<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 333-70553
--------------------------
HEALTHEON/WEBMD CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-3236644
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 THE LENOX BUILDING
3399 PEACHTREE ROAD, NE
ATLANTA, GEORGIA 30326
(Address of principal executive offices)
(404) 495-7600
(Registrant's telephone number, including area code)
--------------------------
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of April 28, 2000, there were 182,104,643 shares of the
Registrant's Common Stock outstanding.
================================================================================
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HEALTHEON/WEBMD CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION NUMBER
<S> <C> <C>
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2000 (Unaudited) and
December 31, 1999............................................................... 3
Unaudited Condensed Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999................................................... 4
Unaudited Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999................................................... 5
Notes to Condensed Consolidated Financial Statements............................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk......................... 26
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K................................................... 27
Signatures......................................................................... 28
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEALTHEON/WEBMD CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................. $ 1,160,682 $ 291,286
Accounts receivable, net ................... 71,925 51,511
Other current assets ....................... 15,564 20,808
----------- -----------
Total current assets ................ 1,248,171 363,605
Property and equipment, net ....................... 65,103 48,384
Prepaid content and services ...................... 616,875 273,038
Intangible assets, net ............................ 3,763,748 3,547,559
Other assets ...................................... 54,370 9,876
----------- -----------
$ 5,748,267 $ 4,242,462
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $ 45,186 $ 77,288
Accrued liabilities ........................ 81,770 62,841
Deferred revenue ........................... 10,532 4,891
Current portion of capital lease obligations 2,204 2,281
----------- -----------
Total current liabilities ........... 139,692 147,301
Long-term liabilities ............................. 121,409 121,489
Stockholders' equity:
Convertible preferred stock ................ 629,000 --
Common stock ............................... 18 16
Additional paid-in capital ................. 5,684,964 4,370,165
Deferred stock compensation ................ (3,931) (5,089)
Accumulated deficit ........................ (822,885) (391,420)
----------- -----------
Total stockholders' equity .......... 5,487,166 3,973,672
----------- -----------
$ 5,748,267 $ 4,242,462
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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HEALTHEON/WEBMD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
--------- --------
<S> <C> <C>
Revenue (1) ......................................... $ 65,881 $ 17,555
Operating costs and expenses:
Cost of operations ............................. 59,365 15,518
Development and engineering .................... 11,574 7,041
Sales and marketing ............................ 86,715 4,652
General and administrative ..................... 13,811 4,249
Depreciation and amortization .................. 338,710 5,225
--------- --------
Total operating costs and expenses ......... 510,175 36,685
--------- --------
Loss from operations ................................ (444,294) (19,130)
Interest income, net ................................ 12,829 561
--------- --------
Net loss ............................................ $(431,465) $(18,569)
========= ========
Basic and diluted net loss per common share ......... $ (2.47) $ (0.30)
========= ========
Weighted average shares outstanding used in computing
basic and diluted net loss per common share ........ 175,041 62,665
========= ========
</TABLE>
(1) Includes revenue to related parties of $12,777 and $9,521 for the three
months ended March 31, 2000 and 1999, respectively. See note 2.
See notes to condensed consolidated financial statements.
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HEALTHEON/WEBMD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................................... $ (431,465) $(18,569)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of intangible assets ...................... 338,710 5,946
Amortization of deferred compensation related to options granted ........ 1,158 2,084
Amortization of non-cash prepaid content and services ................... 18,554 --
Changes in operating assets and liabilities:
Accounts receivable ................................................. (12,294) (2,470)
Other assets ........................................................ 16,061 (3,069)
Accounts payable .................................................... (28,163) (1,161)
Accrued liabilities ................................................. (22,575) 4,175
Deferred revenue .................................................... (294) 1,723
---------- --------
Net cash used in operating activities ........................ (120,308) (11,341)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments .......................................... -- (15,148)
Maturities of short-term investments ......................................... -- 7,790
Decrease in restricted cash .................................................. -- 867
Purchases of long-term investments ........................................... (42,500) --
Purchases of property and equipment .......................................... (5,666) (4,048)
Cash acquired in business combinations, net of cash paid ..................... 101,662 --
---------- --------
Net cash provided by (used in) investing activities .......... 53,496 (10,539)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable .................................................... -- (159)
Proceeds from issuance of common stock, net of repurchases ................... 936,951 41,755
Principal payments of capital lease obligations .............................. (743) (716)
---------- --------
Net cash provided by financing activities .................... 936,208 40,880
---------- --------
Net increase in cash and cash equivalents ........................................... 869,396 19,000
Cash and cash equivalents at beginning of period .................................... 291,286 19,389
---------- --------
Cash and cash equivalents at end of period .......................................... $1,160,682 $ 38,389
========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................................................ $ 148 $ 139
========== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases ...................................... $ 215 $ 983
========== ========
Issuance of common stock for asset purchases ................................. $ 372,737 $ 11,000
========== ========
Issuance of preferred stock for asset purchases .............................. $ 629,000 $ --
========== ========
Deferred compensation related to options granted ............................. $ -- $ 6,261
========== ========
Conversion of convertible preferred stock to common stock .................... $ -- $ 46,101
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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HEALTHEON/WEBMD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited condensed consolidated financial statements have been
prepared by Healtheon/WebMD's management and reflect all adjustments that, in
the opinion of management, are necessary for a fair presentation of the interim
periods presented. The results of operations for the three months ended March
31, 2000 are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire year ending December 31, 2000. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted under the Securities and Exchange Commission's rules and
regulations. A condensed consolidated statement of comprehensive loss has not
been presented because the components of comprehensive loss are not material.
Healtheon/WebMD operates within a single operating segment and to date has
derived nearly all of its revenue from within the United States.
These unaudited condensed consolidated financial statements and notes
included herein should be read in conjunction with Healtheon/WebMD's audited
consolidated financial statements and notes for the year ended December 31, 1999
which were included in our Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
Revenue Recognition
Revenue recognized from arrangements deemed to be nonmonetary exchanges
of Healtheon/WebMD's products and services for customer products and services
totaled approximately $3,080 during the three months ended March 31, 2000, with
no revenue of this type recognized during the three months ended March 31, 1999.
Revenues from these exchanges are recorded at the fair value of the products and
services provided or received, whichever is more clearly evident.
Concentration of Revenue and Credit Risk
One customer represented 11% of consolidated revenue for the three
months ended March 31, 2000. Two customers, one of which is a related party,
comprised 32% of the total accounts receivable at March 31, 2000. We believe
that the concentration of credit risk in our trade receivables, with respect
to our limited customer base, is substantially mitigated by our credit
evaluation process. We do not require collateral. To date, our bad debt
write-offs have not been significant.
Net Loss Per Common Share
The following table presents the calculation of basic and diluted net
loss per common share:
6
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2000 1999
------------- ------------
<S> <C> <C>
Net loss ................................................................................. $ (431,465) $ (18,569)
============= ============
Basic and diluted:
Weighted-average shares of common stock outstanding ................................. 175,572 63,789
Less: Weighted-average common shares subject to repurchase .......................... (531) (1,124)
------------- ------------
Weighted-average shares used in computing basic and diluted net loss per
common share ........................................................................ 175,041 62,665
============= ============
Basic and diluted net loss per common share .............................................. $ (2.47) $ (0.30)
============= ============
</TABLE>
We have excluded all convertible redeemable preferred stock,
convertible preferred stock, warrants, outstanding stock options and shares
subject to repurchase by Healtheon/WebMD from the calculation of diluted net
loss per common share because all such securities are anti-dilutive for the
periods presented. The total number of shares on an "as converted" basis
excluded from the calculation of diluted loss per shares was approximately 81.5
million shares at March 31, 2000 and 18.2 million shares at March 31, 1999.
Reclassifications
Certain reclassifications have been made to the financial statements to
conform with the current year presentation. These reclassifications had no
effect on previously reported financial position or results of operations.
2. RELATED PARTY TRANSACTIONS
Revenue from related parties for the three months ended March 31, 2000
includes advertising revenue, content license and carriage fees, subscription
and e-commerce revenue pursuant to revenue-sharing and fixed-fee agreements with
related parties as discussed below. Two of the following arrangements were
originally entered into by and between WebMD and Microsoft Corporation in March
1999 and WebMD and At Home Corporation, or Excite@Home, in May 1999. As a result
of WebMD's merger in November 1999 with Healtheon, we assumed these agreements
and Microsoft Corporation and Excite@Home became related parties to
Healtheon/WebMD. In January 2000, we completed the transactions contemplated by
our strategic alliance with News Corporation at which time News Corporation
became a related party.
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<PAGE> 8
Microsoft
For the three months ended March 31, 2000, we recognized $7,250 in
carriage fees as sales and marketing expense under the terms of our five-year
strategic alliance with Microsoft. For the three month period ended March 31,
2000, we recognized $964 of advertising revenue for advertising placed on
Microsoft's health channels and no revenue related to advertising placed by
Microsoft on our web site. For the three month period ended March 31, 2000, we
recorded revenue of $3,753 related to subscriptions to WebMD's physician web
site which were sponsored by Microsoft. This amount has been recorded net of
commissions. For the three month period ended March 31, 2000, we recognized
$9,000 as sales and marketing expense for amortization of the $180,000 value
assigned to the Microsoft strategic agreement. At March 31, 2000 and December
31, 1999, accounts receivable from Microsoft was $15,741 and $9,030,
respectively.
News Corporation
Pursuant to our strategic alliance entered into with News Corporation
in January 2000, Healtheon/WebMD will provide daily, health-related content to
News Corporation for an aggregate of $60,000 in licensing fees over a five-year
term. Revenue recognized from this agreement and from other services provided to
News Corporation totaled $4,500 for the three months ended March 31, 2000. There
was no accounts receivable from News Corporation at either March 31, 2000 or
December 31, 1999.
Excite@Home
Under a three-year services agreement with Excite@Home, Healtheon/WebMD
will create a co-branded health channel and online health-related communities
for Excite@Home. Excite@Home has guaranteed a minimum level of impressions
throughout the Excite@Home network, and we have agreed to pay carriage fees over
the term of the agreement. For the three month period ended March 31, 2000, we
recorded $2,500 as sales and marketing expense related to carriage fees based on
impressions delivered. Excite@Home and Healtheon/WebMD will share the
advertising revenue generated by the co-branded web site. At March 31, 2000 and
December 31, 1999, accounts receivable from Excite@Home was $1,837 and $1,158,
respectively.
Revenue from related parties includes revenue attributable to
UnitedHealth Group of $1,300 and $3,400 for the three months ended March 31,
2000 and 1999, respectively. In January 2000, the Chairman and Chief Executive
Officer of UnitedHealth Group resigned from our Board of Directors, and at this
date, UnitedHealth Group ceased to be a related party.
Revenue from related parties for the three months ended March 31, 1999
includes revenue attributable to SmithKline Labs of $6,100. In August 1999,
SmithKline Labs was sold to a company which is not a significant stockholder of
Healtheon/WebMD, and at this date, SmithKline Labs ceased to be a related party.
3. STOCKHOLDERS' EQUITY
From January 1, 1999 through February 10, 1999, the date of our initial
public offering, Healtheon/WebMD granted to employees options to purchase common
stock equal to a total of 4,107,625 shares with exercise prices ranging from
$3.55 to $5.85 per share. Deferred stock compensation of $6,261 was recorded for
the three month period March 31, 1999 and is being amortized over the vesting
period of these options.
On February 10, 1999, Healtheon completed its initial public offering.
We sold 5,750,000 shares of common stock to the public and realized net proceeds
of approximately $41,398.
On January 27, 2000, Janus Capital Corporation, through its managed
mutual funds, invested $930,000 in exchange for 15,000,000 shares of
Healtheon/WebMD common stock at $62.00 per share in a private transaction.
On January 26, 2000, as part of our strategic alliance with News
Corporation, we issued convertible preferred stock that is convertible into
21,282,645 shares of common stock and sold 2,000,000 shares of common stock to
affiliates of News Corporation. See Note 4.
4. BUSINESS COMBINATIONS
The 1999 Mergers
Effective November 12, 1999, Healtheon merged with WebMD, a provider of
web-based solutions for the administrative, communications and information needs
of healthcare professionals and the healthcare informational needs of consumers.
Healtheon exchanged 1.796 shares of its common stock for each share of WebMD
stock. The total purchase consideration was approximately $3,659,921. The
acquisition was accounted for using the purchase method and, accordingly, the
purchase price was allocated to the tangible and intangible assets acquired and
the liabilities assumed on the basis of their respective fair values on the
acquisition date. The total goodwill recorded in connection with the purchase
was $2,944,804 and is being amortized over three years. The values, totaling
approximately $196,307, assigned to WebMD's acquired technology, customer lists,
trademarks, and other intangibles, were determined through independent
appraisal.
Effective November 12, 1999, Healtheon acquired MedE America, a
provider of healthcare transaction services for hospitals, pharmacies,
physicians, dentists, payers and pharmacy benefit managers. Healtheon exchanged
0.7494 shares of its common stock for each share of MedE America stock. The
total purchase consideration was approximately $417,292. The acquisition was
accounted for using the purchase method and, accordingly, the purchase price was
allocated to the tangible and intangible assets acquired and
8
<PAGE> 9
the liabilities assumed on the basis of their respective fair values on the
acquisition date. The total goodwill recorded in connection with the purchase
was $324,983 and is being amortized over four years. The values, totaling
approximately $105,545, assigned to MedE America's customer lists, trademarks
and acquired technology, were determined through independent appraisal.
Effective November 12, 1999, Healtheon acquired Medcast, an
Internet-based medical news and information service. Healtheon exchanged
2,692,501 shares or options to purchase shares of its common stock and
approximately $2,336 in cash for all Medcast outstanding stock. The total
purchase consideration was approximately $112,953. The acquisition was accounted
for using the purchase method and, accordingly, the purchase price was allocated
to the tangible and intangible assets acquired and the liabilities assumed on
the basis of their respective fair values on the acquisition date. The total
goodwill recorded in connection with the purchase was approximately $109,755 and
is being amortized over three years. The values, totaling $17,700, assigned to
Medcast's customer lists, trademarks and acquired technology, were determined
through independent appraisal.
The fair value per share of Healtheon's common stock was based on the
closing price of Healtheon's common stock on the five days prior and subsequent
to the days the mergers were announced, or, if applicable, the days the merger
agreements were amended, which were September 7, 1999 for WebMD, October 6, 1999
for Medcast and November 9, 1999 for MedE America.
2000 Acquisitions and Strategic Partnerships
On January 26, 2000, Healtheon/WebMD completed the transactions
contemplated by its strategic alliance agreement with The News Corporation
Limited, Fox Entertainment Group and certain of their affiliates (collectively,
"News Corporation"). Under this strategic partnership, News Corporation became a
minority stockholder in Healtheon/WebMD. The financial terms of the strategic
partnership include $400.0 million in media branding services to be provided by
News Corporation and its affiliates to Healtheon/WebMD domestically over 10
years; a $100.0 million cash investment commitment by News Corporation in an
international joint venture; a $60.0 million five-year licensing agreement for
syndication of WebMD daily broadcast content; the transfer to Healtheon/WebMD of
a 50% interest in The Health Network, a health-focused cable network, and 50%
ownership of thehealthnetwork.com. Healtheon/WebMD issued an aggregate of
155,951 shares of Series A Preferred Stock, which shares vote on an
as-if-converted basis with Healtheon/WebMD's common stock, in consideration for
its 50% interest in thehealthnetwork.com. Assuming conversion of all of the
shares of Series A Preferred Stock, the holders of these shares will receive
21,282,645 shares of the Healtheon/WebMD's common stock. These shares are
subject to restrictions on their sale for three years. In addition, affiliates
of Fox Entertainment purchased 2,000,000 shares of the Healtheon/WebMD's common
stock at $50.00 per share for an aggregate purchase price of $100.0 million in
cash.
On January 31, 2000, Healtheon/WebMD completed its acquisition of
Kinetra LLC, a joint venture between Electronic Data Systems Corporation and Eli
Lilly and Company, which was accounted for under the purchase method of
accounting. Kinetra is a provider of health information networks and healthcare
e-commerce services that enhance decision-critical information flow within the
healthcare field. The total purchase consideration was approximately $291,538,
comprising the issuance of 7,437,248 shares of Healtheon/WebMD's common stock
with an aggregate fair value of $286,288, $5,250 of acquisition costs and a
nominal amount of cash in exchange for all of the membership interests of
Kinetra.
Proposed Mergers
On January 22, 2000, Healtheon/WebMD entered into a definitive
agreement with Quintiles Transnational Corp. and its subsidiary, QFinance, Inc.
(collectively, "Quintiles"), to acquire Quintiles' electronic data interchange
subsidiary ("EDI"), Envoy Corporation, a provider of healthcare EDI transactions
in the United States. Under the terms of the agreement, Quintiles will receive
35,000,000 shares of Healtheon/WebMD stock and $400,000 in cash, for a total
consideration of approximately $2,500,000. Quintiles will issue Healtheon/WebMD
a warrant to purchase up to 10,000,000 shares of Quintiles common stock at
$40.00 per share, exercisable for four years. Stock received by Quintiles in the
transaction will be subject to restrictions on sale for one to two years.
Completion of the agreement, which will be accounted for as a purchase
transaction, is expected in the second quarter of 2000, subject to regulatory
approval and certain other customary closing conditions. We have received and
responded to a request from the Department of Justice for additional information
in connection with our pre-merger notification filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect
to our announced acquisition of Envoy. This acquisition may not be completed
until 20 days after the DOJ determines that we have substantially complied with
the request for additional information, unless this waiting period is terminated
earlier by the DOJ.
9
<PAGE> 10
On February 13, 2000, Healtheon/WebMD entered into definitive
agreements to acquire Medical Manager Corporation, a provider of physician
practice management systems in the United States, and its publicly traded
subsidiary, CareInsite, Inc., a developer of an Internet-based healthcare
e-commerce network that links physicians, suppliers and patients. Under the
terms of the agreements, Healtheon/WebMD will exchange 1.65 shares of its common
stock for each share of Medical Manager and 1.3 shares for each share of
CareInsite not owned directly or indirectly by Medical Manager. Completion of
the acquisitions, which will be accounted for under the purchase method of
accounting, is expected in mid-year 2000, subject to regulatory and stockholder
approvals and certain other customary closing conditions. The completion of the
Medical Manager and CareInsite acquisitions are conditioned on each other.
On February 15, 2000, Healtheon/WebMD entered into a definitive
agreement to acquire OnHealth Network Company, a leading source of
consumer-oriented health and wellness information, products and services on the
web. Under the terms of the agreement, stockholders of OnHealth stock are to
receive 0.189435 shares of Healtheon/WebMD common stock for each share of
OnHealth stock. Closing of the transaction, which will be accounted for under
the purchase method of accounting, is expected in mid-year 2000, subject to
regulatory and OnHealth stockholder approval and other customary closing
conditions. In connection with the agreement, Healtheon/WebMD advanced $15,000
to OnHealth for working capital needs and has agreed to provide an additional
$15,000 as needed prior to the date of closing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Except for historical information, this quarterly report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements involve risks and uncertainties,
including, among other things, statements regarding our pending acquisitions,
anticipated costs and expenses, revenue mix, product and service development and
relationships with strategic partners. These forward-looking statements include
declarations regarding our belief or current expectations of management, such as
statements indicating that "we expect," "we anticipate," "we intend," "we
believe" and similar language. Our actual results may differ significantly from
those projected in the forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed
in the section "Management's discussion and analysis of financial condition and,
results of operations -- Factors that may affect future results of operations."
You should carefully review the risks described in our reports and registration
statements that we file from time to time with the Securities and Exchange
Commission. You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this quarterly report. We
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this document.
The following discussion also should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1999 included in our Annual Report on Form 10-K as filed with the Securities
and Exchange Commission.
OVERVIEW
We provide web-based healthcare information and services to facilitate
connectivity and transactions among physicians, patients, payers and other
healthcare industry participants. Our Internet-based information and transaction
platform allows for the secure exchange of information among the disparate
information systems used by healthcare industry participants and supports our
administrative transaction services, including patient enrollment, eligibility
determination, referrals and authorizations, laboratory and diagnostic test
orders and results, clinical data retrieval and claims processing.
