprises or Parent may assign their respective rights
and obligations hereunder without the consent of any other party hereto to one
or more of their respective Affiliates, in which event Purchaser, Medscape,
Enterprises or Parent, as applicable, shall remain liable for all its
obligations under this Agreement, and the assignee or assignees shall, together
with such assigning party, be jointly and severally liable for such obligations;
and provided further, that in the event that either Medscape, Enterprises or
Parent shall consolidate or merge with or into, or sell, assign, transfer,
convey or otherwise dispose of all or substantially all of its stock, properties
or assets in one or more related transactions, to another Person, Medscape,
Enterprises or Parent, as applicable, shall assign all of their respective
rights, obligations and liabilities hereunder to the Person formed by or
surviving any such consolidation or merger (if other than Parent, Enterprises or
Medscape) or to the Person to which such sale, assignment, transfer or
conveyance or other disposition shall have been made, and shall cause such
Person to execute an express assumption of all of such Seller's obligations
hereunder, without restriction or limitation.
Section 8.13 Governing Law; Submission to Jurisdiction; Waivers. This
Agreement and the Ancillary Agreements shall be governed by, and construed in
accordance with, the Laws of the State of New York without giving effect to the
conflicts of law principles of such state. Each of the Sellers and Purchaser by
this Agreement irrevocably and unconditionally:
(a) submits for itself and its property in any legal suit, action or
proceeding relating to this Agreement or any of the Ancillary Agreements, or for
recognition and enforcement of any judgment in respect thereof, to the exclusive
jurisdiction of the courts of the State of New York sitting in the County of New
York, the United States District Court for the
46
Southern District of New York, and appellate courts having jurisdiction of
appeals from any of the foregoing, and agrees that all claims in respect of any
such suit, action or proceeding shall be heard and determined in such New York
State court or, to the extent permitted by law, in such federal court;
(b) consents that any such suit, action or proceeding may and shall be
brought in such courts and waives any objection that it may now or hereafter
have to the venue or jurisdiction of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) waives all right to trial by jury in any legal suit, action or
proceeding (whether based on contract, tort or otherwise) arising out of or
relating to this Agreement or any of the Ancillary Agreements, or its
performance under or the enforcement of this Agreement or any of the Ancillary
Agreements;
(d) agrees that service of process in any such suit, action or
proceeding may be effected by mailing a copy of such process by registered or
certified mail, postage prepaid, to such party at its address as provided in
Section 8.04; and
(e) agrees that nothing in this Agreement or the Ancillary Agreements
shall affect the right to effect service of process in any other manner
permitted by the laws of the State of New York.
Section 8.14 Survival of Article VIII. This Article VIII shall survive
until the last to survive of all other provisions of this Agreement.
47
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto as of the date first above written.
MEDSCAPE
--------
MEDSCAPE, INC.
By:________________________________
Name:
Title:
ENTERPRISES
-----------
MEDSCAPE ENTERPRISES, INC.
By:________________________________
Name:
Title:
PARENT
------
MEDICALOGIC/MEDSCAPE, INC.
By:________________________________
Name:
Title:
PURCHASER
---------
WEBMD CORPORATION
By:________________________________
Name:
Title:
48
EXHIBIT A
DEFINITIONS
"Accounts Receivable" shall have the meaning set forth in Section
6.03(b)(i).
"Acquired Assets" shall have the meaning set forth in Section 1.01.
"Acquired Contracts" shall have the meaning set forth on Exhibit B.
"Acquired Intellectual Property" shall have the meaning set forth on
Exhibit B.
"Action" shall mean any action, claim, suit, litigation, proceeding, labor
dispute, arbitral action, governmental audit, inquiry, criminal prosecution,
investigation or unfair labor practice charge or complaint.
"Affected Employees" shall have the meaning set forth in Section 5.02(a).
"Affiliate" shall mean, with respect to any person or entity, any entity
controlling, controlled by or under common control with such person or entity.
"Agreement" shall have the meaning set forth in the Preamble.
"Ancillary Agreements" shall have the meaning set forth in Section 2.02(a).
"Assumed Employment Agreement" shall have the meaning set forth in Section
5.02(c).
"Assumed Leases" shall have the meaning set forth in Section 2.21(b).
"Assumed Liabilities" shall have the meaning set forth in Section 1.06.