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<PAGE> 11
Our web site, WebMD.com, offers a single destination for the exchange
of healthcare information and supports a broad range of healthcare transactions
delivered over our secure, Internet-based platform. We design our service
offerings to help integrate and manage administrative, clinical, research and
information needs of healthcare industry participants. We believe that our
web-based solution has the potential to create significant improvements in the
way that information is used by the healthcare system, enabling improved
workflows, better decision making and, ultimately, higher quality patient care
at a lower cost.
Through WebMD.com, physician subscribers can access WebMD Practice, our
provider destination, and consumers can access WebMD Health, our free consumer
destination. WebMD Practice provides physicians with administrative transaction
services, medical news and research, continuing medical education credits,
customized web sites and e-mail accounts, among other services. WebMD Health
provides consumers with health and wellness news and information, support
communities, interactive tools and opportunities to purchase health-related
products and services. Our communities allow consumers to participate in
real-time discussion and support networks over the Internet.
We currently provide services to over 250,000 physicians and
approximately 11,000 dentists, 4,500 hospitals, 46,000 pharmacies, 650 payers
and 8 laboratory companies. In addition, nearly 100,000 physicians have
subscriptions to WebMD Practice, and over 1,100,000 consumers are enrolled in
our support communities on WebMD Health. In March 2000, WebMD.com attracted
approximately 2.9 million unique users, according to Media Metrix, and page
views exceeded approximately 44.8 million, according to commercial software that
we utilize.
We were incorporated in December 1995 and commenced operations in
January 1996. In November 1999, we merged with WebMD, Inc., MedE America
Corporation and Greenberg News Networks, Inc., which is referred to as Medcast,
and changed our name to Healtheon/WebMD Corporation. We launched our integrated
web site in November 1999 following the closing of these mergers.
In January 2000, we completed the acquisition of Kinetra LLC and the
transactions contemplated by our strategic alliance with News Corporation. Also
in the first quarter of 2000, we entered into definitive agreements to acquire
Envoy Corporation, Medical Manager Corporation, CareInsite, Inc. and OnHealth
Network Company. These acquisitions are subject to regulatory approvals and
customary closing conditions. These acquisitions will be acccounted for as
purchase transactions and are expected to be completed in mid-year 2000. For a
more complete description of these transactions, see Note 4 to the Condensed
Consolidated Financial Statements in this quarterly report and "Business -
Recent events" in our 1999 annual report.
RESULTS OF OPERATIONS
Revenue
We recognize revenue as our services are performed or our products are
delivered. We earn revenue on our network-based fees from fixed fee subscription
arrangements, which are recognized ratably over the term of the applicable
agreement, and from our administrative services, which are priced on a
per-transaction or per-user basis and recognized as the services are performed.
Revenue from our development, consulting and information technology management
services is recognized as these services are performed. We recognize revenue
related to software license fees when a customer enters into a non-cancelable
license agreement, the software product covered by the license agreement has
been delivered, there are no uncertainties surrounding product acceptance, there
are no significant future performance obligations, the license fees are fixed or
determinable and collection of the license fees is considered probable.
Revenue from advertising is recognized as advertisements are run on our
web site or on co-branded web sites. Our subscription revenue, including
subscription revenue from sponsorship arrangements, is recognized ratably over
the subscription term as subscriptions are placed with physicians. We do not
allocate subscription revenue among our various service offerings included as
part of the base subscription fee. Revenue from fixed fee content license or
carriage fees is recognized ratably over the term of the applicable agreement.
We recognize e-commerce revenue when a subscriber or consumer utilizes our
Internet-based services or purchases goods or services through our web site or a
co-branded web site with one of our strategic partners. We recognize revenue
from our optional services when we provide one or more of these services for
fees in addition to the base subscription fees for WebMD Practice.
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For the three months ended March 31, 2000, total revenue increased to
$65.9 million from $17.6 million for the three months ended March 31, 1999. This
increase is due primarily to the growth of our transaction- and network-based
services and to the additional revenue sources that were acquired upon the
closing of our mergers with WebMD and MedE America. Transaction revenue,
advertising revenue and subscription revenue comprise 43.8%, 29.4% and 10.3% of
total revenue for the three months ended March 31, 2000 and 54.5%, 0% and 0% of
total revenue for the three months ended March 31, 1999, respectively.
For the three months ended March 31, 2000, revenue from related
parties, which consists principally of services provided to UnitedHealth Group,
Microsoft and News Corporation, increased to $12.8 million from $9.5 million for
the three months ended March 31, 1999. The increase was primarily due to
increases in transaction-based services to UnitedHealth Group, from
subscriptions and third party advertising through our Microsoft strategic
alliance and from health-related content licensed to News Corporation. Revenue
from SmithKline Labs ceased being related party revenue in August 1999 when
SmithKline Labs was sold to Quest Diagnostics, and revenue from UnitedHealth
Group ceased being related party revenue in January 2000 when the Chairman and
Chief Executive Officer of UnitedHealth Group resigned from our board of
directors.
Cost of Operations
Cost of operations, which consists principally of costs to operate and
maintain our networks and costs related to providing services, increased from
$15.5 million for the three months ended March 31, 1999 to $59.4 million for the
three months ended March 31, 2000. The increase resulted primarily from
increased personnel and network operations costs, costs to acquire exclusive
arrangements to provide consumer healthcare-related content to other web sites
and other costs required to support the increased service revenues. Of the
increase in cost of operations, $33.1 million relates to expenses incurred by
the companies acquired in the 1999 Mergers and the 2000 Acquisitions and
Strategic Partnerships.
Development and Engineering
Development and engineering expense consists primarily of expenses
associated with development of services and applications and excludes
development expenses that are included in cost of operations. These expenses,
which are comprised of salaries paid to engineering personnel, fees paid to
outside contractors and consultants, a portion of facilities expenses and
maintenance of capital equipment used in the development process, increased from
$7.0 million for the three months ended March 31, 1999 to $11.6 for the three
months ended March 31, 2000. The increase was the result of a significant
increase in the number of engineers engaged in the development of our
applications and services. Of the increase, $2.7 million relates to expenses
incurred by the companies acquired in the 1999 Mergers and the 2000 Acquisitions
and Strategic Partnerships.
Sales and Marketing
Sales and marketing expense, which consists principally of salaries and
related expenses for sales, account management and marketing personnel,
commissions, and expenses for marketing programs and trade shows, increased from
$4.6 million for the three months ended March 31, 1999 to $86.7 million for the
three months ended March 31, 2000. The increase primarily related to the
salaries and related costs of added sales and marketing personnel and to
advertising and promotion costs incurred to increase awareness of our WebMD
brand. Of the increase, $79.0 million relates to expenses incurred by the
companies acquired in the 1999 Mergers and the 2000 Acquisitions and Strategic
Partnerships.
General and Administrative
General and administrative expense which consists primarily of salaries
and related expenses for administrative, finance, legal, human resources and
executive personnel, fees for professional services, costs of general insurance
and other internal control systems costs, increased to $13.8 million for the
three months ended March 31, 2000 from $4.2 million for the three months ended
March 31, 1999. The increase primarily related to increased personnel costs and
facilities expenses incurred as we added administrative personnel and executive
management. General and administrative expenses include the amortization of
deferred stock compensation which increased to $1.2 million for the three months
ended March 31, 2000 from $2.1 million for the three months ended March 31,
1999. The remainder of the increase resulted from salaries and related costs of
office space and facilities as we added administrative personnel and executive
management. Of the increase, $12.2 million is a result of expenses incurred by
the companies acquired in the 1999 Mergers and the 2000 Acquisitions and
Strategic Partnerships.
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Depreciation and Amortization
Depreciation and amortization was $338.7 million for the three months
ended March 31, 2000 and $5.2 million for the three months ended March 31, 1999.
The increase was due primarily to the amortization of intangible assets acquired
in the 1999 Mergers and the 2000 Acquisitions and Strategic Partnerships, the
amounts of which are being amortized over expected lives of one to five years.
The consummation of the pending proposed purchase transactions announced in the
first quarter of 2000 will add significant additional charges in future periods.
Interest Income and Expense
Interest income has been derived primarily from cash investments.
Interest expense results primarily from our borrowings and from capitalized
lease obligations for equipment purchases. Net interest income was $12.8 million
for the three months ended March 31, 2000 and $0.6 million for the three months
ended March 31, 1999. The increase was primarily due to higher average cash
balances resulting from the $41.4 million in net proceeds from our initial
public offering in February 1999, the $930.0 million in net proceeds received
from the sale of our common stock to Janus Capital in February 2000 and from
cash balances that were acquired in the 1999 Mergers and the 2000 Acquisitions
and Strategic Partnerships.
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LIQUIDITY AND CAPITAL RESOURCES
In February 1999, we completed the initial public offering of our
common stock and realized net proceeds from the offering of approximately $41.4
million. Prior to this offering, we had funded our operations since inception
primarily through the private placement of equity securities. We had also
financed our operations through equipment lease financing and bank borrowings.
In January 2000, we raised an additional $1.03 billion from our sale of
15.0 million shares of our common stock to Janus Capital Corporation, through
its managed mutual funds, for $930.0 million, as well as our sale of 2.0 million
shares of our common stock to affiliates of News Corporation for $100.0 million
in connection with our News Corporation strategic alliance. As of March 31,
2000, we had outstanding equipment lease liabilities of $4.4 million. As of
March 31, 2000, we had approximately $1.16 billion in cash and cash equivalents
and working capital of $1.11 billion.
Cash used in operating activities was $120.3 million for the three
months ended March 31, 2000 compared to $11.3 million for the first quarter of
1999. The cash used during these periods was primarily attributable to net
operating losses, offset in part by depreciation and amortization. Our losses
were principally related to increased sales and marketing expenses to promote
the WebMD brand and development and engineering expenses to improve our product
offerings and develop new applications and content.
Cash provided by investing activities was $53.5 million for the three
months ended March 31, 2000 compared to cash used in investing activities of
$10.5 million for the first quarter of 1999. Purchases of long-term investments,
consisting primarily of investments in technology or service partners, were
$42.5 million for the first quarter of 2000 compared with no long-term
investment purchases during the same period of 1999. Investments in property and
equipment, excluding equipment acquired under capital leases, were $5.7 million
for the first quarter of 2000 compared to $4.0 million for the same period in
1999. In the first quarter of 1999, we purchased $15.1 million of short-term
investments and realized $7.8 million in cash from maturities of our short-term
investments. We invest our excess cash in short-term, interest-bearing
securities and will continue to do so in the future. We are not assured of
having excess cash balances in the future, so purchases of short-term
investments cannot be assured.
Cash provided by financing activities was $936.2 million for the three
months ended March 31, 2000, primarily related to the net proceeds received from
our sale of common stock to Janus. We intend to use proceeds from these
financing activities to pay the $400.0 million cash portion of our acquisition
of Envoy, to fund additional advances, if any, to OnHealth of up to $15.0
million pursuant to their line of credit, to provide working capital and for
general corporate purposes. For the first quarter of 1999, cash provided by
financing activities of $40.9 million related primarily to the net proceeds of
our initial public offering of $41.4 million.
As of March 31, 2000, we did not have any material commitments for
capital expenditures. Our principal commitments at March 31, 2000 consisted of
obligations under operating and capital leases and guaranteed payments under our
strategic agreements.
We estimate that we will make the following aggregate guaranteed
payments under our current relationships with our strategic partners in each
calendar year noted:
<TABLE>
<CAPTION>
Year Ended December 31, Amount
------------------------ -------------
<S> <C>
2000................................................... $78.3 million
2001................................................... 82.6 million
2002................................................... 51.4 million
2003................................................... 34.4 million
2004................................................... 8.8 million
</TABLE>
Most of our current strategic relationships contain revenue sharing
arrangements which generally provide for us to share advertising, sponsorship or
transaction net revenues, ranging from 15% to as much as 100%, with strategic
partners. In addition, some strategic partner agreements and promotional
arrangements require payments on a per-subscriber basis. We may enter into
additional promotional arrangements with current and future strategic partners
that may require us to pay consideration in amounts that significantly exceed
the
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amounts we are required to pay under our current arrangements. These guaranteed
payments and promotional and other arrangements may require us to incur
significant expenses. We cannot guarantee that we will generate sufficient
revenues to offset these expenses.
We may need to raise additional funds to support expansion, develop new or
enhanced applications and services, respond to competitive pressures, acquire
complementary businesses or technologies or take advantage of unanticipated
opportunities. However, with the investments by Janus and affiliates of News
Corporation, we believe that we will have sufficient cash resources to meet our
presently anticipated working capital and capital expenditure requirements for
at least the next 12 months. In addition, we expect to incur operating losses
for at least the next 12 months. We believe that our future liquidity and
capital requirements will depend upon numerous factors, including the success of
our existing and new application and service offerings and competing
technological and market developments. We may be required to raise additional
funds through public or private financing, strategic relationships or other
arrangements.
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FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
We have incurred and will continue to incur substantial losses
We began operations in January 1996 and have incurred net losses from
operations in each fiscal period since our inception. As of March 31, 2000, we
had accumulated losses of approximately $822.9 million. In addition, we
currently intend to invest heavily in pending acquisitions, infrastructure
development, applications development and sales and marketing in order to deploy
our services to a growing number of potential customers and strategic partners.
The purchase price of acquisitions we have recently completed will be, and the
purchase price of acquisitions which we may undertake in the future may be,
amortized over the useful life of the tangible and intangible assets. As of
March 31, 2000, we had approximately $3.8 billion of unamortized goodwill and
other intangible assets reflected on our financial statements as a result of
acquisitions. We currently anticipate that this amortization will cause us to
incur significant net losses for the next several years. We expect that we will
incur increasing net operating losses and negative cash flows for the
foreseeable future and may never be profitable.
The business of providing services over the Internet is difficult to
evaluate and our business model is unproven
Because we recently began operations, it is difficult to evaluate our
businesses and prospects. Our revenue and income potential is unproven and our
business model is evolving. We derive a substantial portion of our revenue from
non-Internet network services, from development and consulting services and from
managing and operating our customers' information technology infrastructures. We
may never achieve favorable operating results or profitability.
Our quarterly operating results may vary, which could affect the market
price of our common stock
Our operating results have varied on a quarterly basis during our
limited operating history, and we expect to experience significant fluctuations
in future quarterly operating results. These fluctuations have been and may in
the future be caused by numerous factors, many of which are outside of our
control, including, but not limited to:
- market acceptance of and demand for our products and services
- our ability to attract and retain customers and subscribers
- expenses relating to acquisitions and strategic partnerships
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- usage of the Internet and our ability to maintain and increase traffic
on our web site
- our ability to continue to develop and extend our brand
- our ability to effectively integrate the operations and technologies
of acquired businesses with our operations
- introduction and timing of new products and services or enhancements by
us or our competitors
- capacity constraints and dependencies on computer infrastructure
- economic conditions affecting the Internet or healthcare industries
- general economic conditions
Fluctuations in our quarterly results could adversely affect the market
price of our common stock in a manner unrelated to our long-term operating
performance. We expect to increase activities and spending in substantially all
operational areas and will base our expense levels in part upon our expectations
concerning future revenue, and these expense levels will be relatively fixed in
the short term. If we have lower revenue, we may not be able to reduce spending
in the short term in response. Any shortfall in revenue would have a direct
impact on our results of operations. As a result, we believe that
period-to-period comparisons of our results of operations will not necessarily
be meaningful and should not be relied upon as an indicator of future
performance. For these and other reasons, it is likely that in some future
quarter or quarters we may not meet the earnings estimates of securities
analysts or investors, which would materially and adversely affect our stock
price.
Our business will suffer if we fail to successfully integrate any acquired
businesses and technologies in the future
We have in the past acquired, and may in the future acquire,
businesses, technologies, services, product lines or content databases. We are
in the process of completing the integration and consolidation of the
operations, products and services, technologies and personnel of our November
1999 acquisitions of WebMD, MedE America and Medcast, as well as our January
2000 acquisition of Kinetra and strategic partnership with News Corporation, and
we will need to integrate and consolidate the operations, products and services,
technologies and personnel of Envoy, Medical Manager, CareInsite and OnHealth
upon our completion of these pending mergers. We cannot guarantee that any
acquired businesses will be successfully integrated with our operations in a
timely manner, or at all. The successful integration of the acquired businesses
into our operations is critical to our future performance. Failure to
successfully integrate acquired businesses or to achieve operating synergies
would have a material adverse effect on our business, financial condition and
results of operation. Integrating any newly acquired organizations and
technologies in the future could be expensive, time consuming and may strain our
resources. Our pending and any future acquisitions could divert management's
attention from other business concerns and expose us to unforeseen liabilities
or risks associated with entering new markets. In addition, we may lose key
employees while integrating these new companies. We may also lose our current
strategic partners and customers if any acquired companies have relationships
with competitors of our strategic partners or customers.
Challenges to the successful integration of acquired businesses include,
but are not limited to:
- centralization and consolidation of financial, operational and
administrative functions
- integration of platforms, networks and service centers
- ability to cross-sell products and services to our existing customer base
and customer bases of acquired companies
- integration and retention of personnel
- potential conflicts in customer, strategic, sponsor or advertising
relationships
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- need to coordinate geographically diverse organizations
- compliance with regulatory requirements
Consequently, we may not be successful in integrating acquired businesses or
technologies and may not achieve anticipated revenue and cost benefits. We also
cannot guarantee that these acquisitions will result in sufficient revenues or
earnings to justify our investment in, or expenses related to, these
acquisitions or that any synergies will develop. If we fail to execute our
acquisition strategy successfully for any reason, our business will suffer
significantly.
Managing our growth through acquisitions may strain our administrative,
technical and financial resources
We have rapidly and significantly expanded our operations recently and
expect to continue to do so. Our growth has been accomplished primarily through
acquisitions, including our mergers with WebMD, MedE America, Medcast and
Kinetra. This growth has placed a significant strain on our managerial,
operational, financial and other resources and is expected to continue to strain
our resources. If we are unable to respond to and manage this expected growth,
then the quality of our services and our results of operations could be
materially adversely affected.
Our current platforms, information systems, procedures and controls may
not continue to support our operations, and may hinder our ability to exploit
the market for healthcare applications and services. We are in the process of
completing the integration of our accounting and management information systems
following the mergers of WebMD, MedE America an Medcast in November 1999 and
Kinetra in January 2000. We could experience interruptions to our business while
we transition to new systems. We cannot guarantee that our systems, procedures
and controls will be adequate to support expansion of our operations.
Our business and stock price could suffer if we fail to complete our
pending acquisitions
In the first quarter of 2000, we entered into merger agreements
providing for our acquisition of Envoy, Medical Manager, CareInsite and
OnHealth. The completion of each is subject to regulatory approval, including
approval from state and federal antitrust agencies, and other customary closing
conditions. The Medical Manager and CareInsite mergers are subject to the
approval of our stockholders, Medical Manager's stockholders and CareInsite's
stockholders and the OnHealth merger is subject to approval by OnHealth's
stockholders. In addition, the closing of the Medical Manager and CareInsite
mergers are conditioned on each other. We cannot guarantee that regulatory
approvals will be received, or that we will not be required to make changes in
our business in order to receive regulatory approvals, or that other closing
conditions of any of our pending mergers will be satisfied in a timely manner,
or at all. Failure to complete these mergers in a timely manner would have a
material effect on our business, results of operations and stock price.
Future stock issuances will dilute our stockholders and could result in
adverse accounting consequences
We intend to pay for some of our acquisitions and branding and
advertising services by issuing additional common stock which would dilute our
stockholders. We may also use cash to acquire companies or technologies and may
need to incur debt to pay for these acquisitions. Acquisition financing may not
be available on favorable terms, or at all. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which could materially increase our
operating expenses.