"Assumed Taxes" means New York City commercial rent Taxes incurred in
connection with the operation of the Business, New York State franchise Taxes of
Subsidiary, and New York State and City sales and use Taxes incurred in
connection with the operation of the Business, in each case, to the extent
accrued on the Pro-Forma Balance Sheet (except to the extent that any such taxes
shall have been paid prior to the date of this Agreement) and all such Taxes
accrued in the ordinary course in connection with the operation of the Business
after November 30, 2001; provided, that Assumed Taxes shall not include Taxes
related to periods ended prior to January 1, 2001, whether or not accrued on the
Pro-Forma Balance Sheet.
"Balance Sheet" means column A of Schedule 2.04(a)(i).
"Balance Sheet Date" shall have the meaning set forth in Section 2.04(a).
"Beneficial Owner" shall have the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to
A-1
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition.
"Beneficial Rights" shall have the meaning set forth in Section 7.01(d).
"Bills of Sale" shall have the meaning set forth in Section 1.04(c).
"Books and Records" shall mean all books, records, lists, ledgers, files,
reports, plans, drawings and operating records of every kind relating to the
Business, its assets, operations, clients, sponsors, vendors and personnel,
including, without limitation: (a) all corporate books and records, disk or tape
files, printouts, runs or other computer-based information; (b) all product,
business and marketing plans; (c) all environmental control records; and (d) all
sales, maintenance, employment and personnel records.
"Bulk Transfer Laws" shall mean all applicable "bulk transfer laws"
(including any applicable bulk sale transfer notice requirements for state and
local sales Tax (or similar Tax)).
"Business" shall mean the business of Sellers relating to the online
provisioning of healthcare information and services to consumers and health
professionals, including without limitation, the internet portals of
Medscape.com (including the accredited continuing professional medical education
programs thereon) and MedscapeHealth.com (previously CBSHealthwatch.com) and all
of the issued and outstanding capital stock of Subsidiary. Excluded from the
definition of Business are: (i) the digital health record systems business of
Sellers and (ii) the Encounter and Logician electronic medical records products,
the consumer application "AboutMyHealth" and its related URL, the Chart Room
Services messaging application, the handheld Prescriber application, and all
related clinical applications for creating and accessing health history and
medical records, regardless of whether any aspects of such clinical applications
are integrated into the Medscape.com or MedscapeHealth.com (previously
CBSHealthwatch.com) internet portals, and the Medscape Quality Improvement
Consortium and related efforts to mine and sell data from the Sellers' digital
health records systems.
"Cash Contribution Amount" shall have the meaning set forth in Section
5.04(b).
"Change of Control" shall mean the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of Parent and its subsidiaries taken as a whole
to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act)
(other than a subsidiary of Parent) or (ii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" becomes the Beneficial Owner, directly or indirectly, of
shares of Parent having more than 50% of the combined voting power of all
classes of capital stock of Parent then outstanding.
"Claim Notice" shall have the meaning set forth in Section 6.05(a)(ii).
"Closing" shall have the meaning set forth in Section 1.05.
"Closing Date" shall have the meaning set forth in Section 1.05.
A-2
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COGS Accrual" shall have the meaning as set forth in Section 2.04(b).
"Competing Business" shall have the meaning set forth in Section 5.03(a).
"Condition" shall have the meaning set forth in Exhibit E.
"Confidential Information" shall have the meaning set forth in Section
5.05(a).
"Contest" shall have the meaning set forth in Section 7.02(g).
"Contracts" means any contract, agreement, commitment, lease or instrument.
"Damages" shall have the meaning set forth in Section 6.03(a).
"Deficiency Amount" shall have the meaning set forth in Section
6.03(b)(iv).
"Determination Date" shall have the meaning set forth in Section
6.03(b)(vii).
"Disputed Receivable" shall have the meaning set forth in Section
6.03(b)(i).
"Election" shall have the meaning set forth in Section 7.02(i).
"Employee Benefit Plans" shall have the meaning set forth in Section 2.15.
"Environmental Laws" shall have the meaning set forth in Section 2.22.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 2.15(a).
"Escrow Account" shall have the meaning set forth in Section 1.03.
"Escrow Agent" shall have the meaning set forth in Section 1.04(e).
"Escrow Agreement" shall have the meaning set forth in Section 1.04(e).
"Escrow Amount" shall have the meaning set forth in Section 1.03.