Our ability to generate revenues will suffer if we do not quickly expand
our suite of applications and service offerings
We currently offer a limited number of applications on our
Internet-based platform and some of our service offerings are not fully
developed or launched. We must quickly introduce new applications and services,
improve the functionality of our existing services and successfully launch these
services in a timely manner in order to attract and retain subscribers. We
expect that our advertising and sponsorship revenues will be dependent on the
level of usage of our services by subscribers and consumers, and believe that
levels of usage will not increase unless we improve functionality. We rely on a
combination of internal development,
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strategic relationships, licensing and acquisitions to develop these
applications and services. Each of our applications, regardless of how it was
developed, must be integrated and customized to operate with existing customer
legacy computer systems and our platform. We are currently in the process of
migrating many of our acquired applications and products and services to our
Internet-based platform. Developing, integrating and customizing these
applications and services will be time consuming, and these applications and
services may never achieve market acceptance, which could also cause our
business to suffer.
We are dependent on strategic relationships to generate some of our revenue
Our ability to generate revenue will suffer if we cannot establish and
maintain strategic relationships. We must establish and maintain strategic
relationships with leaders in a number of healthcare and Internet industry
segments. For a more complete description of our strategic relationships, see
the section entitled "Business -- Strategic relationships," in our 1999 annual
report and for a description of our revenue resulting from these relationships,
see "--Our revenue will be concentrated in a few customers and our ability to
generate revenue would suffer if we lost any of these customers." Our strategic
relationships are critical to our success because we believe that these
relationships will provide additional subscribers and consumers to our web site
and will generate acceptance of our platform, applications and services. We may
not be able to establish commercial acceptance of our platform, applications and
services unless we maintain our existing strategic relationships and establish
and maintain additional strategic relationships in the future.
We may compete with potential strategic partners. Some of our current
and future strategic partners may compete with us and some strategic
relationships or acquisitions may put us in competition with existing strategic
partners or customers. For example, Medical Manager, which we have agreed to
acquire, competes with some of our strategic partners in the physician practice
management software business. In addition, we may not be able to maintain or
establish relationships with key participants in the healthcare and Internet
industries if we have already established relationships with competitors of
these key participants.
We have granted exclusive rights to strategic partners. We have agreed
that some of our strategic partners will be our exclusive providers of some of
our applications and content. For example, we have entered into strategic
agreements with exclusive online pharmacy and medical supplies and equipment
e-commerce partners and providers of various categories of content and services.
These agreements may limit our access to other applications and content we might
otherwise be able to make available to our customers. Our inability to offer
such applications and content could cause our business to suffer.
Our revenue will be concentrated in a few customers, and our ability to
generate revenue would suffer if we lost any of these customers
We received a significant amount of our 1999 revenue from three
customers. Quest Diagnostics, which recently acquired SmithKline Labs, Beech
Street and UnitedHealth Group, each accounted for more than 10% of our revenue
for the year ended December 31, 1999, and together accounted for approximately
57.9% of our revenue for the same period. In addition, Quest Diagnostics
accounted for 11% of our revenue for the three months ended March 31, 2000. We
expect that these three customers, together with Microsoft, may account for a
significant amount of our revenue for 2000. Microsoft will have the right to
terminate its strategic alliance with us if we acquire Medical Manager and
CareInsite and within 60 days thereafter we cannot resolve with Microsoft any
conflicts that may be created by our ownership of those companies. For details
regarding our relationship with Microsoft, see the section entitled "Business -
Strategic relationships -- Microsoft" in our 1999 annual report. If we do not
generate as much revenue from these customers as we expect, or if we lose any of
these customers, our revenue will be significantly reduced which would harm our
business and results of operations.
Our ability to generate revenue will suffer if we cannot attract and
retain subscribers
We must attract and retain subscribers to WebMD Practice in order to
generate subscription revenue. In addition, our ability to generate advertising
and sponsorship revenue and transaction revenue will be dependent on the
number of subscribers and level of usage by those subscribers. We cannot
guarantee that we will be able to attract new or retain existing subscribers. In
particular, we cannot guarantee that we will retain
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subscribers whose subscriptions are initially paid for by our strategic partners
once those subscribers are required to pay for their subscriptions themselves or
that these subscribers will actually use our services.
Our business will suffer if healthcare participants do not accept Internet
solutions
Our business model depends on the adoption of Internet solutions by
healthcare participants. Our ability to generate revenue could suffer
dramatically if Internet solutions are not accepted or not perceived to be
effective.
The Internet infrastructure may be unable to support the demands placed
on it by continued growth and use of the Internet. The adoption of Internet
solutions by healthcare participants will require the acceptance of a new way of
conducting business and exchanging information. To maximize the benefits of our
platform, healthcare participants must be willing to allow sensitive information
to be stored in our databases and to conduct healthcare transactions over the
Internet.
Performance problems with our systems could damage our business
Our customer satisfaction and our business could be harmed if we or our
customers experience system delays, failures or loss of data. We currently
process substantially all our customer transactions and data at our facilities.
Although we have a contingency plan for emergencies, we have limited backup
facilities to process information if these facilities are not functioning. The
occurrence of a major catastrophic event or other system failure at any of our
facilities could interrupt data processing or result in the loss of stored data.
While we have general liability insurance that we believe is adequate, including
coverage for errors and omissions, we may not be able to maintain this insurance
on reasonable terms in the future. In addition, our insurance may not be
sufficient to cover large claims and our insurer could deny coverage on claims.
If we are liable for an uninsured or underinsured claim or if our premiums
increase significantly, our financial condition could be materially harmed.
Performance problems with the systems of our service and content providers
could harm our business
We depend on service and content providers to provide information and
data feeds on a timely basis. Our web site could experience disruptions or
interruptions in service due to the failure or delay in the transmission or
receipt of this information. In addition, our customers depend on Internet
service providers, online service providers and other web site operators for
access to our web site. All of these providers have experienced significant
outages in the past and could experience outages, delays and other difficulties
in the future due to system failures unrelated to our systems. Any significant
interruptions in our services or increases in response time could result in a
loss of potential or existing customers, strategic partners, advertisers or
sponsors and, if sustained or repeated, could reduce the attractiveness of our
services.
If our systems experience security breaches or are otherwise perceived to
be insecure, our reputation will suffer
A material security breach could damage our reputation or result in
liability. We retain confidential customer and patient information in our
processing centers. We may be required to spend significant capital and other
resources to protect against security breaches or to alleviate problems caused
by breaches. Any well-publicized compromise of Internet security could deter
people from using the Internet or from conducting transactions that involve
transmitting confidential information, including confidential healthcare
information. Therefore, it is critical that these facilities and infrastructure
remain secure and are perceived by the marketplace to be secure. Despite the
implementation of security measures, this infrastructure may be vulnerable to
physical break-ins, computer viruses, programming errors, attacks by third
parties or similar disruptive problems.
Our business will be harmed if we are unsuccessful in responding to rapid
technology changes in our markets
Healthcare information exchange and transaction processing is a
relatively new and evolving market. The pace of change in our markets is rapid
and there are frequent new product introductions and evolving industry
standards. We may be unsuccessful in responding to technological developments
and changing customer
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needs. In addition, our applications and services offerings may become obsolete
due to the adoption of new technologies or standards.
Our platform infrastructure and scalability are not proven and we may fail
to respond to new growth
To date, we have processed a limited number and variety of transactions
over our platforms. Similarly, a limited number of healthcare participants use
these platforms. Our systems may not accommodate increased use while maintaining
acceptable overall performance. We must continue to expand and adapt our network
infrastructure to accommodate additional users, increased transaction volumes
and changing customer requirements. This expansion and adaptation will be
expensive and could divert our attention from other activities.
If we are unable to generate significant advertising revenues, our future
results of operations could be materially adversely affected
We derive a portion of our revenues from advertising on our web site.
We may not be able to continue to generate significant advertising revenues. No
standards have been widely accepted to measure the effectiveness of web
advertising. If no standards develop, existing advertisers may not continue
their current level of web advertising, and advertisers that have traditionally
relied on other advertising media may be reluctant to advertise on the web.
Advertisers that already have invested substantial resources in other
advertising methods may be reluctant to adopt a new strategy. Our business would
be adversely affected if the market for web advertising fails to develop or
develops more slowly than expected. Different pricing models are used to sell
advertising on the web. It is difficult to predict which, if any, will emerge as
the industry standard. This makes it difficult to project future advertising
revenues. The level of subscriber and consumer usage for our services is likely
to be a factor in determining advertising rates, and we cannot predict whether
those subscribers whose subscriptions are paid for by our strategic partners
will actually use our services. Moreover, filter software programs that limit or
prevent advertising from being delivered to a web user's computer are available.
Widespread adoption of this software could adversely affect the commercial
viability of web advertising.
If we are unable to generate significant revenue from e-commerce
transactions, our future results of operations could be materially
adversely affected
We cannot guarantee that we will be able to generate significant
transaction revenues in the future. We have developed relationships with service
providers to offer healthcare products and services through direct links from
our web site to their web sites. However, there is no established business model
for the sale of healthcare products or services over the Internet. Accordingly,
we have no significant experience in the sale of products or services online and
the development of relationships with providers of these products and services,
nor can we predict the rate at which our customers will elect to engage in this
form of commerce or the compensation that we will receive for enabling these
transactions.
Lengthy sales and implementation cycles for our solutions could adversely
affect our revenue growth
A key element of our strategy is to market our solutions directly to
large healthcare organizations. We will be unable to control many of the factors
that will influence our customers' buying decisions. We expect that the sales
and implementation process will be lengthy and will involve a significant
technical evaluation and commitment of capital and other resources by our
customers. The sale and implementation of our solutions are subject to delays
due to our customers' internal budgets and procedures for approving large
capital expenditures and deploying new technologies within their networks.
We will need to expend substantial resources to integrate our
applications with the existing legacy and client-server architectures of large
healthcare organizations. We have limited experience in integrating our
applications with large, complex architectures, and we may experience delays in
the integration process. These delays would, in turn, delay our ability to
generate revenue from these applications and could adversely affect our results
of operations.
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We will face significant competition
The market for healthcare information services is intensely
competitive, rapidly evolving and subject to rapid technological change. Many of
our competitors have greater financial, technical, product development,
marketing and other resources than we have. These organizations may be better
known and have more customers than we have. Many of our competitors have also
announced or introduced Internet strategies that will compete with our
applications and services. We may be unable to compete successfully against
these organizations.
We have many competitors, including:
- healthcare information software vendors
- healthcare electronic data interchange companies
- large information technology consulting service providers
- online services or web sites targeted to the healthcare industry,
physicians and healthcare consumers generally
- publishers and distributors of traditional offline media, including those
targeted to healthcare professionals, many of which have established or may
establish web sites
- general purpose consumer online services and portals and other
high-traffic web sites which provide access to healthcare-related content and
services
- public sector and non-profit web sites that provide healthcare
information without advertising or commercial sponsorships
- vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging
We expect that major software information systems companies and others
specializing in the healthcare industry will offer competitive applications or
services. In addition, some of our existing and potential customers and
strategic partners may also compete with us. For example, in April 2000, it was
reported that a consortium of six health insurance companies may join together
to develop an online project which links insurers, doctors and patients. If this
consortium decides to proceed with its plans to allow patients to enroll in
health plans and choose doctors online, while also taking care of administrative
tasks such as processing payment claims, it could compete with our services.
Our business could be adversely affected as a result of political,
regulatory, economic or other changes in the healthcare industry
The healthcare industry is highly regulated and is subject to changing
political, economic and regulatory influences. These factors affect the
purchasing practices and operation of healthcare organizations. Changes in
current healthcare financing and reimbursement systems could cause us to make
unplanned modifications of applications or services, or result in delays or
cancellations of orders or in the revocation of endorsement of our applications
and services by healthcare participants. Federal and state legislatures have
periodically considered programs to reform or amend the U.S. healthcare system
at both the federal and state level. These programs may contain proposals to
increase governmental involvement in healthcare, lower reimbursement rates or
otherwise change the environment in which healthcare industry participants
operate. Healthcare industry participants may respond by reducing their
investments or postponing investment decisions, including investments in our
applications and services. We do not know what effect any proposals would have
on our business.
22
<PAGE> 23
Government regulation could adversely affect our business
Our business is and will continue to be subject to government
regulation. Existing and new laws and regulations could adversely affect our
business. Laws and regulations may be adopted with respect to the Internet or
other online services covering issues such as:
- user privacy and patient confidentiality
- pricing
- content
- copyrights and patents
- distribution
- characteristic and quality of products and services
We cannot predict whether these laws will be adopted and how they will
affect our business.
Regulation regarding privacy and patient confidentiality. Internet user
privacy has become an issue both in the U.S. and abroad. Whether and how
existing privacy or consumer protection laws in various jurisdictions apply to
the Internet is uncertain and may take years to resolve. Any legislation or
regulations of this nature could affect the way we conduct our business,
particularly in our collection or use of personal information, and could harm
our business. Further, activities on or using the Internet have come under
increased scrutiny, including increased investigation in the healthcare arena by
the Federal Trade Commission and heightened media attention.
Similar to many other Internet healthcare companies, we have recently
received a request for information from the FTC concerning our web site privacy
policies and practices. While we believe we are in compliance with all
applicable laws, all third party contractual commitments and our published
privacy commitments, government inquiries such as this inquiry can divert
management's attention from other matters and create unfavorable publicity.
Numerous state and federal laws govern the collection, dissemination, use,
access to and confidentiality of patient health information. Many states have
laws and regulations that protect the confidentiality of medical records or
medical information. In addition, the federal Department of Health and Human
Services has proposed regulations implementing the Health Insurance Portability
and Accountability Act of 1996, or HIPAA, concerning standards for electronic
transactions, security and electronic signatures and privacy of individually
identifiable health information. The proposed regulations, among other things,
would require companies to develop security standards for all health information
that is used electronically. The proposed regulations would impose significant
obligations on companies that send or receive electronic health information. The
application of these laws to the personal information we collect could create
potential liability under these laws. We have designed our services to comply
with these proposed regulations. However, we cannot predict when these proposed
regulations will be finalized and whether they will be changed before they are
finalized. Any changes could cause us to use additional resources to revise our
platform and services.
Additional legislation governing the distribution of medical records exists
and has been proposed at both the state and federal levels. We will be subject
to extensive regulation relating to the confidentiality and release of patient
records, and it may be expensive to implement security or other measures to
comply with new legislation and final regulations. Further, we may be restricted
or prevented from maintaining or delivering patient records electronically. Such
a restriction may have an adverse effect on our business.
Federal and state regulation of healthcare relationships. There are federal
and state laws that govern patient referrals, physician financial relationships
and inducements to beneficiaries of federal healthcare programs. The federal
Anti-Kickback Law prohibits any person or entity from offering, paying,
soliciting or receiving anything of value, directly or indirectly, for the
referral of patients covered by Medicare, Medicaid and other federal healthcare
programs or the leasing, purchasing, ordering or arranging for or recommending
23
<PAGE> 24
the lease, purchase or order of any item, good, facility or service covered by
these programs. The Anti-Kickback Law is broad and may apply to some of our
activities. Penalties for violating the Anti-Kickback Law include imprisonment,
fines and exclusion from participating, directly or indirectly, in Medicare,
Medicaid and other federal healthcare programs. Many states also have similar
anti-kickback laws that are not necessarily limited to items or services for
which payment is made by a federal healthcare program. We carefully review our
practices with regulatory experts to ensure that we comply with all applicable
laws. However, the laws in this area are both broad and vague and it is often
difficult or impossible to determine precisely how the laws will be applied,
particularly to new services such as ours. Any determination by a state or
federal regulatory agency that any of our practices violate any of these laws
could subject us to civil or criminal penalties and require us to change or
terminate certain portions of our business.
We currently provide billing services and intend to provide repricing
services to providers and, therefore, may be subject to state and federal laws
that govern the submission of claims for medical expense reimbursement. These
laws generally prohibit an individual or entity from knowingly presenting or
causing to be presented a claim for payment from Medicare, Medicaid or other
third party payers that is false or fraudulent, or is for an item or service
that was not provided as claimed. These laws also provide civil and criminal
penalties for noncompliance. We have designed our current transaction services
and will design any future services to place the responsibility for compliance
with these laws on our customers. However, we cannot guarantee that state and
federal agencies will regard billing errors processed by us as inadvertent and
not in violation of these laws.
Regulation by the Food and Drug Administration. Some computer
applications and software are considered medical devices and are subject to
regulation by the United States Food and Drug Administration, or the FDA. FDA
regulations are broadly worded and its guidance in these areas is outdated,
leaving uncertainty in how these regulations apply. We have attempted to design
our services so that our computer applications and software are not considered
to be medical devices. However, the FDA may take the position that our services
are subject to FDA regulation. In addition, we may expand our services in the
future to areas that subject us to FDA regulation. We have no experience in
complying with FDA regulations. We believe that complying with FDA regulations
may be time-consuming, burdensome and expensive and could delay our introduction
of new applications or services.
Regulation of transaction services. State and federal statutes
and regulations governing transmission of claims may affect our operations. For
example, Medicaid rules require certain processing services and eligibility
verification to be maintained as separate and distinct operations. We believe
that our practices are in compliance with applicable state and federal laws.
These laws, though, are complex and changing, and the government may take
positions that are inconsistent with our practices.
Professional regulation. The practice of most healthcare
professions requires licensing under applicable state law. In addition, the laws
in some states prohibit business entities from practicing medicine, which is
referred to as the prohibition against the corporate practice of medicine. We
have attempted to structure our web site, strategic relationships and other
operations to avoid violating these state licensing and professional practice
laws. A state, however, may determine that some portion of our business violates
these laws and may seek to have us discontinue those portions or subject us to
penalties or licensure requirements. We employ and contract with physicians who
provide only medical information to consumers, and we have no intent to provide
medical care or advice. We do not maintain professional liability insurance
because we believe we are not a healthcare provider. Any determination that we
are a healthcare provider and acted improperly as a healthcare provider may
result in liability for which we are not insured.
Complying with antitrust regulations may delay completion of our pending
acquisitions
The FTC, Department of Justice or other federal or state regulatory
agencies charged with enforcement of the antitrust laws may review our future
acquisitions or business activities. We believe that our business activities,
contractual relationships and pending acquisitions comply with all applicable
antitrust laws.
24
<PAGE> 25
In the course of reviewing our pending acquisitions and strategic
relationships, it is possible that governmental agencies may seek to require us
to modify our pending acquisitions or business activities. If governmental
agencies seek modifications, it could delay our completion of these
transactions. If the governmental agencies were successful in requiring
modifications, it could have an adverse effect on our operations. We have
received and responded to a request from the DOJ for additional information in
connection with our pre-merger notification filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, with respect to our announced
acquisition of Envoy. This acquisition may not be completed until 20 days after
the DOJ determines that we have substantially complied with the request for
additional information, unless this waiting period is terminated earlier by the
DOJ.
Third parties may bring claims against us as a result of content provided
on our web site, which may be expensive and time consuming to defend
We could be subject to third party claims based on the nature and
content of information supplied on our web site by us or third parties,
including content providers, medical advisors or users. We could also be subject
to liability for content that may be accessible through our web site or third
party web sites linked from our web sites or through content and information
that may be posted by users in chat rooms or bulletin boards. Even if these
claims do not result in liability to us, investigating and defending against
these claims could be expensive and time consuming and could divert management's
attention away from operating the business.
Our intellectual property may be subjected to infringement claims or may be
infringed upon
Our intellectual property is important to our business. We could be
subject to intellectual property infringement claims as the number of our
competitors grows and the functionality of our applications overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
and divert management's attention from our operations. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and to develop non-infringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property. We may be unable to develop non-infringing
technology or obtain a license on commercially reasonable terms, or at all. In
addition, we may not be able to protect against misappropriation of our
intellectual property. Third parties may infringe upon our intellectual property
rights. If we do not detect any unauthorized use, we may be unable to enforce
our rights.
Our business will be adversely affected if we cannot attract and retain key
personnel
Our future operating results will substantially depend on the ability
of our officers and key employees to manage changing business conditions and to
implement and improve our technical, administrative, financial control and
reporting systems. We need to attract, integrate, motivate and retain highly
skilled technical people. In particular, we need to attract experienced
professionals capable of developing, selling and installing complex healthcare
information systems. We face intense competition for these people. Our executive
management team, including Jeffrey T. Arnold, our Chief Executive Officer, and
W. Michael Long, our Chairman, are critical to our success.
Our business could be adversely affected as a result of our international
expansion
One element of our strategic alliance with News Corporation is the
formation of WebMD International as a joint venture with News Corporation to
launch our services worldwide, other than in the U.S. and Japan. In addition, we
have entered into an agreement with one of our strategic partners to form an
international joint venture in Japan. We have extremely limited experience in
developing localized versions of our products and services. WebMD International
and any future international ventures may not be successful in launching our
services into foreign markets.