"Excess COGS" shall have the meaning set forth in Section 6.03(b)(vii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" shall have the meaning set forth in Section 1.02.
"Excluded Contracts" shall have the meaning set forth on Exhibit C.
A-3
"Excluded Liabilities" shall have the meaning set forth in Section 1.07.
"Excluded Personal Property" shall have the meaning set forth on Exhibit C.
"Excluded Receivables" shall have the meaning set forth in Section
6.03(b)(iv).
"Expenses" shall have the meaning set forth in Section 8.02.
"Final Calculation Date" shall have the meaning set forth in Section
6.03(b)(iv).
"GAAP" shall have the meaning set forth in Section 2.04.
"Governmental Authority" shall have the meaning set forth in Section
2.06(a).
"Hired Employee" shall have the meaning set forth in Section 5.02(a).
"Improvements" means any buildings, facilities, parking lots, other
structures and improvements, building systems and fixtures located on or under
any Leased Property.
"Initial Amount" shall have the meaning set forth in Section 6.03(b)(i).
"Intellectual Property" means: (a) inventions (whether or not patentable),
patents, patent applications, invention disclosures, and other rights of
invention, worldwide, including without limitation any continuing applications,
reissued patents, reexamined patents or other applications or patents claiming
the benefit of the filing date of any such application or patent; (b)
trademarks, service marks, trade names, trade dress, logos, domain names,
product names and slogans, including any common law rights, registrations, and
applications for registration for any of the foregoing, and the goodwill
associated with all of the foregoing, worldwide; (c) copyrights and other rights
of authorship, and any applications, registrations and renewals in connection
therewith, worldwide; (d) trade secrets and any other confidential business and
technical information, including, without limitation, web site user information,
customer and supplier lists and related information, pricing and cost
information, business and marketing plans, advertising statistics, any other
financial, marketing and business data, technical data, specifications,
schematics and know-how; (e) computer applications, operating systems, and any
other software (including source code and object code) documentation for any of
the foregoing, electronic data and databases, web sites (including all related
computer code and content); (f) rights to exclude others from appropriating any
of such intellectual property including the rights to sue for and remedies
against past, present and future infringements of any or all of the foregoing
and rights of priority and protection of interests therein under the laws of the
United States and abroad; and (g) any other proprietary, intellectual property
and other rights relating to any or all of the foregoing.
"Knowledge of Medscape Parties" means the actual knowledge after due
inquiry of the Chairman of Parent, the Chief Executive Officer of Parent, the
Chief Financial Officer of Parent, the Chief Operating Officer of Parent, the
General Counsel, Executive Vice President of Gov't and Regulatory Affairs, Vice
President - Human Resources of Parent and the Chief Technology Officer of
Parent, David Yakimischak, Adele Murray, William Silberg, Mary Kate Hallahan,
Jonathan Katz, William Lee and Floss O'Sullivan.
A-4
"Laws" shall have the meaning set forth in Section 2.12.
"Leased Property" shall have the meaning set forth in Section 2.21(b).
"License Agreement" shall have the meaning set forth in Section 1.04(g).
"Liens" shall have the meaning set forth in Section 2.01(c).
"Material Adverse Effect" means any event (or events in the aggregate)
which has had, or would reasonably be expected to have, a material adverse
effect on the business, financial condition or results of operation of the
Business.
"Material Contract(s)" shall have the meaning set forth in Section 2.09.
"MDLI Business" shall mean (i) the digital health record systems business
of Sellers and (ii) other business of Sellers (other than the Business),
including, without limitation, the Encounter and Logician electronic medical
records products, the consumer application "AboutMyHealth" and its related URL,
the Chart Room Services messaging application, the handheld Prescriber
application, and all related clinical applications for creating and accessing
health history and medical records, regardless of whether any aspects of such
clinical applications are integrated into the Medscape.com or MedscapeHealth.com
(previously CBSHealthwatch.com) internet portals, and the Medscape Quality
Improvement Consortium and related efforts to mine and sell data from the
Sellers' digital health records systems.
"Medscape" shall have the meaning set forth in the Preamble.
"Medscape Deductible" shall have the meaning set forth in Section 6.02(b).
"Medscape Enterprises" shall have the meaning set forth in the Preamble.
"Medscape Financial Statements" shall have the meaning set forth in Section
2.04.