25
<PAGE> 26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The primary objective of our investment activities is to preserve
principal while at the same time maximizing the income we receive from our
investments without significantly increasing risk. Some of the securities that
we have invested in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, other
non-government debt securities and money market funds. In general, money market
funds are not subject to market risk because the interest paid on such funds
fluctuates with the prevailing interest rate. In addition, we invest in
relatively short-term securities. As of March 31, 2000, all of our investments
mature in less than three months.
The following table presents the amounts of our cash equivalents that
are subject to market risk and weighted-average interest rates as of March 31,
2000. This table does not include money market funds because those funds are not
subject to market risk.
<TABLE>
<CAPTION>
MATURING IN
--------------------------------------
THREE MONTHS FAIR
OR LESS VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Included in cash and cash equivalents....................... $1,097,969 $1,097,969
Weighted-average interest rate......................... 6.11%
</TABLE>
EXCHANGE RATE SENSITIVITY
Currently the majority of Healtheon/WebMD's sales and expenses are
denominated in U.S. dollars and as a result we have experienced no significant
foreign exchange gains and losses to date. We conduct only limited transactions
in foreign currencies, and we do not anticipate that foreign exchange gains or
losses will be significant in the foreseeable future. We have not engaged in
foreign currency hedging activities to date.
26
<PAGE> 27
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The exhibits listed in the accompanying Exhibit Index on page 29 are filed
as part of this quarterly report.
(b) The following reports on Form 8-K were filed during the quarter ended
March 31, 2000:
- Report on Form 8-K filed on January 27, 2000 pursuant to which the
Registrant announced entering into a definitive merger agreement to
acquire Envoy from Quintiles.
- Report on Form 8-K filed on January 28, 2000 pursuant to which the
Registrant announced the completion of the investment by Janus.
- Report on Form 8-K filed on February 8, 2000 pursuant to which the
Registrant announced the completion of the transactions contemplated by
its strategic alliance with News Corporation.
- Report on Form 8-K filed on February 10, 2000 pursuant to which the
Registrant announced the completion of the acquisition of Kinetra.
- Report on Form 8-K filed on February 14, 2000 pursuant to which the
Registrant announced entering into definitive merger agreements to acquire
Medical Manager and CareInsite.
- Report on Form 8-K filed on February 16, 2000 pursuant to which the
Registrant announced entering into a definitive merger agreement to
acquire OnHealth.
- Report on Form 8-K/A filed on February 22, 2000 pursuant to which the
Registrant filed the merger agreement and voting agreement as exhibits
in connection with its previously announced acquisition of OnHealth.
- Report on Form 8-K/A filed on February 24, 2000 pursuant to which the
Registrant filed the merger agreements and voting agreements as exhibits
in connection with its previously announced acquisitions of Medical
Manager and CareInsite.
- Report on Form 8-K/A filed on March 23, 2000 pursuant to which the
Registrant filed a voting agreement as an exhibit in connection with its
previously announced acquisitions of Medical Manager and CareInsite.
27
<PAGE> 28
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HEALTHEON/WEBMD CORPORATION
Date: May 15, 2000 By: /s/ John L. Westermann III
-----------------------------------------------------
John L. Westermann III
Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
28
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.1 Amended and Restated Operating Agreement of The Health Network LLC
dated January 26, 2000, between Registrant and AHN/FIT Cable, LLC
10.2 Amended and Restated Operating Agreement of The H/W Health & Fitness
LLC dated January 26, 2000, between Healtheon/WebMD Cable Corporation
and AHN/FIT Internet, LLC
10.3 Content License Agreement dated January 26, 2000, between Fox
Entertainment Group, Inc. and Registrant
10.4 Healtheon/WebMD Corporation Registration Rights Agreement dated January
26, 2000, between Registrant, Eastrise Profits Limited, AHN/FIT Cable,
LLC, AHN/FIT Internet, LLC, News America Incorporated, and Fox
Broadcasting Company
10.5 Healtheon/WebMD Media Services Agreement dated January 26, 2000,
between Registrant, Eastrise Profits Limited and Fox Entertainment
Group, Inc.
10.6 Content License Agreement dated January 26, 2000, between The News
Corporation Limited and Registrant
10.7 Operating Agreement of WebMD International LLC dated January 26, 2000,
between HW International Holdings, Inc. and IJV Holdings Inc.
10.8 WebMD International Media Services Agreement dated January 26, 2000,
between WebMD International LLC and Eastrise Profits Limited
</TABLE>
29
<PAGE> 30
<TABLE>
<S> <C>
10.9 Assignment and Assumption Agreement dated January 26, 2000,
between AHN/FIT Internet, and H/W Health & Fitness, LLC
10.10 Stock Purchase Agreement dated January 26, 2000 between Registrant
and Janus Capital Corporation.
10.11 Healtheon/WebMD Corporation Registration Rights Agreement dated
January 26, 2000 between Registrant and Janus Capital Corporation
27.1 Financial data schedule (EDGAR only)
</TABLE>
30
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
THE HEALTH NETWORK LLC
JANUARY 26, 2000
THE OWNERSHIP INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES
AUTHORITIES AND MAY NOT BE SOLD OR REGISTERED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE
OWNERSHIP INTERESTS IS ALSO RESTRICTED BY PROVISIONS OF THIS AGREEMENT AND
RELATED AGREEMENTS.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS...................................................................................1
ARTICLE II FORMATION.....................................................................................8
2.1 Formation.....................................................................................8
2.2 Name..........................................................................................8
2.3 Office and Agent..............................................................................8
2.4 Purposes......................................................................................9
2.5 Powers........................................................................................9
2.6 Ownership of Property.........................................................................9
2.7 Qualification in Other Jurisdictions..........................................................9
ARTICLE III CAPITAL.......................................................................................9
3.1 Initial Capital Contributions by Members; Initial Capital Accounts;
Initial Tax Basis in Assets.................................................................. 9
3.2 Percentage Interests.........................................................................10
3.3 Additional Capital...........................................................................10
3.4 Capital Accounts.............................................................................11
3.5 Allocation of Items of Company Income, Gain, Loss, Deduction and Credit......................12
3.6 Distributions................................................................................16
3.7 Withholding..................................................................................16
3.8 Distribution Limitation......................................................................16
3.9 Company Funds................................................................................16
3.10 Capital Contribution.........................................................................16
ARTICLE IV MANAGEMENT...................................................................................16
4.1 Management of the Company's Business.........................................................16
4.2 Board........................................................................................17
4.3 Budget Approval..............................................................................18
4.4 Actions by Members...........................................................................19
4.5 Managing Member's Services and Expenses......................................................21
4.6 Indemnification..............................................................................21
4.7 Officers.....................................................................................22
ARTICLE V LIABILITY OF A MEMBER........................................................................23
5.1 Limited Liability............................................................................23
5.2 Capital Contribution.........................................................................23
5.3 Reliance.....................................................................................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES...............................................................23
6.1 Due Incorporation; Authorization.............................................................24
6.2 No Conflict..................................................................................24
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
6.3 No Conflict; No Default......................................................................24
6.4 Unregistered Interests.......................................................................24
ARTICLE VII BOOKS AND RECORDS; REPORTS TO MEMBERS........................................................25
7.1 Books and Records............................................................................25
7.2 Financial Reports; Subscriber Reports........................................................25
7.3 Tax Returns and Information..................................................................26
ARTICLE VIII COMPANY INTERESTS; RESTRICTIONS ON TRANSFER..................................................26
8.1 Transfer.....................................................................................26
8.2 Admission as a Member........................................................................27
8.3 No Right to Withdraw.........................................................................27
8.4 Corporate Conversion.........................................................................27
8.5 Put/Call.....................................................................................28
ARTICLE IX DISSOLUTION AND LIQUIDATION..................................................................29
9.1 Dissolution..................................................................................29
9.2 Exclusive Means of Dissolution...............................................................29
9.3 Liquidation..................................................................................29
9.4 Priority of Payment..........................................................................29
9.5 Liquidating Distributions....................................................................30
9.6 No Restoration Obligation....................................................................30
9.7 Timing.......................................................................................30
9.8 Liquidating Reports..........................................................................30
9.9 Certificate of Cancellation..................................................................30
ARTICLE X ADDITIONAL AGREEMENTS........................................................................31
10.1 Licenses.....................................................................................31
ARTICLE XI MISCELLANEOUS................................................................................31
11.1 Waiver of Partition..........................................................................31
11.2 Modification; Waivers........................................................................31
11.3 Entire Agreement.............................................................................31
11.4 Severability.................................................................................31
11.5 Notices......................................................................................31
11.6 Successors and Assigns.......................................................................32
11.7 Counterparts.................................................................................33
11.8 Headings; Cross-references...................................................................33
11.9 Construction.................................................................................33
11.10 Property Rights; Confidentiality.............................................................33
11.11 Further Actions..............................................................................33
11.12 Governing Law; Forum.........................................................................33
11.13 Expenses of the Parties......................................................................34
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
THE HEALTH NETWORK LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made as of the 26th
day of January, 2000, by and between Healtheon Web/MD Cable Corporation, a
Delaware corporation and wholly-owned subsidiary of Healtheon/WebMD Corporation
("Healtheon/WebMD"), (together with any of its Affiliate Transferees (as
hereinafter defined), the "Healtheon Member"), and AHN/FIT Cable, LLC, a
Delaware limited liability company (together with any of its Affiliate
Transferees (as hereinafter defined), the "Fox Member," and together with the
Healtheon Member, the "Members").
W I T N E S S E T H :
The Fox Member entered into an Operating Agreement on the 10th day of
January 2000 (the "Original Agreement"). The Fox Member desires to amend and
restate the Original Agreement in its entirety as set forth herein.
In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound, the Members hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
assigned to them in this Article I (except as otherwise expressly provided) and
include the plural as well as the singular and vice versa. All accounting terms
not otherwise defined herein have the meanings assigned to them in accordance
with GAAP.
"Act" shall mean the Delaware Limited Liability Company Act, as
amended.
"Additional Capital Contribution" shall have the meaning set forth in
Section 3.3(a) hereof.
"Additional Capital Notice" shall have the meaning set forth in Section
3.3(a) hereof.
<PAGE> 5
"Adjusted Capital Account Deficit" shall mean the deficit balance (if
any) in such Member's Capital Account as of the end of any Fiscal Year, after
(a) crediting to such Capital Account any amount which such Member is obligated
to restore pursuant to this Agreement or is deemed obligated to restore pursuant
to the minimum gain chargeback provisions of the Section 704(b) of the Treasury
Regulations, and (b) charging to such Capital Account any adjustments,
allocations or distributions described in the qualified income offset provisions
of the Section 704(b) of the Treasury Regulations which are required to be
charged to such Capital Account pursuant to this Agreement.
"Affiliate" shall mean, with respect to any Person, any Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with such Person.
"Aggregate Capital Commitment" shall mean $150,000,000.
"Agreement" shall mean this Amended and Restated Operating Agreement,
also known as a "limited liability company agreement" under the Act, as amended
from time to time.
"Annual Budget" shall mean, as at any time, the Company's then
effective annual operating and capital budget approved in the manner
contemplated by Section 4.3(h) hereof or in effect pursuant to Section 4.3(c)
hereof.
"Available Cash" shall mean for any Fiscal Year or other period, the
positive amount, if any, obtained by calculating net income (or loss) of the
Company determined in accordance with GAAP for such period, adjusted, without
duplication, by adding (x) depreciation, amortization and other non-cash charges
to the extent deducted in determining net income and deducting (y) (i) the
current portion of indebtedness of the Company, (ii) prepaid expenses and other
cash expenditures to the extent not deducted in determining net income or loss
and (iii) reasonable reserves for working capital and contingent liabilities as
determined by the Managing Member.
"Board" shall have the meaning set forth in Section 4.2 hereof.
"Business" shall mean the business of the Company as set forth in
Section 2.4 hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday or
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law to close.
"Business Plan" shall mean the business plan most recently approved by
the Board pursuant to Section 4.3 hereof.
"Call" shall have the meaning set forth in Section 8.5(a) hereof.
"Capital Account" shall have the meaning set forth in Section 3.4(a)
hereof.
"Capital Call" shall have the meaning set forth in Section 3.3(a)
hereof.
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<PAGE> 6
"Capital Contribution" shall mean the amount which a Member shall
contribute to the capital of the Company as provided in Article III hereof.
"Certificate" shall mean the certificate of formation of the Company,
as amended from time to time.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or statutes.
"Common Stock" shall mean the common stock, par value $0.0001 per
share, of Healtheon/WebMD and any and all shares of capital stock or other
equity securities of: (i) Healtheon/WebMD which are added to or exchanged or
substituted for the Common Stock by reason of the declaration of any stock
dividend or stock split, the issuance of any distribution or the
reclassification, readjustment, recapitalization or other such modification of
the capital structure of Healtheon/WebMD; and (ii) any other corporation, now or
hereafter organized under the laws of any state or other governmental authority,
with which Healtheon/WebMD is merged, which results from any consolidation or
reorganization to which Healtheon/WebMD is a party, or to which is sold all or
substantially all of the shares or assets of Healtheon/WebMD, if immediately
after such merger, consolidation, reorganization or sale, Healtheon/WebMD or any
Stockholders of Healtheon/WebMD own equity securities having in the aggregate
more than fifty percent (50%) of the total voting power of such other
corporation.
"Company" shall mean the limited liability company formed pursuant to
the Certificate and governed by this Agreement and the Act.
"Company Minimum Gain" shall mean the amount determined in accordance
with the principles of Treasury Regulations Section 1.704-2(d).
"Company Property" shall have the meaning set forth in Section 2.6
hereof.
"Contribution Date" shall have the meaning set forth in Section 3.3(a)
hereof.
"Control" shall mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Corporate Conversion" shall mean any merger, consolidation, conversion
by filing, assignment of assets, or similar transaction or series of
transactions resulting in a corporation substantially all of the assets of which
consist of substantially all of the assets that were held directly or indirectly
by the Company immediately prior to such transaction and substantially all the
capital stock of which corporation is held by Persons who were either (i)
Members immediately prior to such transaction or (ii) the owners of a Member the
sole or principal asset of which Member was an Interest in the Company.
"CPI-U" shall have the meaning set forth in Section 4.3(c) hereof.
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<PAGE> 7
"Current Market Price" shall mean, per share of Common Stock on any
date specified, the average of the daily market prices of such Common Stock for
the 20 consecutive Business Days ending on the second Business Day prior to such
date. The daily market price of Common Stock on any Business Day will be (a) the
last sale price on such day on the principal stock exchange on which such share
of Common Stock is then listed or admitted to trading (including the Nasdaq
National Market System if such Common Stock is admitted to trading thereon), or
(b) if no sale takes place on such date on any exchange on which such share of
Common Stock is listed or admitted to trading, the average of the reported
closing bid and asked prices on such day as officially noted on any exchange.
"Damages" shall have the meaning set forth in Section 4.6(a) hereof.
"Default Loan" shall have the meaning set forth in Section 3.3(b)
hereof.
"Defaulting Member" shall have the meaning set forth in Section 3.3(b)
hereof.
"Depreciation" shall mean, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Gross Asset Value of any asset differs from
its adjusted basis for federal income tax purposes at the beginning of such year
or other period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Tax
Matters Member.
"Dissolution" shall mean the happening of any of the events described
in Section 9.1 hereof.
"Economic Risk of Loss" shall have the meaning set forth in Sections
1.704-2(b)(4) and 1.752-2 of the Treasury Regulations.
"Effective Date" shall mean the date hereof, unless the parties
otherwise mutually agree in writing that some other date shall be the Effective
Date.
"Fair Market Value" shall mean, for purposes of this Agreement, the
cash price at which a willing seller would sell, and a willing buyer would buy,
the property in question, both having full knowledge of the relevant facts and
being under no compulsion to buy or sell, in an arm's length transaction without
time constraints. Fair Market Value may be determined by mutual agreement of the
Members. If the Members are unable to agree on a Fair Market Value within 15
days of the date on which a determination of Fair Market Value is required, or
if they determine that an appraisal should be used to determine Fair Market
Value. then each of the Members will cause the Fair Market Value as of the most
recent month end (or as of such other date as may be expressly provided herein)
to be determined by a qualified appraiser in accordance with the following
procedure. The Members shall, within 10 days of the date that an appraiser is
required, seek to select a mutually agreeable
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appraiser. If the Members are unable to agree on a single qualified appraiser
within 10 days, each Member will have 10 additional days to select one appraiser
internationally recognized in valuing items of the kind required to be valued.
Any Member not appointing an appraiser pursuant to the preceding sentence within
the allotted time shall have no right to select an appraiser thereafter but
shall be bound by the procedure set forth herein using values determined by
appraisers selected by the other Member or Members, as applicable. The appointed
appraiser, or appraisers, as the case may be, will determine the Fair Market
Value. The Members will use their reasonable best efforts to cause such
appraiser or appraisers to submit to them written reports indicating the
determination of Fair Market Value within 30 days after the date such appraiser
is selected. If there is more than one appointed appraiser, and the highest of
the appraisals is not more than 110% of the lowest appraisal, the average of the
two will be the Fair Market Value. If the highest of the appraisals is more than
110% of the lowest appraisal, the Members will immediately notify the appraisers
and cause them to appoint another similarly qualified appraiser within 10 days
after such notice. The Members will use their reasonable best efforts to cause
such appraiser (who will not be apprised of the determination of the other
appraisers) to submit a written report to each of them indicating such
appraiser's determination of Fair Market Value within 30 days after the date
such appraiser is selected. If three appraisals are necessary, then the average,
of the two appraisals in which the determinations of Fair Market Value are
closest together will be the Fair Market Value or, if the highest and lowest are
equidistant from the middle determination, then the middle determination will be
the Fair Market Value. A determination of Fair Market Value as provided herein
will be final, binding and nonappealable. Each Member will pay one half of the
fees and costs of any appraiser involved in a determination of Fair Market Value
required by this Agreement.
"Fiscal Year" shall mean the twelve-month period ending June 30 of each
year, or such other fiscal year as the Members may designate.
"Fox Member" shall have the meaning set forth in the preamble to this
Agreement.
"Fox Representatives" shall have the meaning set forth in Section
4.2(a) hereof.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States from time to time and consistently applied, with such
exceptions thereto or deviations therefrom, if any, as the Managing Member may
approve.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the Fair Market Value of such
asset;
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective Fair Market Value (taking Section 7701(g) of
the Code into account), as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for
more than a de minimis capital contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company Property as
consideration for an
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<PAGE> 9
interest in the Company, in the case of either (i) or (ii), if the Members
reasonably determine that such adjustment is necessary or appropriate to reflect
the relative economic interests of the Members in the Company and (iii) the
liquidation of a Member's interest in the Company or the Company within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations;
(c) the Gross Asset Value of any Company asset
distributed to any Member shall be the Fair Market Value (taking Section 7701(g)
of the Code into account) of such asset on the date of distribution;
(d) the Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Section 732(d), Section 734(b) or Section 743(b) of the
Code, but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Treasury Regulations and Section 3.5 hereof, provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subsection (d) to the extent that
the Members determine that an adjustment pursuant to subsection (b) of this
definition is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this subsection (d); and
(e) if the Gross Asset Value of any asset has been
determined or adjusted pursuant to subsection (a), (b) or (c) hereof, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing gains or losses from the
disposition of such asset.
"Healtheon Member" shall have the meaning set forth in the preamble to
this Agreement.
"Healtheon Representatives" shall have the meaning set forth in Section
4.2(a) hereof.
"HSR" shall have the meaning set forth in Section 8.5(b) hereof.
"Indemnitee" shall have the meaning set forth in Section 4.6(a) hereof.
"Interest" shall mean, as to each Member, such Member's rights to
participate in the income, gains, losses, deductions and credits of the Company,
together with all other rights and obligations of such Member in the capital of
the Company under this Agreement.
"Internet" shall mean a decentralized worldwide network of computer
networks.
"Lien" shall mean a mortgage, lien, pledge, security interest or other
encumbrance.
"Liquidation" shall mean the process of winding up and terminating the
Company after its Dissolution.
"Losses" shall have the meaning set forth in Section 3.5(a) hereof.
"Management Fee" shall have the meaning set forth in Section 4.5(a)
hereof.
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<PAGE> 10
"Management Services" shall have the meaning set forth in Section
4.5(a) hereof.
"Managing Member" shall mean the Fox Member, and any Person who may
after the date hereof become a successor to the Fox Member, as provided herein.
"Member" shall mean the Fox Member, the Healtheon Member and any
permitted transferee of an Interest or portion thereof who becomes a Member in
accordance with Article VIII. The Fox Member and the Healtheon Member (together
with such transferees) may be collectively referred to herein as the "Members."
"Member Nonrecourse Debt" shall mean liabilities of the Company treated
as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury
Regulations.
"Member Nonrecourse Deductions" shall mean any losses, deductions or
Code Section 705(a)(2)(b) expenditures characterized as "partner nonrecourse
deductions under Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury
Regulations.
"Member Nonrecourse Debt Minimum Gain" shall mean an amount of gain
characterized as "partner nonrecourse debt minimum gain" under Treasury
Regulations Sections 1.704-2(i)(2) and 1.704-2(i)(3).
"Non-Defaulting Member" shall have the meaning set forth in Section
3.3(b) hereof.
"Non-Standard Television Services" shall mean audiovisual programming
delivered by any means of transmission, whether now existing or developed in the
future (including all forms of fixed-line or wireless, narrowband or broadband,
transmission), other than (a) audio visual programming which is made available
to viewers free-of-charge (e.g., free-to-air UHF or VHF television), even if
retransmitted via cable or any other means of retransmission for which a
facilities fee is charged, and (b) home-video distribution.
"Nonrecourse Deductions" in any year shall mean the Company deductions
that are characterized as "nonrecourse deductions" under Sections 1.704-2(b)(1)
and 1.704-2(c) of the Treasury Regulations.
"Percentage Interest" shall mean, with respect to each Member, such
Member's proportionate share of the total Interests in the Company expressed as
a percentage, as set forth in Section 3.2 hereof and as may be adjusted from
time to time pursuant to this Agreement.
"Person" shall mean an individual or a corporation, limited liability
company, joint venture, partnership, trust, unincorporated association,
governmental authority or other entity.
"Prime Rate" shall mean a rate of interest equal to the rate per annum
announced from time to time by Citibank, N.A. at its principal office as its
prime rate (which rate shall change when and as such announced prime rate
changes) but in no event more than the maximum rate of interest permitted to be
collected from time to time under applicable usury laws.
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"Prime Time" shall mean between the hours of 6:00 p.m. and 12 a.m.
"Profits" shall have the meaning set forth in Section 3.5(a) hereof.
"Proposed Annual Budget" shall have the meaning set forth in Section
4.3(a) hereof.
"Proposed Business Plan" shall have the meaning set forth in Section
4.3(a) hereof.
"Purchase Agreement" shall mean the Purchase Agreement, dated the date
hereof, by and among Affiliates of the Members.
"Put" shall have the meaning set forth in Section 8.5(a) hereof.
"Regulatory Allocations" shall have the meaning set forth in
subparagraph 3.5(c)(viii) hereof.
"Representatives" shall have the meaning set forth in Section 4.2(a)
hereof.
"Subscriber" shall have the meaning set forth in Section 8.5(a) hereof.
"Section 704(c) Property" shall have the meaning set forth in Section
1.704-3(a)(3) of the Treasury Regulations and shall include assets treated as
Section 704(c) Property by virtue of Section 704-1(b)(2)(iv)(f) of the Treasury
Regulations.
"Tax Matters Member" shall mean the "tax matters partner," as that term
is defined in Section 6231(a)(7) of the Code.
"Transfer" shall mean a sale, exchange, assignment, transfer, pledge or
other disposition of all or any part of an Interest (whether voluntary,
involuntary or by operation of law).
"Transferee" shall mean a Person to whom an Interest is Transferred in
compliance with this Agreement.
"Transferor" shall mean a Person who Transfers all or any part of an
Interest in compliance with this Agreement.
"Treasury Regulations" shall mean the income tax regulations (including
temporary and proposed) promulgated under the Code.
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ARTICLE II
FORMATION
2.1 Formation. The Company was formed as a limited liability
company pursuant to the Act by the filing, on January 10, 2000, the Certificate
with the Secretary of State of the State of Delaware.
2.2 Name. The business of the Company shall be conducted under the
name THE HEALTH NETWORK LLC or such other or additional name or names and
variations thereof as the Managing Member may from time to time determine. The
Managing Member shall file, or cause to be filed, any fictitious name
certificate and similar filings, and any amendments thereto, as may be directed
by the Board from time to time,
2.3 Office and Agent.
(a) The initial registered office of the Company in
Delaware will be at 1013 Centre Road, Wilmington, Delaware 19805-1297, and its
initial registered agent will be Corporation Service Company. The Company may,
upon compliance with the applicable provisions of the Act, change its registered
office or registered agent in Delaware.
(b) The initial principal office of the Company will be
at 1300 North Market Street, Suite 404, Wilmington, Delaware 19801. The Company
may maintain any other offices at any other places that the Managing Member
deems advisable.
2.4 Purposes. The purposes of the Company shall be (a) to own and
operate one or more Non-Standard Television Services substantially all of the
programming of which shall consist of health and fitness content consisting of
audio-visual programming (the "Business"), (b) to acquire, own, hold, sell or
otherwise dispose of interests in the assets used to conduct the Business, (c)
to make and perform all contracts and engage in all activities and transactions
and to do any and all things necessary or advisable to carry out the foregoing
purpose, and (d) to otherwise engage in any lawful activity incidental thereto
for which limited liability companies may be organized under the Act.
2.5 Powers. The Company shall have all the powers granted to a
limited liability company under the Act, as well as all powers necessary or
convenient to achieve its purposes and to further its business.
2.6 Ownership of Property. Legal title to all assets, rights and
property, whether real, personal or mixed, owned by the Company (collectively,
the "Company Property") shall be acquired, held and conveyed only in the name of
the Company.
2.7 Qualification in Other Jurisdiction. The Managing Member shall
cause the Company to be qualified or registered under applicable laws of any
jurisdiction in which the Company transacts business and shall be authorized to
execute, deliver and file any certificates and
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documents necessary to effect such qualifications or registrations including,
without limitation, the appointment of agents or service of process in such
jurisdictions.
ARTICLE III
CAPITAL
3.1 Initial Capital Contributions by Members; Initial Capital
Accounts; Initial Tax Basis in Assets. The Company was formed on January 10,
2000 and on the date hereof the Fox Member contributed to the capital of the
Company assets, subject to liabilities, which constituted all of its assets,
other than the Galaxy Assets, as defined in the Purchase Agreement, and cash on
hand, and all of its liabilities, other than liabilities in respect of member
loans. The Healtheon Member then purchased a 50% Interest from the Fox Member
pursuant to a purchase agreement dated as of the date hereof. It is agreed that
(i) the Healtheon Member is admitted to the Company as a Member, (ii) this
Agreement shall govern the management, business and affairs of the Company,
(iii) the purchase of its Interest by the Healtheon Member shall be treated
under the Code as a purchase of an undivided one-half interest in each of the
Company's assets, subject to its liabilities, on the date hereof, followed by
the contribution of such assets subject to such liabilities to the capital of
the Company by the Healtheon Member and the contribution of the remaining
one-half undivided interest in such assets subject to the remaining liabilities
by the Fox Member to the capital of the Company, (iv) the initial Capital
Account of the Healtheon Member and the Fox Member shall each equal $1,250,000,
(v) the aggregate adjusted tax basis under the Code of the Healtheon Member's
share of the assets of the Company on the date hereof shall equal the Healtheon
Member's Capital Account plus one-half of the Company's liabilities on the date
hereof, (vi) the aggregate adjusted tax basis under the Code of the Fox Member's
share of the assets of the Company on the date hereof shall equal one-half of
the basis of such assets in the hands of the Company immediately prior to the
purchase by the Healtheon Member of its Interest, plus one-half of the Company's
liabilities at such time and (vii) the difference between amount described in
clauses (v) and (vi) above shall be treated as Section 704(c) Property with
respect to the Fox Member.
3.2 Percentage Interests. Subject to adjustment pursuant to
Section 3.3 hereof, the Percentage Interest of each Member shall initially be as
follows:
Healtheon Member: 50%
Fox Member: 50%
The Percentage Interest of a Member may be adjusted from time to time pursuant
to Section 3.3 hereof.
3.3 Additional Capital.
(a) If, at any time, prior to the fifth anniversary of
the Effective Date, the Managing Member determines that the Company requires
additional funds for its continued
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<PAGE> 14
operation or growth in accordance with the previously approved Annual Budget,
the Managing Member may cause the Company to request (a "Capital Call") that the
Members contribute to the Company such amounts as the Managing Member may direct
on no less than five Business Days' prior notice to the Members. Each such
notice (an "Additional Capital Notice") shall specify the amount of funds to be
provided by each Member (each, an "Additional Capital Contribution"), the date
on which funds are to be provided (the "Contribution Date"), and the account of
the Company to which such funds are to be transmitted; provided, that the
aggregate sum of all Additional Capital Contributions requested by the Company
pursuant to this Section 3.3(a) shall not exceed an aggregate of $50,000,000 in
any Fiscal Year or the Aggregate Capital Commitment in total. All Additional
Capital Contributions to be made by the Members shall be in amounts that are in
proportion to their respective Percentage Interests, determined, in each case,
as of the date of the Capital Call. Unless otherwise agreed by the Members, all
Additional Capital Contributions shall be in cash or immediately available
funds. No Additional Capital Contribution shall be required to be paid by the
Members unless (i) the need for additional capital is specifically provided for
in the then currently approved Annual Budget or (ii) the Members approve the
payment of such Additional Capital Contribution in accordance with Section 4.4
hereof.
(b) Within five days after receipt of an Additional Capital Notice
issued pursuant to Section 3.3(a), each Member shall notify the Company whether
it intends to contribute its respective Additional Capital Contribution referred
to in the Additional Capital Notice. If any Member (a "Defaulting Member") fails
to contribute timely all or any portion of any Additional Capital Contribution,
the other Member (the "Non-Defaulting Member") may, at its option, at any time
following the date of default, and prior to the date such default is cured,
exercise, or cause the Company to exercise, on five days notice to the
Defaulting Member any one of the following remedies and the Defaulting Member
shall not be permitted to vote with respect to the election of any of the
following remedies by the Non-Defaulting Member:
(i) take such action, including court proceedings, as the
Non-Defaulting Member may deem appropriate to obtain payment by the Defaulting
Member of the Defaulting Member's Additional Capital Contribution that is in
default, together with interest thereon, at the rate of 12% per annum, from the
date that the Additional Capital Contribution was due until the date that is it
made, all at the cost and expense of the Defaulting Member; or
(ii) make a payment to the Company in an amount equal to
the Additional Capital Contribution that is in default with the effect that such
payment shall constitute a loan (a "Default Loan") to the Defaulting Member from
the Non-Defaulting Member, any such loan to bear interest, compounded quarterly,
at the rate of 5% over the Prime Rate on the date nearest the date of the
advance, which rate shall be adjusted annually, based on changes to the Prime
Rate on the anniversary of such Default Loan. For so long as any Default Loan
remains unpaid, all distributions from the Company that otherwise would be made
to the Defaulting Member (whether before or after the Dissolution of the
Company) instead shall be paid to the Non-Defaulting Member until the Default
Loan and all interest accrued thereon have been paid in full to the
Non-Defaulting Member. Payments in respect of any Default Loan will be applied
in the order that such loans were made, and all payments will be applied first
to accrued but unpaid interest and then to reduce the outstanding principal
amount of the loan. A Default Loan shall become automatically and immediately
due and
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<PAGE> 15
payable by the Defaulting Member, and shall constitute a general obligation of
the Defaulting Member, upon the earlier of. (A) the sale of the Fox Member's
Interest pursuant to Section 8.6 hereof or (B) the Dissolution of the Company.
Any Default Loan shall be prepayable in whole or in part at any time without
penalty.
(c) Except as set forth in this Section 3.3, no Member
shall have any obligation to make Additional Capital Contributions to the
Company.
3.4 Capital Accounts.
(a) A separate capital account (each a "Capital Account")
shall be maintained for each Member. Such Member's initial Capital Account shall
be as described in Section 3.1 above. Subject to the provisions of subsections
(b), (c) and (d) of this Section 3.4, the Capital Account of each Member shall
be (i) increased by (A) the amount of cash and the Gross Asset Value of any
property contributed to the Company by such Member (net of liabilities secured
by the property or to which the property is subject), and (B) Profits and any
other items of income and gain allocated to such Member pursuant to Section 3.5
hereof and (ii) decreased by (A) the amount of cash and the Gross Asset Value of
any property distributed to such Member (net of liabilities secured by the
property or to which the property is subject) and (B) the Losses and any other
items of deduction and loss allocated to such Member pursuant to Section 3.5,
and otherwise maintained in accordance with Treasury Regulations in order for
the allocation of Profits and Losses pursuant to Section 3.5.
(b) For purposes of this Section 3.4, an assumption of a
Member's unsecured liability by the Company shall be treated as a distribution
of money to that Member. An assumption of the Company's unsecured liability by a
Member shall be treated as a cash contribution to the Company by that Member.
(c) In the event a contribution of money or other
property is made to the Company other than a contribution made ratably by all
existing Members, then the Capital Accounts for the Members shall be adjusted
for the hypothetical "book" gain or loss that would have been realized by the
Company if all Company assets had been sold for their Gross Asset Values in a
cash sale, and shall be in proportion to the Percentage Interests of the
Members. If a determination of the Fair Market Value of the Company is made
pursuant to Section 3.3 in connection with any Additional Capital Contribution
which would also be subject to this Section 3.4(c), the Gross Asset Value of the
Company's assets shall be deemed to be equal to the Fair Market Value of the
Company plus its liabilities as determined pursuant to Section 3.3 hereof.
(d) In the event that assets of the Company other than
money are distributed to a Member in liquidation of the Company, or in the event
that assets of the Company other than money are distributed to a Member in kind,
in order to reflect unrealized gain or loss, Capital accounts for the Members
shall be adjusted for the hypothetical "book" gain or loss that would have been
realized by the Company if the distributed assets had been sold for their Gross
Asset Values in a cash sale. In the event of the liquidation of a Member's
interest in the Company, in order to reflect unrealized gain or loss, Capital
Accounts for the Members shall be adjusted for the hypothetical "book" gain or
loss that would have been realized by the Company if all Company assets had been
sold for their Gross Asset Values in a cash sale.
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<PAGE> 16
(e) The foregoing provisions of this Section 3.4 and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 704(b) of the Treasury Regulations
and will be interpreted and applied in a manner consistent with such Treasury
Regulations and any amendment or successor provision thereto. The Members will
cause appropriate modifications to be made if unanticipated events might
otherwise cause this Agreement not to comply with Section 704(b) of the Treasury
Regulations, so long as such modifications do not cause a material change in the
relative economic benefits of the Members under this Agreement.
(f) If all or any part of an Interest is transferred in
accordance with this Agreement, the Capital Account of the Transferor that is
attributable to the transferred Interest will carry over to the Transferee.
3.5 Allocation of Items of Company Income, Gain, Loss, Deduction
and Credit.
(a) For purposes of this Agreement, the terms "Profits"
and "Losses" shall mean, for each Fiscal Year or other period, an amount equal
to the Company's taxable income or loss, as the case may be for such year or
period, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss and deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) any income of the Company that is exempt
from federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this paragraph shall be added to such taxable
income or loss;
(ii) any expenditures of the Company described in
Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury
Regulations, and not otherwise taken into account in computing Profits or Losses
pursuant to this Section shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (b) or (c) of the definition
thereof, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from the disposition
of any Company asset with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax basis of
such asset differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in computing, such taxable
income or loss, there shall be taken into
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<PAGE> 17
account Depreciation for such Fiscal Year or other period, computed in
accordance with the definition thereof;
(vi) to the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Section 734(b) of the Code is
required, pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury
Regulations, to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Member's Interest in the
Company, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) from the disposition of such asset and shall be taken into
account for purposes of computing Profits or Losses; and
(vii) notwithstanding any other provision of this
Section, any items which are specially allocated pursuant to Section 3.5(c)
hereof shall not be taken into account in computing Profits and Losses.
(b) After giving effect to the special allocations set
forth in Section 3.5(c):
(i) All Company Profits shall be allocated to
the Members as follows:
(A) first, pro rata to the Members in
proportion to and to the extent of Losses
previously allocated to each Member pursuant
to Section 3.5(b)(ii)(B) hereof and not
previously recouped pursuant to this Section
3.5(b)(i)(A); and
(B) thereafter, to the Members in
accordance with their respective Percentage
Interests.
(ii) All Company Losses shall be allocated to the
Members as follows:
(A) first, pro rata to the Members in
proportion to and to the extent of
Profits previously allocated to such
Members pursuant to Section
3.5(b)(i)(B) hereof and not
previously recouped pursuant to this
Section 3.5(b)(ii)(A); and
(B) thereafter, to the Members in
accordance with their respective
Percentage Interests.
(c) Special Allocations. The following special
allocations shall be made in the following order:
(i) Minimum Gain Chargeback. Subject to the
exceptions set forth in Section 1.704-2(f) of the Treasury Regulations, if there
is a net decrease in Company Minimum Gain during a Fiscal Year, each Member
shall be specially allocated items of income and gain for Capital Account
purposes for such year (and, if necessary, for subsequent years) in an amount
equal to such Member's share of the net decrease in Company Minimum Gain during
such year (which share of
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such net decrease shall be determined under Section 1.704-2(g)(2)) of the
Treasury Regulations. It is intended that this Section 3.5(c)(i) shall
constitute a "minimum gain chargeback" as provided by Section 1.704-2(f) of the
Treasury Regulations and shall be interpreted consistently therewith.
(ii) Member Nonrecourse Debt Minimum Gain
Chargeback. Subject to the exceptions contained in Section 1.704-2(i)(4) of the
Treasury Regulations, if there is a net decrease in Member Nonrecourse Debt
Minimum Gain during a Fiscal Year, any Member with a hare of such Member
Non-recourse Debt Minimum Gain (determined in accordance with Section
1.704-2(i)(5)) of the Treasury Regulations as of the beginning of such year
shall be specially allocated items of income and gain for Capital Account
purposes for such year (and, if necessary, for subsequent years) in an amount
equal to such Member's share of the net decrease in Member Nonrecourse Debt
Minimum Gain (which share of such net decrease shall be determined under
Sections 1.704-2(i)(4) and 1.704-(j)(2)) of the Treasury Regulations. It is
intended that this Section 3.5(c)(ii) shall constitute a "partner nonrecourse
debt minimum gain chargeback" as provided by Section 1.704-2(i)(4) of the
Treasury Regulations and shall be interpreted consistently therewith.
(iii) Nonrecourse Deductions. Any Nonrecourse
deductions shall be located to the Members in the same manner as Net Losses are
allocated pursuant to Section 3.5(b)(ii) hereof.
(iv) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions shall be allocated to the Member that bears the Economic
Risk of Loss for the Member Nonrecourse Debt to which such deductions relate as
provided in Section 1.704-2(i)(l) of the Treasury Regulations. If more than one
Member bears the Economic Risk of Loss, such deduction shall be allocated
between or among such Members in accordance with the ratios in which such
Members share such risk of loss.
(v) Qualified Income Offset. In the event any
Member unexpectedly receives any adjustments, allocations, or distributions
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations (modified as appropriate, by
Sections 1.704-2(g)(1) and 1.704-2(i)(5)) of the Treasury Regulations, items of
Company income and gain for Capital Account purposes for such Fiscal Year shall
be specially allocated to the Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, any Adjusted
Capital Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 3.5(c)(v) shall be made if and only to the
extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made as
if this Section 3.5(c)(v) were not in the Agreement.