"Net Accounts Receivable" shall have the meaning set forth in Section
6.03(b)(vii).
"Order" means any decree, decision, injunction, judgment, order, ruling,
assessment or writ of any court or Governmental Authority.
"Parent" shall have the meaning set forth in the Preamble.
"Parent Confidential Information" shall have the meaning set forth in
Section 5.05(b).
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to, any
Governmental Authority, whether foreign, federal, state or local, necessary or
desirable for the past, present or currently anticipated conduct of, or relating
to the operation of the Business.
"Permitted Liens" shall have the meaning set forth in Section 2.07(a).
A-5
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, limited liability partnership, firm,
association, or organization or other legal entity.
"Portals Assignment and Assumption Agreement" shall have the meaning set
forth in Section 5.06(a).
"Portals Bill of Sale" shall have the meaning set forth in Section 5.06(a).
"Privacy Policies" shall have the meaning set forth in Section 2.08(i).
"Pro-Forma Balance Sheet" means column B of Schedule 2.04(a)(i).
"Purchase Price" shall have the meaning set forth in Section 1.03.
"Purchase Price Allocation Schedule" shall have the meaning set forth in
Section 1.08.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Deductible" shall have the meaning set forth in Section 6.02(a).
"Receivable Deficiency" shall have the meaning set forth in Section
6.03(b).
"Representative" of a Person means the directors, officers, employees,
advisors, agents, stockholders, consultants, accountants, investment bankers or
other representatives of such Person.
"Retained Employees" shall have the meaning set forth in Exhibit E.
"Retained Liabilities" shall have the meaning set forth in Section 7.01(d).
"Retention Incentives" shall have the meaning set forth in Section 2.05(e).
"Returns" shall have the meaning set forth in Section 2.11(a).
"Section 6.03(b) Notice" shall have the meaning set forth in Section
6.03(b)(iii).
"Seller Employees" shall have the meaning set forth in Section 5.02(a).
"Sellers" shall have the meaning set forth in the Preamble.
"Severance Reimbursement Amount" shall have the meaning set forth in
Section 5.04(c).
"Shares" shall have the meaning set forth in Section 7.02(f).
"Solvent" shall mean, with respect to each of the Sellers on a particular
date, that on such date (i) the fair value of the property of such party is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such party, (ii) the present fair salable value of
the assets of such party is not less than the amount that will be required to
pay the
A-6
probable liability of such party on its debts as they become absolute and
matured, (iii) such party does not intend to, and does not believe that it will,
incur debts or liabilities beyond such party's ability to pay such debts and
liabilities as they mature and (iv) such party is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such party's property would constitute an unreasonably small capital. The amount
of contingent liabilities at any time shall be computed as the amount that, in
the light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Statute Claim" shall have the meaning set forth in Section 6.01.
"subsidiary" shall mean, with respect to any of the parties to this
Agreement, any corporation or other business entity, whether or not
incorporated, of which at least 50% of the securities or interests having, by
their terms, ordinary voting power to elect members of the board of directors,
or other persons performing similar functions with respect to such entity, are
held, directly or indirectly, by such party.
"Subsidiary" shall mean Medscape Portals, Inc., a Delaware corporation and
wholly-owned direct subsidiary of Medscape.
"Subsidiary Employees" shall have the meaning set forth in Section 5.02(a).
"Subsidiary Equity Securities" shall have the meaning set forth in Section
2.01(c).
"Taxes" shall have the meaning set forth in Section 2.11(a).
"Taxing Authorities" shall have the meaning set forth in Section 2.11(a).
"Third Party Claims" shall have the meaning set forth in Section
6.05(a)(i).
"Total Pro-Forma Liabilities" shall have the meaning set forth in Section
2.04(a).
"Transition Services Agreement" shall have the meaning set forth in Section
1.04(d).
"Unlimited Claim" shall have the meaning set forth in Section 6.01.
"Unlimited Representation Claim" shall have the meaning set forth in
Section 6.01.
A-7
EXHIBIT B
ACQUIRED ASSETS
Sellers' right, title and interest in and to the following:
1. All accounts receivable (whether current or noncurrent) resulting from
sales of the Business.