(vi) Certain Section 754 Adjustment. To the
extent any adjustment to the adjusted tax basis of any Company asset pursuant to
Section 732(d), Section 734(b) or Section 743(b) of the Code is required,
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury Regulations, to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its Interest in the Company,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment decreases such basis) and
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such gain or loss shall be specially allocated to the Members in accordance with
their interests in the Company as determined under Section 1.704-1(b)(3) of the
Treasury Regulations in the event Section 1.704-1(b)(2)(iv)(m)(2) of the
Treasury Regulations applies, or to the Member to whom such distribution was
made in the event Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations
applies.
(vii) Limit on Loss Allocations. Notwithstanding
the provisions of Section 3.5(b)(ii) hereof or any other provision of this
Agreement to the contrary, Net Losses (or items thereof) will not be allocated
to a Member if such allocation would cause or increase a Member's Adjusted
Capital Account Deficit and will be reallocated to the other Members in
proportion to their Percentage Interests, subject to the limitations of this
Section 3.5(c)(vii).
(viii) Curative Allocations. The allocations under
Section 3.5(c)(i) through (c)(vii) (such allocations, the "Regulatory
Allocations") are intended to comply with certain requirements of the Treasury
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of income, gain, loss or deduction
pursuant to this Agreement. Therefore, notwithstanding any other provision of
this Agreement (other than the Regulatory Allocations), the Company shall make
such offsetting special allocations of income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all items were
allocated pursuant to Section 3.5(b), as the case may be. In exercising its
discretion under this Section 3.5(c)(viii), the Company shall take into account
future Regulatory Allocations under Section 3.5(c)(i) through (c)(vii) that are
likely to offset other Regulatory Allocations previously made.
3.6 Distributions.
(a) No Member shall have the right to withdraw any amount
from its Capital Account. No Member shall have the right to demand or, to
receive any distribution other than distributions of Available Cash pursuant to
Section 3.6(b) hereof. No Member shall have the right receive a distribution of
property other than cash from the Company, unless otherwise agreed by all the
Members.
(b) The Company shall, from time to time, but not less
often than quarterly, distribute Available Cash to the Members. Any such
distributions shall be made in accordance with the Members' Percentage
Interests. Nothing set forth in this Section 3.6 shall impair the right or
relieve the duty of the Managing Member, or if there is no Managing Member the
Board, as provided this Agreement to establish reasonable cash reserves.
3.7 Withholding. If required by the Code or by state or local law,
the Company will withhold any required amount from distribution to a Member for
payment to the appropriate taxing authority. Any amount so withheld from a
Member will be treated as a distribution by the Company to such Member. Each
Member will timely file any agreement that is required by any taxing
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authority in order to avoid any withholding obligation that would otherwise be
imposed on the Company.
3.8 Distribution Limitation. Notwithstanding any other provision
of this Agreement, the Company will not make any distribution to the Members if,
after the distribution, the liabilities of the Company (other than liabilities
to Members on account of their Percentage Interests) would exceed the Fair
Market Value of the Company's assets. With respect to any property subject to a
liability for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the extent the
property's Fair Market Value exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
3.9 Company Funds. The funds of the Company shall be deposited in
such bank accounts or invested in investments as shall be determined by the
Managing Member, or if there is no Managing Member, the Board. The Company's
funds shall not be commingled with funds not belonging to the Company and shall
be used only for the affairs or business of the Company. It shall be the
responsibility of the Managing Member to establish a cash management plan
pursuant to which the funds of the Company will be managed.
3.10 Capital Contribution. Each Member is liable to the Company for
any Capital Contribution or distribution that has been wrongfully or erroneously
returned or made to such Person in violation of the Act or this Agreement.
ARTICLE IV
MANAGEMENT
4.1 Management of the Company's Business.
(a) The management of the Company shall be vested in the
Managing Member. Except as provided in Section 4.4 hereof, or for actions and
determinations which pursuant to this Agreement can be taken or made only with
the consent of all of the Members or the Board, the Managing Member shall manage
the affairs and business of the Company, and the Managing Member shall possess
all powers necessary, convenient or appropriate to carrying out the purposes and
business of the Company, including, without limitation, doing all things and
taking all actions necessary to carry out the terms and provisions of this
Agreement. The business and affairs of the Company shall be directed and
controlled by the Managing Member in a manner consistent with the Business Plan
and the Annual Budget.
(b) Nothing contained in this Article IV shall impose any
obligation on any Person doing business or dealing with the Company to inquire
as to whether the Managing Member has exceeded its authority in executing any
contract, lease, mortgage, note, deed or other instrument on behalf of the
Company, and any such Person shall be fully protected in relying upon the
plenary authority of the Managing Member.
(c) Except as otherwise provided in Section 4.5 hereof,
the Managing Member
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shall serve without compensation for its services. The Managing Member may
delegate such of its respective powers and authority to officers, employees and
agents of the Company as the Managing Member shall deem necessary or appropriate
for the conduct of the Business.
(d) Other than the Managing Member, no Member shall have
any authority to act for, or to assume any obligation or responsibility on
behalf of, the Company, except as expressly provided herein or as expressly
approved by written consent of all the Members.
4.2 Board.
(a) The Members hereby form a supervisory board (the
"Board"), which shall be responsible for taking all action required under this
Agreement to be taken by the Board. The Board shall consist of four
representatives (the "Representatives"), two of whom shall be appointed by the
Healtheon Member (the "Healtheon Representatives"), and two of whom shall be
appointed by the Fox Member (the "Fox Representatives"). Each Member agrees to
notify the other of the initial Representatives appointed by it.
(b) Each Member may at any time remove its
Representative(s) and appoint substitute Representative(s) in their stead, by
delivering written notice of such substitution to the other Member. Each
Representative shall have the authority to act on behalf of and bind the Member
which appointed such Representative with regard to matters relating to the
Company. The presence or participation of at least two of the four
Representatives shall constitute a quorum for the taking of any action;
provided, however, that at least one Representative appointed by each Member
shall be present; and provided further that all Members have received prior
written notice of such meeting in accordance with the notice requirements
adopted by the Board as provided in Section 4.2(c). If at any meeting of the
Board one Member has more Representatives present than the other, then at the
beginning of the meeting the Representatives of the Member having two
Representatives present shall select between themselves one of them to vote at
the meeting such that neither Member shall have fewer voting Representatives at
any Board meeting. Each Member shall have the right to bring additional
representatives to any meeting of the Board; provided, however, a Member shall
vote only through its appointed Representatives in connection with any matter
discussed and voted on at any such meeting of the Board. No Representative shall
be entitled to compensation from the Company for serving in such capacity.
(c) The Board shall meet no less often than quarterly and
shall establish meeting times, dates and places and requisite notice
requirements and adopt rules or procedures consistent with the terms of this
Agreement, which shall include rules and procedures for the dissemination of
written information to the Members concerning the items to be acted upon at any
regular or special meeting of the Board. Any Member may call a special meeting
of the Board for any purpose by giving the other Member at least five (5)
Business Days' notice thereof, except in the case of an emergency, in which
case, such notice as is practicable shall be sufficient. The Board may meet by
means of conference telephone call, and any Representative or non-voting
representative may participate in any Board meeting by conference telephone
call. Any action that may be taken at a meeting of the Board may be taken
without a meeting by written consent of the number of Members
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needed to authorize the action; provided, that all Members, are given notice of
such written consent at least 15 Business Days prior to its effective date.
(d) The Managing Member shall keep the Board informed
with respect to all matters of material interest to the Members and shall in any
event report to the Board not less frequently than once each quarter with
respect to material matters relating to the business and affairs of the Company.
4.3 Budget Approval.
(a) The Managing Member shall submit annually to the
Board at least sixty days prior to the start of each Fiscal Year, beginning with
the Fiscal Year commencing January 1, 2000, (i) a proposed annual budget (the
"Proposed Annual Budget") for the forthcoming Fiscal Year, including an income
statement prepared on an accrual basis which shall show in reasonable detail the
revenues and expenses projected for the Company's operations for the forthcoming
Fiscal Year and a cash flow statement which shall show in reasonable detail the
receipts and disbursements projected for the Company's operations for the
forthcoming Fiscal Year, the amount of any corresponding cash deficiency or
surplus, contemplated borrowings under credit facilities and the required
Additional Capital Contributions, if any, and (ii) a proposed revised five-year
business plan (the "Proposed Business Plan") for the Fiscal Year covered by the
Proposed Annual Budget and the succeeding four Fiscal Years. Such Proposed
Annual Budget and Proposed Business Plan shall be prepared on a basis consistent
with the Company's audited financial statements and GAAP.
(b) Within thirty days after the submission of such
Proposed Annual Budget and Proposed Business Plan, the Board shall advise the
Managing Member in writing whether the Board has approved the total expenditures
set forth in the Proposed Annual Budget and Proposed Business Plan. Each Annual
Budget and Business Plan shall be at least as detailed as the Annual Budget and
Business Plan annexed hereto as Exhibit A. If the total annual expenditures set
forth in the Proposed Annual Budget and Proposed Business Plan are approved by
the Board, then such Proposed Annual Budget and such Proposed Business Plan as
approved shall constitute the Annual Budget or the Business Plan, as the case
may be, for all purposes of this Agreement and shall supersede any previously
approved Annual Budget and Business Plan.
(c) If the Board fails to approve an Annual Budget for
the Company, then, until a new Annual Budget is approved, the budget for the
Company for the immediately preceding Fiscal Year will remain in effect,
adjusted (without duplication) to reflect the following increases or decreases:
(i) the operation of escalation or de-escalation provisions in contracts in
effect at the time of approval of the Annual Budget solely as a result of the
passage of time or due to operations or undertakings approved in the Annual
Budget or the occurrence of events beyond the control of the Company, to the
extent such contracts are still in effect; (ii) elections made in any prior year
under contracts contemplated by the budget for the prior year regardless of
which party to such contracts makes such election; (iii) the effect of the
existence of any multi-year contract entered into in accordance with a previous
budget to the extent not fully reflected in the prior year's budget; (iv)
increases or decreases in expenses attributable to the annualized effect of
employee additions or reductions during the prior year contemplated by the
budget for the prior year; (v) interest expense
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attributable to any loans; (vi) increases or decreases in overhead expenses in
an amount equal to the total of overhead expenses reflected in the budget for
the prior year (excluding non-recurring items) multiplied by the percentage
increase or decrease in the U.S. Department of Labor Bureau of Labor Statistics
Consumer Price Index for all Urban Consumers ("CPI-U") or a successor index for
the prior Fiscal Year (but in no event will such change be more than 10% of the
corresponding items in the prior budget); and (vii) decreases in expenses
attributable to non-recurring items reflected in the prior year's budget.
4.4 Actions by Members. Neither the Company nor the Managing
Member shall take any of the following actions without the prior approval of all
the Board:
(a) entry into areas of business other than the Business;
(b) any amendment of this Agreement, including changing
the Company's name, or any other organizational document of the Company;
(c) any action relating to the merger, sale,
consolidation, reorganization, dissolution, winding up, Liquidation or similar
transaction involving all or substantially all of the Company or all or
substantially all of its assets;
(d) incurrence of any debt exceeding US$1,000,000 in the
aggregate (excluding normal trade debt), or the issuance of any guarantee, or
the creation of any Lien unless provided for in the Annual Budget under which
the Company is then operating;
(e) any transaction involving the Company, on the one
hand, and a Member or Affiliate of a Member, on the other, other than
transactions involving less than US$500,000 in the aggregate, which are entered
into in the ordinary course of business on an arms-length basis;
(f) any decision to acquire any interest or participation
in, or to acquire all or substantially all the assets of, any other Person for
an acquisition price of more than US$1,000,000;
(g) appointment or removal of auditors of the Company,
approval or adoption of accounting or tax principles applicable to the Company,
and any change in the Fiscal Year of the Company;
(h) any decision to require Additional Capital
Contributions to the Company, other than as provided in Section 3.3 hereof;
(i) any decision to distribute cash or other assets of
the Company, except any distribution made pursuant to Section 3.7 hereof;
(j) the admission of additional Members (except as
provided in Section 8.1) or the grant by the Company of any right to acquire any
interest in the Company or any stock or equity appreciation or similar right;
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(k) cause the Company (i) to enter into any contract or
agreement or series of related contracts or agreements (including any
programming rights or content rights acquisition agreements), whether oral or
written, obligating the Company to expend money or provide goods or services
other than in the ordinary course of business; (ii) to obligate the Company in
any other manner, unless in each case the amount involved is less than
US$100,000 or provided for in the Annual Budget; or (iii) to enter into any
affiliation agreement with a distribution platform unless the terms of such
affiliation agreement are at least as favorable to the Company as (x) those
prevailing in the market for Non-Standard Television affiliation agreements for
comparable programming services at such time or (y) those contained in
affiliation agreements entered into by the Company and its predecessors in the
past (excluding for purposes of such comparison (A) the affiliation agreement
dated November 20, 1995 between Cablevision Systems Corporation, et al., and
America's Health Network (the "Cablevision Agreement"), which was assigned to
the Company on the date hereof, and (B) any other affiliation agreement with
terms equally unfavorable or less favorable to the Company than those contained
in the Cablevision Agreement);
(l) cause the Company to sell, transfer, lease, or
otherwise dispose of, or mortgage or pledge, either in a single transaction or a
series of related transactions, any assets of the Company with an aggregate fair
market value greater than US$1,000,000 except as reflected in an Annual Budget
and except for the sale of inventory or the grant of programming rights in the
ordinary course of Business;
(m) settle any dispute or litigation or other proceeding,
whether administrative or otherwise, which would have a material adverse affect
on the Company or any Member, or waive any claim in excess of US$100,000 which
the Company may have against another Person;
(n) amend or modify the previously approved Annual Budget
or Business Plan;
(o) Subject to Section 8.1 hereof, approve the Transfer
of any Interest including a repurchase of an Interest by the Company;
(p) appointment or removal of the Tax Matters Member; or
(q) any agreement by the Company to take any of the
foregoing actions.
4.5 Managing Member's Services and Expenses.
(a) Without limiting the generality of Section 4.1 in
connection with the authority of the Managing Member, the Managing Member shall
provide or cause to be provided to the Company national advertising sales and
the administration thereof, commercial trafficking and broadcast operations
(including program delivery to affiliates of the Company), administrative
support in the areas of research, promotion, business affairs, legal affairs and
accounting (collectively, the "Management Services") pursuant to the terms of a
Management Services Agreement substantially in the form attached hereto as
Exhibit B. During each of the first two years following the Effective Date, the
Healtheon Member shall pay the Fox Member an annual fee of
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$15,000,000 (the "Management Fee") for procuring the Management Services. The
Management Fee shall be paid quarterly in advance in four equal installments. In
addition to the Management Fee, all reasonable and necessary expenses
(including, but not limited to, human resources, insurance, out-of-pocket,
salary, rent, utility costs and similar expenses, but excluding general overhead
expenses and salaries, bonuses and benefits of executives serving on the Board
or monitoring the Fox Member's investment) incurred in accordance with the
Annual Budget by the Managing Member and by and from its Affiliates in
furtherance of the Business shall be paid or reimbursed by the Company.
(b) Except as otherwise contemplated by this Section 4.5
or in connection with a transaction or arrangement approved in accordance with
Section 4.4 hereof, no Member shall be reimbursed for any of its overhead or
general or administrative expenses attributable to the Company, nor shall
salaries, fees, commissions or other compensation be paid by the Company to any
Member or to any Affiliates of a Member for services rendered to the Company.
4.6 Indemnification.
(a) No Member, Managing Manager or Representative
(including the Tax Matters Member) (each, an "Indemnitee") shall be liable, in
damages or otherwise, to the Company or any Member for any act or omission
performed or omitted to be performed by it or him pursuant to the authority
granted by this Agreement, except if such act or omission results from such
Person's own bad faith, fraud, gross negligence, willful breach of this
Agreement or willful or wanton misconduct. To the fullest extent permitted by
law, the Company shall indemnify and hold harmless each Indemnitee from and
against any and all losses, claims, demands, costs, damages, liabilities (joint
or several), expenses of any nature (including reasonable attorneys' fees and
disbursements), judgments, fines, settlements, and other amounts ("Damages")
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which an Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the business of the Company, regardless of whether an
Indemnitee continues to be a Member, Managing Manager or Representative, or an
officer, director, shareholder, member or partner of such Member, Managing
Manager or Representative, at the time any such liability or expense is paid or
incurred, if (i) the Indemnitee acted in good faith and in a manner it or be
reasonably believed to be in, or not opposed to, the interests of the Company,
and, with respect to any criminal proceeding, had no reason to believe this
conduct was unlawful, and (ii) the Indemnitee's conduct did not constitute bad
faith, fraud, gross negligence, willful breach of this Agreement, or willful or
wanton misconduct. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall not, in and of itself, create a presumption or otherwise
constitute evidence that the Indemnitee acted in a manner contrary to that
specified in (i) or (ii) above.
(b) Notwithstanding anything contained in this Section
4.6, the Company shall not indemnify and hold harmless any Indemnitee if a
judgment or other final adjudication adverse to such Indemnitee establishes: (i)
that such Indemnitee's acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated or (ii) that such Indemnitee personally gained financial profit or
other advantage to which he was
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not legally entitled.
(c) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, hereof,
shall be paid by the Company in advance of the final disposition of such claim,
demand, action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction from which no further appeal
may be taken or the time for any appeal has lapsed (or otherwise, as the case
may be) that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereunder.
(d) The indemnification provided by this Section 4.6
shall be in addition to any other rights to which each Indemnitee may be
entitled under any agreement or vote of the Members, as a matter of law or
otherwise, both (i) as to action in the Indemnitee's capacity as a Member,
Managing Manager or Representative or as an officer, director, shareholder,
member or partner of a Member, Managing Manager or Representative, and (ii) as
to action in another capacity, and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, administrators and personal representatives of the
Indemnitee.
(e) The Company may purchase and maintain insurance on
behalf of one or more Indemnitees and other Persons against any liability which
may be asserted against, or expense which may be incurred by, any such Person in
connection with the Company's activities, whether or not the Company would have
the power to indemnify such Person against such liability under the provisions
of this Agreement.
(f) Any indemnification hereunder shall be satisfied only
out of the assets of the Company, and the Members and the Representatives shall
not be subject to personal liability by reason of these indemnification
provisions.
(g) An Indemnitee shall not be denied indemnification in
whole or in part under his Section 4.6 because the Indemnitee had an interest in
the transaction with respect to which the Indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) To the same extent that the Company will indemnify
and advance expenses to a Member or Representative, the Company may indemnify
and advance expenses to any officer, employee or agent of the Company.
4.7 Officers.
(a) Subject to the Healtheon Member's approval, which
approval shall not be unreasonably withheld or delayed, the Managing Member
shall appoint a chief executive officer ("CEO") of the Company. The CEO shall
appoint a chief financial officer ("CFO") and a chief operating officer ("COO").
The CEO shall have the authority to select such other officers (other than a CFO
and a COO) as may be necessary or desirable to carry out the day-to-day
management of the business and the Company.
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(b) Each of the Fox Member and the Healtheon Member shall
have the right, in its sole discretion, to cause the Company to terminate the
employment of any officer of the Company including the CEO, the CFO or the COO.
In case of any such termination, the terminated officer will be required to
leave his or her position within 24 hours after receiving a notice of
termination.
(c) The appointment of any Person as an officer or agent
of the Company will not, in and of itself, create any contractual rights between
such Person and the Company. The officers of the Company, acting in their
capacities as such, will be agents acting on behalf of the Company as principal.
ARTICLE V
LIABILITY OF A MEMBER
5.1 Limited Liability. Except as otherwise provided in the Act,
the debts, obligations and liabilities of the Company (whether arising in
contract, tort or otherwise) will be solely the debts, obligations and
liabilities of the Company, and no Member of the Company (including any Person
who formerly held such status) is liable or will be obligated personally for any
such debt, obligation or liability of the Company solely by reason of such
status. No individual trustee, officer, director, employee or agent of any
Member will have any personal liability for the performance of any obligation of
such Member under this Agreement.