2. All prepaid advertising of the Business.
3. All Flexware software and hardware associated with such Flexware
software used in the billing systems of the Business and all other
machinery, equipment, furniture, fixtures, computers, vehicles,
software, spare and replacement parts and other tangible personal
property primarily used in the Business, including, but not limited to,
the servers located in the New Jersey Exodus data center.
4. (a) All licenses and sublicenses granted or obtained with respect to
the Business, and all rights under such licenses and sublicenses; (b)
the Intellectual Property identified on Exhibit B-1, attached hereto,
identifying: (i) each patent, unregistered and registered trademark,
service mark and trade name, domain name, copyright registration, and
each application for any of the foregoing which is used or held for use
in the Business; (ii) each license agreement (including, without
limitation, license agreements with respect to software, databases or
web site content), not listed in any other schedule to this Agreement,
in which Sellers are a licensor or licensee of any Intellectual
Property used or held for use in the Business; and (iii) each
agreement, not listed in any other schedule to this Agreement, with any
Person (other than Medscape employees) with respect to the creation of
any Intellectual Property used or held for use in the Business; (c) all
other Intellectual Property primarily used or held for use in the
Business; and (d) all right, title and interest to sue and recover for
any past, present and future infringements of any of the foregoing, and
all rights of protection of interests in all of the foregoing under the
laws of all jurisdictions (collectively, the "Acquired Intellectual
Property").
5. All Contracts of Sellers or Subsidiary (other than Excluded Contracts),
(a) set forth on Schedule 2.09, (b) not set forth on Schedule 2.09 due
solely to the specific dollar thresholds contained in Section 2.09, and
(c) all other Contracts which are used primarily in connection with the
Business (collectively, the "Acquired Contracts").
6. All prepayments and deposits of the Business.
7. All claims, refunds, rights of recovery, rights of set off and rights
of recoupment of any kind including all rights pursuant to any
warranty, representation or guarantee made by suppliers, contractors or
other third parties in connection with products or services primarily
used or held for use in the Business.
8. To the extent transferable, all franchises, approvals, permits,
licenses, orders, registrations, certificates, variances and similar
rights obtained from governments and governmental agencies of the
Business.
B-1
9. All books, records, ledgers and files, documents, correspondence,
lists, drawings, specifications, advertising and promotional materials,
studies, reports, customer and supplier data, lists and information,
trade secrets, confidential information, know-how and inventions and
other printed or written materials of the Business, except those
materials identified as Excluded Assets in Section 1.02(a).
10. All real property and leases (including the right to recover any
deposits made pursuant to such leases) of, and other interests in, real
property set forth on Schedule 2.21(b) (including all buildings,
fixtures, signage and improvements erected thereon and appurtenances
thereto and all of Sellers' rights to easements, rights of way and
rights of use with respect to real property adjacent or appurtenant
thereto) and any other real property and leases of, or other interests
in, real property primarily used or held for use in the Business.
11. All goodwill associated with the Business together with the right to
represent to third parties that Purchaser is the successor to the
Business.
12. All property reflected on the Balance Sheet other than (i) assets
disposed of in the ordinary course of business since the date of the
Balance Sheet Date and (ii) the Excluded Assets.
13. All of the issued and outstanding capital stock of Subsidiary.
14. All of the lockbox and deposits accounts held by Subsidiary.
B-2
EXHIBIT B-1
ACQUIRED INTELLECTUAL PROPERTY
a. Patents - None
b. Registered Trademarks, Service Marks and Trade Names See
Attachment B-1(i) - Trademarks, Service Marks and Trade Names
c. Domain names
bonehome.com
medgenmed.com
medpyx.com
medpyx.net
medpyx.org
medscapebrasil.com
medscape.com
medscapehealth.com
medscapeinc.com
medscapeinc.net
medscapeinc.org
medscapeprofiles.com
medscapejapan.com
medscapeeurope.com
medscapechina.com
medscapeeuk.com
medscapemobile.com
medscapemobile.net
medscapemobile.org
medscapechile.com
medscapeargentina.com
medscapesweden.com
medscapedeutschland.com
medscapefrance.com
medscapesverige.com
medscapemiddleeast.com
medscapeespana.com
medscapeasia.com
Medscape.co.uk - registered with Medscape UK Limited
Medscape.it - is registered with Infomedica, Medscape, Inc.'s Italian dealer -
see Attachment 2.09 (g)(1) International Partners
d. Copyright registrations and applications - none
B-1-1
(ii) All License Agreements and Agreements with Respect to the Creation of
Intellectual Property
a. CME Circle and related License Agreements -See Attachment B-1(ii)A
b. Freelancer Agreements - See Attachment 2.09(f)(5).
i. Our Freelance Agreements provide that the authors are required to
assign all copyright in works to Medscape, Inc or Medscape
Portals, Inc.
c. Author Agreements
i. Seller regularly enters into Author Agreements. Pursuant to these
agreements physicians or other authors contract with Medscape,
Inc to write a review, article or otherwise cover a medical
meeting. Typically, these authors are paid a one time fee of
between $1,000-$5,000 for their work, depending upon the desired
turn around time, the length of the article and the author's
status. Pursuant to these Agreements, authors assign to Medscape,
Inc or Medscape Portals, Inc the copyright to the work.
d. Reference is made to Attachment 2.09(f)(1) - Publisher's Circle
Content Sourcing Agreements.
e. Reference is made to Attachment 2.09(f)(2) - Software Licensing
Agreements.
B-1-2
EXHIBIT C
EXCLUDED ASSETS
1. Sellers' marketable securities, including without limitation Medscape's
equity investment in Softwatch, Ltd. and in Dietwatch, Inc.
2. All machines, equipment and other tangible personal property listed
below (collectively, "Excluded Personal Property"):
(a) all of the office equipment (laptop computer, peripherals and
etc.) used primarily by the Retained Employees;
(b) The capital stock of Medscape UK.
3. The following contracts:
(a) Interactive Services Agreement between America Online, Inc.
and Medscape, Inc. initially dated September 3, 1999, as
amended.
(b) Standard Form of Store Lease, made as of December, 1999 as
amended, between 224 West 30 LLC and Medscape, Inc.
(c) SCP Communications, Inc. Publishers Circle Agreements.
(d) Medscape Publisher's Circle Agreement dated April 1, 1996
between Medscape, Inc. and SCP Communications, (amended June
1, 1997).
(e) Medscape/BMS E-Business Enterprise Agreement dated as of May
25, 2000 between Medscape, Inc. and Bristol-Myers Squibb
Company, (including Exhibit A, Exhibit B (Service order dated
May 25, 2000), Exhibit C and Exhibit D).
(f) Novartis Preferred Partner Agreement between Novartis
Pharmaceutical Corporation and Medscape dated May 7, 1999.
(g) SubContractor - Customer Agreement for the AMA Physician
Professional Data dated as of July 22, 1999 between NDC Health
Information Services (Arizona) Inc. and Medscape, Inc.
(h) License and Product Development Agreement dated as of July 7,
1999 between Medscape, Inc. and National Data Corporation, as
amended.
(i) PERQ/HCI FOCUS and/or Media-Chek/APEX syndicated Media Audit
Subscription dated July 18, 2001.
(j) Market Measures Interactive Strategic Alliance Agreement among
Medscape, Inc., Market Measures Interactive, L.P., United
Information
C-1
StrategicMarketing, L.P., NOP HealthCare and United
Information Group, Inc., dated as of January 1, 2000.
(k) Sun Microsystems Hardware and Contracts, to the extent not
used primarily for the Business.*
(l) the agreement between Sun Microsystems, Inc./iPlanet Web
Server and Medscape, dated November 10, 1999. *
(m) BEA Systems/WEBXpress, Inc. Agreement with
MedicaLogic/Medscape, Inc. - effective 5/19/00 Product:
WEBLogic.*
(n) Oracle licenses*
(o) MCI Worldcom Agreement- Long Distance *
(p) Internet Security Systems Agreement (Intrusion Detection)
(q) IKON copier *
(r) Boise Cascade supply contract *
(s) Contracts with Softwatch, Ltd. regarding web site development
and preferred stock.
(t) License Agreement dated Dec. 16, 1998 between Ethos
Corporation (Stockpoint) and Medscape regarding provision of
stock quote information.
(u) All agreements with Ogilvy or its Affiliates.
(v) All agreements (including employment agreements) with Retained
Employees.
(collectively, "Excluded Contracts").
4. The following intangibles:
(a) Medscape "M" logo and design
(b) Tarascon Drug Reference Tool/Updates *
(c) Medcalc*
(d) Universal Registration Software *
- --------
* Subject to Transition Services Agreement and/or License Agreement
C-2
(e) ONYX Reporting*
(f) Hyperion Financial Summaries *
C-3
EXHIBIT E
EXCLUDED LIABILITIES
1. Amounts owed or other liabilities due to Parent or any of its
Affiliates.