5.2 Capital Contribution. Each Member is liable to the Company for
any Capital Contribution or distribution that has been wrongfully or erroneously
returned or made to such Person in violation of the Act, the Certificate or this
Agreement.
5.3 Reliance. Any Member will be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements by (a) any of the Company's other Members, employees or
committees or (b) any other Person who has been selected with reasonable care as
to matters such Member reasonably believes are within such other Person's
professional or expert competence. Matters as to which such reliance may be made
include the value and amount of assets, liabilities, Profits and Losses of the
Company, as well as other facts pertinent to the existence and amount of assets
from which distributions to Members might properly be made.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
As of the date hereof, each of the Members hereby makes to the other
Member each of the representations and warranties set forth in this Article VI,
and such warranties and representations shall survive the execution of this
Agreement.
6.1 Due Incorporation; Authorization. Such Member is duly
organized, validly existing
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and in good standing under the laws of the jurisdiction of its incorporation or
formation and has the requisite power and authority to own its property and
carry on its business as owned and carried on at the date hereof and as
contemplated hereby. Such Member is duly licensed or qualified to do business
and in good standing in each of the jurisdictions in which the failure to be so
licensed or qualified would have a material adverse effect on its financial
condition or its ability to perform its obligations hereunder. Such Member has
the requisite power and authority to execute and deliver this Agreement and each
other agreement to which it is to be a party as contemplated hereby and to
perform its obligations hereunder and thereunder and the execution, delivery and
performance of this Agreement and each such other agreement has been duly
authorized by all necessary corporate or limited liability company action. This
Agreement constitutes the legal, valid and binding obligation of such Member.
6.2 No Conflict. Neither the execution, delivery and performance
of this Agreement nor the consummation by such Member of the transactions
contemplated hereby will (a) conflict with, violate or result in a breach of any
of the terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any court, governmental
department, board, agency or instrumentality, domestic or foreign, or any
arbitrator, applicable to such Member, (b) conflict with, violate, result in a
breach of or constitute a default under any of the terms, conditions or
provisions of the articles of incorporation or bylaws or similar constituent
documents of such Member or of any material agreement or instrument to which
such Member is a party or by which such Member is or may be bound or to which
any of its material properties or assets is subject, (c) conflict with, violate,
result in a breach of, constitute a default under (whether with notice or lapse
of time or both), accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
indenture, mortgage, lease agreement or instrument to which such Member is a
party or by which such Member is or may be bound, or (d) result in the creation
or imposition of any lien upon any of the material properties or assets of such
Member., the effect of which could reasonably be expected to materially impair
such Member's ability to perform its obligations under this Agreement.
6.3 No Conflict; No Default. There are no actions, suits,
proceedings or investigations pending or to the knowledge of such Member,
threatened against or affecting such Member or any of its properties, assets or
businesses in any court or before or by any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator which could,
if adversely determined (or, in the case of an investigation could lead to any
action, suit, or proceeding, which if adversely determined could) reasonably be
expected to materially impair such Member's ability to perform its obligations
under this Agreement.
6.4 Unregistered Interests. Such Member (a) acknowledges that the
Interests are being acquired without registration under the Securities Act of
1933, as amended, or under similar provisions of state law, (b) represents and
warrants to the Company and the other Member that it is acquiring the Interest
for its own account, for investment and with no view to the distribution of the
Interest, and (c) agrees not to transfer or attempt to transfer such Interest in
the absence of registration under that Act and any applicable state securities
laws or an available exemption from such registration.
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ARTICLE VII
BOOKS AND RECORDS; REPORTS TO MEMBERS
7.1 Books and Records.
(a) The following books and records of the Company shall be
kept at its principal office:
(i) a current list of the full name and last
known business, residence or mailing address of each Member;
(ii) originals of the Certificate and of this
Agreement, and any amendments thereto (and any signed powers of attorney
pursuant to which any such document was executed);
(iii) a copy of the Company's federal, state and
local income tax returns and reports and annual financial statements of the
Company, for the five most recent years; and
(iv) minutes, or minutes of action or written
consent, of every meeting of the Board.
At the Company's expense, there will also be kept at the Company's principal
office separate books of accounts for the Business, which will be a true and
accurate record of all costs and expenses incurred, all credits made and
received and all income derived in connection with the operation of the Business
in accordance with GAAP.
(b) Each of the Members or its duly authorized
representatives shall have the right, upon reasonable notice, at its own
expense, to examine and inspect, during normal business hours and for any lawful
purpose related to the affairs of the Company or the investment in the Company
by such Member, any of the books of account, and business records of the
Company, and to copy any such books of account and business records of the
Company. The Company's books of account and business records shall be filed and
preserved for a period of at least five years or such longer period as required
by law.
7.2 Financial Reports; Subscriber Reports. The Managing Member
shall deliver or cause to be delivered to each Member, no later than forty-five
(45) days after the close of each of the first three quarters of the Company's
Fiscal Year, and sixty (60) days after the end of each such Fiscal Year, a
financial report of the business and operations of the Company prepared in
accordance with GAAP, relating to such period, which report shall include a
balance sheet as of the end of such period, a statement of income (loss) and
members' Capital Accounts and cash flows (including sources and uses of funds)
for the period then ended, and in each case a comparison of the period then
ended with the corresponding period in the Fiscal Year immediately preceding
such periods, which, in the case of the report furnished after the close of the
Fiscal Year, shall be audited by the Company's independent certified public
accountants. In addition, the quarterly financial statements shall be
accompanied by an analysis, in reasonable detail, of the variance between the
Company's
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operating results and the corresponding amounts in the then current Annual
Budget. The quarterly financial reports may in each case be subject to normal
year-end adjustments. In addition to the foregoing financial statements, the
financial report furnished after the close of each Fiscal Year shall also
include a statement of cash flows, and allocations to the Members of the
Company's taxable income, gains, losses, deductions and credits. The Company
will initially engage Arthur Andersen LLP as its independent certified public
accountants and thereafter such other accounting firm as the Members shall
determine. The Company shall bear the cost of each annual audit and the cost of
any other services furnished to the Company by its independent certified public
accountants as provided herein. The Managing Member shall report to the Members
on a monthly basis prior to the 20th day of the following month the number of
subscribers to the Company's Non-Standard Television Services broken down on the
basis of operators and showing the number of adds and drops for each such
period.
7.3 Tax Returns and Information.
(a) The Managing Member is hereby designated "Tax Matters
Member" for the Company and shall be so designated in each Federal information
return filed on behalf of the Company. The Tax Matters Member shall not be
liable to the Company or any Member for any act or omission taken or suffered by
it in such capacity in good faith and in the belief that such act or omission is
in or is not opposed to the best interests of the Company; provided, however
that such act or omission is not in violation of this Agreement and does not
constitute gross negligence, fraud or a willful violation of law. Within five
Business Days of receipt, each Member shall give to each other Member written
notice of receipt from any taxing authority of any notification of an audit or
investigation of the Company.
(b) The Tax Matters Member shall cause income and other
required Federal, state and local tax returns for the Company to be prepared.
The Tax Matters Member shall make or maintain in effect an election under
Section 754 of the Code to adjust the basis of Company Property under Sections
734 and 743 of the Code for taxable years ending subsequent to the Effective
Date upon the request of any Member. The Tax Matters Member shall make such
other elections as it shall deem to be in the best interests of the Company and
the Members. The cost of preparation of such returns by outside preparers, if
any, shall be borne by the Company.
(c) The Tax Matters Member shall cause to be provided to
each Member no later than June 30 of each year information concerning the
Company's projected taxable income or loss and each class of income, gain, loss,
deduction or credit which is relevant to reporting a Member's share of Company
income, gain, loss, deduction or credit for purposes of Federal or state income
tax. Information required for the preparation of a Member's income tax returns
shall be furnished to the Members as soon as possible after the close of the
Company's Fiscal Year.
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ARTICLE VIII
COMPANY INTERESTS; RESTRICTIONS ON TRANSFER
8.1 Transfer. No Member shall Transfer any Interest owned by it
except for (a) Transfers to an Affiliate of the Transferor at the time, provided
that the Transferee remains an Affiliate of the Transferor immediately after the
Transfer; (b) pledges or grants of a security interest to secure loans to the
Company; or (c) Transfers made in compliance with Section 8.5 hereof, if
applicable. Any Transfer of an Interest other than as specifically permitted by
this Section 8.1 shall be void and of no effect. It is agreed that if the Fair
Market Value of any Member's Interest equals 25% or more of the Fair Market
Value of such Member's total assets determined on the date any proposed Transfer
of any equity interest in such Member is to be consummated, any Transfer of any
equity interest in such Member shall constitute a Transfer hereunder. The
Members shall be responsible to cause the owners of their respective equity
interests to enter into agreements as may be necessary to enable such Member to
ensure compliance with this provision.
8.2 Admission as a Member. No Transferee of any Interests from a
Member shall be admitted to the Company as a Member unless the Transfer shall
have been made in accordance with this Agreement and the Transferee shall have
executed an instrument satisfactory to the non-Transferring Member, whereby such
Transferee agrees to abide by the terms and conditions of this Agreement and
become a Member of the Company.
8.3 No Right to Withdraw. No Member shall have any right to resign
or otherwise withdraw from the Company prior to the dissolution and winding up
of the Company, without the express written consent of the other Member.
8.4 Corporate Conversion.
(a) Upon the execution of this Agreement, it is the
express intention and understanding of the existing Members and those Persons
who became Members at the time of the execution of this Agreement that upon the
occurrence of certain events the Company shall be converted into a corporation
in the manner set forth herein by the action of the Board and without the
necessity of any action or any investment decision on the part of any Member.
(b) Upon the determination by the Board, the Managing
Member shall cause a Corporate Conversion by merger into another corporation or
otherwise, and in connection therewith cause the conversion of the Interests
into the capital stock of any resulting corporation having relative rights,
limitations, preferences and other terms consistent with the Interests so
converted.
(c) The Members shall have no appraisal rights pursuant
to the Act, applicable law or otherwise in connection with a Corporate
Conversion or any other transaction authorized under this Agreement.
(d) In connection with the consummation of a Corporate
Conversion, the Board shall have the authority to merge, consolidate or
reorganize one or more of the subsidiaries with one
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<PAGE> 32
or more other subsidiaries or other entities wholly-owned directly or indirectly
by the Company or the surviving corporation in the Corporate Conversion.
(e) The board is specifically authorized to take any and
all further action, and to execute, deliver and file any and all additional
agreements, documents or instruments, as it may determine to be necessary or
appropriate in order to effectuate the provisions of this Section 8.4, and each
Member hereby agrees to execute, deliver and file any such agreements, documents
or instruments or to take such action as may be reasonably requested by the
Board for the purpose of effectuating the provisions of this Section 8.4.
8.5 Put/Call.
(a) At any time within the 45 day period commencing on
the fifth anniversary of the Effective Date, the Fox Member shall have the right
to require the Healtheon Member to purchase (the "Put") from the Fox Member, and
the Healtheon Member shall have the right to require the Fox Member to sell to
the Healtheon Member (the "Call"), all (but not less than all) of the Fox
Member's Interests in the Company. The parties shall structure the Transfer of
Interests pursuant to the Section as a transaction which qualifies as a tax-free
reorganization under Section 368 of the Code. The consideration due upon
consummation of the Put or the Call, as the case may be, shall be shares of
Common Stock of Healtheon/WebMD, such shares of Common Stock shall be issuable
to the Fox Member or its designee and shad be based on the number of Subscribers
to the Non-Standard Television Services operated by the Company as of the fifth
anniversary of the Effective Date, to be determined as follows:
(i) if the number of Subscribers is less than 20
million, no shares of Common Stock will be issuable, and the consideration shall
be $1.00;
(ii) if the number of subscribers is 50 million
or greater, the consideration shall be the issuance 8,291,939 shares of Common
Stock; and
(iii) if the number of Subscribers is 20 million
or more, but less than 50 million, the consideration shall be, the issuance of a
prorated number of shares of Common Stock between 1 and 8,291,939, based on the
actual number of Subscribers between 20 million and 50 million.
For the purposes hereof, "Subscriber" shall mean as of any date a
subscriber to the Non-Standard Television Services operated by the Company as of
such date who (a) is no more than 60 days past due in payment (measured from the
date the relevant bill is issued), (b) has received and paid for in full the
programming service operated by the Company for at least one month following the
later of the date of activation and the conclusion of any promotional or "free"
months, if any, (c) became a subscriber as a result of ordinary marketing
practices in the normal course of business and (d) is capable of receiving at
least 24 hours per day, 7 days per week (subject to system failure) of the
Non-Standard Television Services operated by the Company.
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<PAGE> 33
(b) The closing of the purchase and sale pursuant to this Section
8.5 shall be held at the principal place of business of the Company or at such
other mutually acceptable place on a mutually acceptable date no later than the
later of (i) 30 days after the final determination of the number of Subscribers
as set forth in Section 8.5(a) hereof or (ii) 10 days after the expiration or
early termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR") or the completion of other applicable
regulatory proceedings. The parties agree to cooperate with each other in filing
all necessary notices and related materials to comply with the provisions of HSR
or other regulatory requirements, if applicable. At such closing, the Fox Member
shall assign to the Healtheon Member, or its designees, the Company Interest of
the Fox Member, and shall execute such documents and instruments as may be
necessary to effectuate the sale of the Interest free and clear of all Liens.
The Fox Member shall represent and warrant in writing that it is the owner and
holder of the Interest which it is selling, free and clear of all Liens (other
than pledges or security interests that secure indebtedness of the Company),
that the Fox Member is the record and beneficial owner of the such Interest, and
that it has the full right, power and authority to convey such Interest to the
Healtheon Member.
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.1 Dissolution. Dissolution of the Company will occur upon the
happening of any of the following events:
(a) the sale or other disposition of all or substantially
all of the Company's assets;
(b) the affirmative vote of all of the Members; or
(c) the entry of a decree of Judicial dissolution under
the Act.
9.2 Exclusive Means of Dissolution. The exclusive means by which
the Company may be dissolved are set forth in 9.1. The Company will not be
dissolved upon the death, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or upon the occurrence of any other event which
terminates the continued membership of any Member in the Company.
9.3 Liquidation. Upon Dissolution of the Company, the Company will
immediately proceed to wind up its affairs and liquidate pursuant to this 9.3.
Following Dissolution, the Board shall appoint a person to serve as the
liquidating trustee and thus be charged with the duty to wind up the affairs of
the Company and distribute its assets as provided herein. A reasonable time will
be allowed for the orderly Liquidation of the Company and the discharge of
liabilities to creditors so as to enable the Company to minimize any losses
attendant upon Liquidation. Any gain or loss on disposition of any Company
assets in Liquidation will be allocated to Members in accordance with the
provisions of Section 3.6. Any liquidating trustee is entitled to reasonable
compensation for services actually performed, as approved by the Board, and may
contract for such assistance in the liquidating process as such Person deems
necessary or desirable. Until the filing of a certificate of cancellation under
9.9, and without affecting the liability of the Members and without imposing
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<PAGE> 34
liability on the liquidating trustee, the liquidating trustee may settle and
close the Company's business, prosecute and defend suits, dispose of its
property, discharge or make provision for its liabilities, and make
Distributions in accordance with the priorities set forth in this Article.
9.4 Priority of Payment. If the Company is dissolved the assets of
the Company will be distributed in Liquidation in the following order:
(a) First, to creditors by the payment or provision for
payment of the debts and liabilities of the Company (other than any loans or
advances that may have been made by any Member or Affiliate) and the expenses of
Liquidation;
(b) Second, to the setting up of any reserves that are
reasonably necessary for any contingent, conditional or unmatured liabilities or
obligations of the Company;
(c) Third, to the repayment of any loans or advances to
the Company that may have been made by any Member or any Affiliate of a Member
(according to the relative priority of repayment of such loans or advances and
proportionally among loans or advances of equal priority if the amount available
for repayment is insufficient for payment in full); and
(d) Fourth, to the Members in proportion to the positive
balances in their respective Capital Accounts after such Capital Accounts have
been adjusted for all allocations of Profits and Losses and items thereof for
the Fiscal Year during which such liquidation occurs.
9.5 Liquidating Distributions. If the Company is dissolved, the
liquidating distributions due to the Members will be made by selling the assets
of the Company and distributing the net proceeds. Notwithstanding the preceding
sentence, but only upon the affirmative vote of all Members, the liquidating
distributions may be made by distributing the assets of the Company in kind to
the Members in proportion to the amounts distributable to them pursuant to
Section 9.4, valuing such assets at their Fair Market Value (net of liabilities
secured by such property that the Member takes subject to or assumes) on the
date of distribution. Each Member agrees to save and hold harmless the other
Members from such Member's proportionate share of any and all such liabilities
which are taken subject to or assumed. Appropriate and customary prorations and
adjustments will be made incident to any distribution in kind. The Members will
look solely to the assets of the Company for the return of their Capital
Contributions, and if the assets of the Company remaining after the payment or
discharge of the debts and liabilities of the Company are insufficient to return
such contributions, they will have no recourse against any other Member. The
Members acknowledge that Section 9.4 may establish distribution priorities
different from those set forth in the provisions of the Act applicable to
distributions upon Liquidation, and the Members agree that they intend, to that
extent, to vary those provisions by this Agreement.
9.6 No Restoration Obligation. Nothing contained in this Agreement
imposes on any Member an obligation to make an Additional Capital Contribution
in order to restore a deficit Capital Account upon Liquidation of the Company.
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<PAGE> 35
9.7 Timing. Final distributions in Liquidation will be made by the
end of the Company's Fiscal Year in which such actual Liquidation occurs (or, if
later, within 90 days after such event) in the manner required to comply with
the Section 704(b) of the Treasury Regulations. Payments or distributions in
Liquidation may be made to a liquidating trust established by the Company for
the benefit of those entitled to payments under Section 9.4, in any manner
consistent with this Agreement and the Section 704(b) of the Treasury
Regulations.
9.8 Liquidating Reports. A report will be submitted with each
liquidating distribution to Members made pursuant to 9.5, showing the
collections, disbursements and distributions during the period which is
subsequent to any previous report. A final report, showing cumulative
collections, disbursements and distributions, will be submitted upon completion
of the Liquidation.
9.9 Certificate of Cancellation. Upon Dissolution of the Company
and the completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate of Formation) with the
Delaware Secretary of State pursuant to the Act. At such time, the Company will
also file an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business. A certificate of
cancellation will also be filed at any time when there are no Members.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 Licenses. In connection with the formation of the Company, the
Healtheon Member shall procure a trademark license agreement, substantially in
the form annexed hereto as Exhibit C and a content license agreement,
substantially in the form annexed hereto as Exhibit D.
ARTICLE XI
MISCELLANEOUS
11.1 Waiver of Partition. Except as may be otherwise provided by
law in connection with the winding-up, liquidation and dissolution of the
Company, each Member hereby irrevocably waives any and all rights that it may
have to maintain an action for partition of any of the Company Property.
11.2 Modification; Waivers. This Agreement may be modified or
amended only with the written consent of each Member. Except as otherwise
specifically provided herein, no Member shall be released from its obligations
hereunder without the written consent of the other Member. The observance of any
terms of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party or parties
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party or parties against which such waiver is to be
asserted. Except as otherwise specifically provided herein, no delay on the part
of any party hereto in exercising any right, power or privilege hereunder shall
operate as a
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<PAGE> 36
waiver thereof, nor shall any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
11.3 Entire Agreement. This Agreement, and the documents expressly
referred to herein, and all related documents, each as amended, constitute the
entire agreement among the Members with respect to the subject matter hereof and
supersede any prior agreement or understanding between or among the Members with
respect to such subject matter.
11.4 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other Persons or circumstances shall not be affected thereby; provided, however
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid.
11.5 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given on the date delivered by hand or on
the third Business Day after such notice is mailed by registered or certified
mail, postage prepaid, and, pending the designation by written notice of another
address, addressed as follows:
If to the Fox Member:
Fox Member
c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Telecopier: (212) 768-2029
Attn: Arthur M. Siskind, Esq.