2. Any liability for (A) indebtedness or other obligations of Sellers or
Subsidiary or any of their respective Affiliates for borrowed money,
whether current, short-term or long-term, secured or unsecured (other
than obligations under leases for personal property that are Assumed
Contracts) or (B) indebtedness of others guaranteed directly or
indirectly by Sellers or Subsidiary or any of their respective
Affiliates.
3. Any liability arising out of or related to any Action and which shall
have been commenced or asserted on or prior to the Closing Date or to
the extent the basis of which shall have arisen on or prior to the
Closing Date.
4. All Taxes of Sellers to the extent such Taxes are not Assumed Taxes.
5. Any liability of Parent or Medscape resulting from entering into,
performing obligations pursuant to or consummating the transactions
contemplated by this Agreement (including without limitation any
liability (A) pursuant to Article VI hereof or (B) any liability for
the costs and expenses of Sellers and Subsidiary (including fees and
disbursements of counsel, advisors, accountants and consultants)
incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby).
6. Any liability arising out of or related to any Excluded Asset
(including any Excluded Contract).
7. Any liability not relating primarily to the Business or the Acquired
Assets.
8. Any liability of Medscape or Parent to their respective shareholders or
former shareholders, in their capacity as shareholders.
9. (A) With respect to the Hired Employees, all liabilities which may arise as
a result of such Hired Employees' employment or consultancy with
Sellers or Subsidiary on or before the Closing, including in each case,
without limitation, obligations and liabilities with respect to (i) the
Employee Benefit Plans, (ii) any employment, severance, retention,
bonus, equity or other incentive agreements and arrangements, except
for the Assumed Employment Agreements, (whether established or
maintained by any Seller, Subsidiary, or any ERISA Affiliate or other
affiliate thereof), (iii) any and all liabilities with respect to
claims against Sellers, Subsidiary, Purchaser, and the affiliates,
directors, owners and agents of each, and (iv) any vacation days, or
payment with respect to unused vacation days, accrued under Sellers',
Purchaser's or Subsidiary's vacation pay policy;
E-1
(B) all liabilities with respect to the current or former employees,
directors, officers or consultants of any Seller or Subsidiary who are
not Hired Employees (the "Retained Employees"), whether arising before,
on or after the Closing, including in each case, without limitation,
obligations and liabilities with respect to (i) the Employee Benefit
Plans, (ii) any employment, severance, retention, bonus, equity or
other incentive agreements and arrangements, (whether established or
maintained by any Seller, Subsidiary, or any ERISA Affiliate or other
affiliate thereof), (iii) any and all liabilities with respect to
claims against Sellers, Subsidiary, Purchaser, and the affiliates,
directors, owners and agents of each, and (iv) any vacation days, or
payment with respect to unused vacation days, accrued under Sellers',
Purchaser's or Subsidiary's vacation pay policy.
(C) All liabilities relating to or arising in connection with the
requirements of Section 4980B of the Code or Part 6 of Title I,
Subtitle B of ERISA to provide continuation of health care coverage
under any Employee Benefit Plan in respect of the Retained Employees.
10. Any liability to Viacom or its Affiliates that have been commenced or
asserted on or prior to the Closing Date or to the extent the basis of
which shall have arisen on or prior to the Closing Date.
11. Any liability arising out of or relating to the sale of any assets of
Parent (other than the Acquired Assets) or any of its Affiliates,
including but not limited to, any merger or consolidation of Parent or
its Affiliates with or into another Person or any sale, assignment,
transfer, conveyance or other disposition of any stock, properties or
assets of Parent or any of its Affiliates.
12. Any liability arising out of acts or omissions occurring prior to the
Closing Date for (A) breach of contract, (B) breach of warranty, (C)
tort, (D) infringement of any third party's Intellectual Property or
other rights or (E) violation of any Law or Order.
13. Any other liability, contingent or otherwise, not defined as an Assumed
Liability and arising out of acts or omissions occurring prior to the
Closing Date.
14. Any liability of Medscape to Frierson Mee & Partners (including
pursuant to the side letter dated October 31, 2001).
E-2