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopier: (212) 697-6686
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<PAGE> 37
If to the Healtheon Member:
c/o Healtheon/WebMD Corporation
400 The Lenox Building
Atlanta, Georgia 30326, USA
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
Attention: Jeffrey T. Arnold
Chief Executive Officer
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
Suite 2600, 100 Tryon Street
Charlotte, North Carolina 28202
Telecopier: __________
Attention: H. Bryan Ives III, Esq.
C. Mark Kelly, Esq.
11.6 Successors and Assigns. Except as otherwise specifically
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Members and their legal representatives, successors and permitted
assigns.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument.
11.8 Headings, Cross-references. The Article and Section headings
in this Agreement are for convenience of reference only, and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
11.9 Construction. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the Company. No one,
including but not limited to the Members or any creditor of the Company or any
of its Members, shall have any rights under this Agreement against any Affiliate
of any Member.
11.10 Property Rights, Confidentiality. All books, records and
accounts maintained exclusively for the Company (including, without limitation,
marketing reports and all other data whether stored on paper or in electronic or
other form), and any contracts or agreements (including, without limitation,
agreements for the purchase, lease or license of programming) entered into by or
exclusively on behalf of the Company, shall at all times be the exclusive
property of the Company. All property (real or personal or mixed) purchased with
Company funds, and all moneys held or collected for or on behalf of the Company
shall at all times be the exclusive property of the Company. Except as expressly
agreed to by the Members, no Member shall, during the period such
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<PAGE> 38
Member is a Member and for a period ending two (2) years after such Member has
ceased to be a Member, disclose any confidential or proprietary information with
respect to the Company to any Person, except (a) with the prior written consent
of the other Member; (b) to the extent necessary to comply with law or the valid
order of a court of competent jurisdiction, in which event the party making such
disclosure shall so notify the other Member as promptly as practicable (and, if
possible, prior to making such disclosure) and shall seek confidential treatment
of such information; (c) as part of its normal reporting or review procedure to
its parent company, its auditors and its attorneys; provided, however, that such
Member shall be liable for any breach by such parent company, auditors or
attorneys of any provision of this Section 11.10; (d) in connection with the
enforcement of such Member's rights hereunder; (e) disclosures to an Affiliate
of, or professional advisor to, such Member in connection with the performance
by such Member of its obligations hereunder; provided, however that such Member
shall be liable for any breach by such Affiliate or professional advisor of any
provision of this Section; and (f) to a prospective purchaser of all or a
portion of such Member's Interest in connection with a sale in accordance with
the terms of this Agreement; provided, however, that such Member shall be liable
for any breach by such prospective purchaser of any provision of this Section.
Except as provided in the preceding sentence, no Member, nor any of its
Affiliates, shall, during the periods referred to in such sentence, use any
confidential or proprietary information with respect to the Company other than
for the benefit of the Company. This Section 11.10 hereof shall survive the
termination of this Agreement, the Dissolution of the Company, the withdrawal of
any Member and the Transfer of the Interest of any Member.
11.11 Further Actions. Each Member shall execute and deliver such
other certificates, agreements and documents, and take such other actions, as
may reasonably be required in connection with the formation and continuation of
the Company and the achievement of its purposes.
11.12 Governing Law; Forum. This Agreement will be governed by, and
construed in accordance with the laws of the State of Delaware without regard to
any conflicts of laws rules. Any conflict or apparent conflict between this
Agreement and the Act will be resolved in favor of this Agreement, except as
otherwise required by the Act.
11.13 Expenses of the Parties. All expenses incurred by or on behalf
of the parties hereto in connection with the authorization, preparation and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the authorization, preparation, execution and
consummation of this Agreement shall be borne solely by the party who shall have
incurred the same.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers or members hereunto duly authorized as of the date
first written above.
HEALTHEON WEB/MD CABLE CORPORATION
By: /s/
--------------------------------
Name: W. Michael Heekin
Title: Vice President
AHN/FIT CABLE, LLC
By: /s/
--------------------------------
Name: Daniel Fawcett
Title: Exec. Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
Healtheon Member set forth in this Agreement. This is a guaranty of payment and
not of collection.
HEALTHEON/WEBMD CORPORATION
By: /s/
--------------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
News Member set forth in this Agreement. This is a guaranty of payment and not
of collection.
THE NEWS CORPORATION LIMITED
By: /s/
--------------------------------
Name: Arthur Siskind
Title: Director
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
THE H/W HEALTH & FITNESS LLC
JANUARY 26, 2000
THE OWNERSHIP INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES
AUTHORITIES AND MAY NOT BE SOLD OR REGISTERED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE
OWNERSHIP INTERESTS IS ALSO RESTRICTED BY PROVISIONS OF THIS AGREEMENT AND
RELATED AGREEMENTS.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I DEFINITIONS..............................................................................1
ARTICLE II FORMATION ...............................................................................7
2.1 Formation ...............................................................................7
2.2 Name ....................................................................................7
2.3 Office and Agent ........................................................................8
2.4 Purposes ................................................................................8
2.5 Powers ..................................................................................8
2.6 Ownership of Property....................................................................8
2.7 Qualification in Other Jurisdictions ....................................................8
ARTICLE III CAPITAL .................................................................................8
3.1 Initial Capital Contributions by Members;
Initial Capital Accounts; Initial Tax Basis in Assets ...................................8
3.2 Percentage Interests ....................................................................9
3.3 Additional Capital ......................................................................9
3.4 Capital Accounts .......................................................................10
3.5 Allocation of Items of Company Income, Gain,
Loss, Deduction and Credit .............................................................11
3.6 Distributions ..........................................................................14
3.7 Withholding ............................................................................14
3.8 Distribution Limitation ................................................................15
3.9 Company Funds ..........................................................................15
3.10 Capital Contribution ...................................................................15
ARTICLE IV MANAGEMENT .............................................................................15
4.1 Management of the Company's Business ...................................................15
4.2 Board ..................................................................................16
4.3 Extraordinary Actions ..................................................................16
4.4 Indemnification ........................................................................17
ARTICLE V LIABILITY OF A MEMBER...................................................................19
5.1 Limited Liability ......................................................................19
5.2 Capital Contribution ...................................................................19
5.3 Reliance ...............................................................................19
ARTICLE VI REPRESENTATIONS AND WARRANTIES .........................................................19
6.1 Due Incorporation; Authorization .......................................................20
6.2 No Conflict ............................................................................20
6.3 No Conflict; No Default ................................................................20
6.4 Unregistered Interests .................................................................20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE VII BOOKS AND RECORDS; REPORTS TO MEMBERS...........................................................21
7.1 Books and Records......................................................................21
7.2 Financial Reports; Subscriber Reports..................................................21
7.3 Tax Returns and Information............................................................22
ARTICLE VIII COMPANY INTERESTS; RESTRICTIONS ON TRANSFER.....................................................23
8.1 Transfer...............................................................................23
8.2 Admission as a Member..................................................................23
8.3 No Right to Withdraw...................................................................23
8.4 Corporate Conversion...................................................................23
8.5 Put/Call...............................................................................24
ARTICLE IX DISSOLUTION AND LIQUIDATION.....................................................................24
9.1 Dissolution............................................................................24
9.2 Exclusive Means of Dissolution.........................................................25
9.3 Liquidation............................................................................25
9.4 Priority of Payment....................................................................25
9.5 Liquidating Distributions..............................................................26
9.6 No Restoration Obligation..............................................................26
9.7 Timing.................................................................................26
9.8 Liquidating Reports....................................................................26
9.9 Certificate of Cancellation............................................................26
ARTICLE X ADDITIONAL AGREEMENTS...........................................................................26
10.1 Indemnification........................................................................26
10.2 Galaxy Asset License...................................................................27
ARTICLE XI MISCELLANEOUS...................................................................................27
11.1 Waiver of Partition....................................................................27
11.2 Modification; Waivers..................................................................27
11.3 Entire Agreement.......................................................................28
11.4 Severability...........................................................................28
11.5 Notices................................................................................28
11.6 Successors and Assigns.................................................................29
11.7 Counterparts...........................................................................29
11.8 Headings; Cross-references.............................................................29
11.9 Construction...........................................................................29
11.10 Property Rights; Confidentiality.......................................................29
11.11 Further Actions........................................................................30
11.12 Governing Law; Forum...................................................................30
11.13 Expenses of the Parties................................................................30
</TABLE>
<PAGE> 4
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
THE H/W HEALTH & FITNESS LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT is made as of the 26th
day of January 2000, by and between Healtheon/WebMD Cable Corporation, a
Delaware corporation and wholly-owned subsidiary of Healtheon/WebMD Corporation
("Healtheon/WebMD"), (together with any of its Affiliate Transferees (as
hereinafter defined), the "Healtheon Member"), and AHN/FIT Internet, LLC, a
Delaware limited liability company (together with any of its Affiliate
Transferees (as hereinafter defined), the "Fox Member," and together with the
Healtheon Member, the "Members").
W I T N E S S E T H:
The Fox Member entered into an Operating Agreement on the 10th day of
January, 2000 (the "Original Agreement"). The Fox Member desires to amend and
restate the Original Agreement in its entirety as set forth herein.
In consideration of the mutual promises and covenants contained in
this Agreement, and intending to be legally bound, the Members hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
assigned to them in this Article I (except as otherwise expressly provided) and
include the plural as well as the singular and vice versa. All accounting terms
not otherwise defined herein have the meanings assigned to them in accordance
with GAAP.
"Act" shall mean the Delaware Limited Liability Company Act, as
amended.
"Adjusted Capital Account Deficit" shall mean the deficit balance (if
any) in such Member's Capital Account as of the end of any Fiscal Year, after
(a) crediting to such Capital Account any amount which such Member is obligated
to restore pursuant to this Agreement or is deemed obligated to restore
pursuant to the minimum gain chargeback provisions of the Section 704(b) of
<PAGE> 5
the Treasury Regulations, and (b) charging to such Capital Account any
adjustments, allocations or distributions described in the qualified income
offset provisions of the Section 704(b) of the Treasury Regulations which are
required to be charged to such Capital Account pursuant to this Agreement.
"Affiliate" shall mean, with respect to any Person, any Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with such Person.
"Agreement" shall mean this Amended and Restated Operating Agreement,
also known as a "limited liability company agreement" under the Act, as amended
from time to time.
"Available Cash" shall mean for any Fiscal Year or other period, the
positive amount, if any, obtained by calculating net income (or loss) of the
Company determined in accordance with GAAP for such period, adjusted, without
duplication, by adding (x) depreciation, amortization and other non-cash
charges to the extent deducted in determining net income and deducting (y) (i)
the current portion of indebtedness of the Company, (11) prepaid expenses and
other cash expenditures to the extent not deducted in determining net income or
loss and (iii) reasonable reserves for working capital and contingent
liabilities as determined by the Managing Member.
"Board" shall have the meaning set forth in Section 4.2 hereof.
"Business" shall mean the business of the Company as set forth in
Section 2.4 hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday or
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law to close.
"Call" shall have the meaning set forth in Section 8.5(a) hereof.
"Capital Account" shall have the meaning set forth in Section 3.4(a)
hereof.
"Capital Contribution" shall mean the amount which a Member shall
contribute to the capital of the Company as provided in Article III hereof.
"Certificate" shall mean the certificate of formation of the Company,
as amended from time to time.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or statutes.
"Common Stock" shall mean the common stock, par value $0.0001 per
share, of Healtheon/WebMD and any and all shares of capital stock or other
equity securities of: (i) Healtheon/WebMD which are added to or exchanged or
substituted for the Common Stock by reason of the declaration of any stock
dividend or stock split, the issuance of any distribution or the
reclassification, readjustment, recapitalization or other such modification of
the capital structure of
<PAGE> 6
Healtheon/WebMD; and (ii) any other corporation, now or hereafter
organized under the laws of any state or other governmental authority, with
which Healtheon/WebMD is merged, which results from any consolidation or
reorganization to which Healtheon/WebMD is a party, or to which is sold all or
substantially all of the shares or assets of Healtheon/WebMD, if immediately
after such merger, consolidation, reorganization or sale, Healtheon/WebMD or
any Stockholders of Healtheon/WebMD own equity securities having in the
aggregate more than fifty percent (50%) of the total voting power of such other
corporation.
"Company" shall mean the limited liability company formed pursuant to
the Certificate and governed by this Agreement and the Act.
"Company Minimum Gain" shall mean the amount determined in accordance
with the principles of Treasury Regulations Section 1.704-2(d).
"Company Property" shall have the meaning set forth in Section 2.6
hereof.
"Control" shall mean the possession, direct or indirect of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Corporate Conversion" shall mean any merger, consolidation,
conversion by filing, assignment of assets, or similar transaction or series of
transactions resulting in a corporation substantially all of the assets of
which consist of substantially all of the assets that were held directly or
indirectly by the Company immediately prior to such transaction and
substantially all the capital stock of which corporation is held by Persons who
were either (i) Members immediately prior to such transaction or (ii) the
owners of a Member the sole or principal asset of which Member was an Interest
in the Company.
"Current Market Price" shall mean, per share of Common Stock on any
date specified, the average of the daily market prices of such Common Stock for
the 20 consecutive Business Days ending on the second Business Day prior to
such date. The daily market price of Common Stock on any Business Day will be
(a) the last sale price on such day on the principal stock exchange on which
such share of Common Stock is then listed or admitted to trading (including the
Nasdaq National Market System if such Common Stock is admitted to trading
thereon), or (b) if no sale takes place on such date on any exchange on which
such share of Common Stock is listed or admitted to trading, the average of the
reported closing bid and asked prices on such day as officially noted on any
exchange.
"Damages" shall have the meaning set forth in Section 4.4(a) hereof.
"Depreciation" shall mean, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for federal income tax purposes with respect to an asset
for such year or other period, except that if the Gross Asset Value of any
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such year or other period, Depreciation shall be an amount which
bears the same ratio to such beginning
<PAGE> 7
Gross Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Tax Matters Member.
"Dissolution" shall mean the happening of any of the events described
in Section 9.1 hereof.
"Economic Risk of Loss" shall have the meaning set forth in Sections
1.704-2(b)(4) and 1.752-2 of the Treasury Regulations.
"Effective Date" shall mean the date hereof, unless the parties
otherwise mutually agree in writing that some other date shall be the Effective
Date.
"Fair Market Value" shall mean, for purposes of this Agreement, the
cash price at which a willing seller would sell, and a willing buyer would buy,
the property in question, both having full knowledge of, the relevant facts and
being under no compulsion to buy or sell, in an arm's length transaction without
time constraints. Fair Market Value may be determined by mutual agreement of the
Members. If the Members are unable to agree on a Fair Market Value within 15
days of the date on which a determination of Fair Market Value is required, or
if they determine that an appraisal should be used to determine Fair Market
Value, then each of the Members will cause the Fair Market Value as of the most
recent month end (or as of such other date as may be expressly provided herein)
to be determined by a qualified appraiser in accordance with the following
procedure. The Members shall, within 10 days of the date that an appraiser is
required, seek to select a mutually agreeable appraiser. If the Members are
unable to agree on a single qualified appraiser within 10 days, each Member will
have 10 additional days to select one appraiser internationally recognized in
valuing items of the kind required to be valued. Any Member not appointing an
appraiser pursuant to the preceding sentence within the allotted time shall have
no right to select an appraiser thereafter but shall be bound by the procedure
set forth herein using values determined by appraisers selected by the other
Member or Members, as applicable. The appointed appraiser, or appraisers, as the
case may be, will determine the Fair Market Value. The Members will use their
reasonable best efforts to cause such appraiser or appraisers to submit to them
written reports indicating the determination of Fair Market Value within 30 days
after the date such appraiser is selected. If there is more than one appointed
appraiser, and the highest of the appraisals is not more than 110% of the lowest
appraisal, the average of the two will be the Fair Market Value. If the highest
of the appraisals is more than 110% of the lowest appraisal, the Members will
immediately notify the appraisers and cause them to appoint another similarly
qualified appraiser within 10 days after such notice. The Members will use their
reasonable best efforts to cause such appraiser (who will not be apprised of the
determination of the other appraisers) to submit a written report to each of
them indicating such appraiser's determination of Fair Market Value within 30
days after the date such appraiser is selected. If three appraisals are
necessary, then the average of the two appraisals in which the determinations of
Fair Market Value are closest together will be the Fair Market Value or, if the
highest and lowest are equidistant from the middle determination, then the
middle determination will be the Fair Market Value. A determination of Fair
Market Value as provided herein will be final, binding and nonappealable. Each
Member will pay one half of the fees and costs of any appraiser
<PAGE> 8
involved in a determination of Fair Market Value required by this Agreement.
"Fiscal Year" shall mean the twelve-month period ending December 31 of
each year, or such other fiscal year as the Members may designate.
"Fox Member" shall have the meaning set forth in the preamble to this
Agreement.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States from time to time and consistently applied, with
such exceptions thereto or deviations therefrom, if any, as the Managing Member
may approve.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the Fair Market Value of such asset;
(b) the Gross Asset Value of all Company assets shall be adjusted
to equal their respective Fair Market Value (taking Section 7701 (g) of the
Code into account), as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange
for more than a de minimis capital contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company Property as
consideration for an interest in the Company, in the case of either (i) or
(ii), if the Members reasonably determine that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company and (iii) the liquidation of a Member's interest in the Company or the
Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury
Regulations;
(c) the Gross Asset Value of any Company asset distributed to any
Member shall be the Fair Market Value (taking Section 7701(g) of the Code
into account) of such asset on the date of distribution;
(d) the Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Section 732(d), Section 734(b) or Section 743(b) of the Code, but
only to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations and Section 3.5 hereof, provided, however, that Gross Asset Values
shall not be adjusted pursuant to this subsection (d) to the extent that the
Members determine that an adjustment pursuant to subsection (b) of this
definition is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this subsection (d); and
(e) if the Gross Asset Value of any asset has been determined or
adjusted pursuant to subsection (a), (b) or (c) hereof, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing gains or losses from the
disposition of such asset.
<PAGE> 9
"Healtheon Member" shall have the meaning set forth in the preamble to
this Agreement.
"HSR" shall have the meaning set forth in Section 8.5(b) hereof.
"Indemnitee" shall have the meaning set forth in Section 4.4(a)
hereof.
"Interest" shall mean, as to each Member, such Member's rights to
participate in the income, gains, losses, deductions and credits of the
Company, together with all other rights and obligations of such Member in the
capital of the Company under this Agreement.
"Internet" shall mean a decentralized worldwide network of computer
networks.
"Lien" shall mean a mortgage, lien, pledge, security interest or
other encumbrance.
"Liquidation" shall mean the process of winding up and terminating the
Company after its Dissolution.
"Losses" shall have the meaning set forth in Section 3.5(a) hereof.
"Managing Member" shall mean the Healtheon Member, and any Person who
may after the date hereof become a successor to the Healtheon Member, as
provided herein.
"Member" shall mean the Fox Member, the Healtheon Member and any
permitted transferee of an Interest or portion thereof who becomes a Member in
accordance with Article VIII. The Fox Member and the Healtheon Member (together
with such transferees) may be collectively referred to herein as the "Members."
"Member Nonrecourse Debt" shall mean liabilities of the Company
treated as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the
Treasury Regulations.
"Member Nonrecourse Deductions" shall mean any losses, deductions or
Code Section 705(a)(2)(b) expenditures characterized as "partner nonrecourse
deductions" under Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury
Regulations.
"Member Nonrecourse Debt Minimum Gain" shall mean an amount of gain
characterized as "partner nonrecourse debt minimum gain" under Treasury
Regulations Sections 1.704-2(i)(2) and 1.704-2(i)(3).
"Nonrecourse Deductions" in any year shall mean the Company deductions
that are characterized as "nonrecourse deductions" under Sections 1.704-2(b)(1)
and 1.704-2(c) of the Treasury Regulations.
<PAGE> 10
"Percentage Interest" shall mean, with respect to each Member, such
Member's proportionate share of the total Interests in the Company expressed as
a percentage, as set forth in Section 3.2 hereof and as may be adjusted from
time to time pursuant to this Agreement.
"Person" shall mean an individual or a corporation, limited liability
company, joint venture, partnership, trust, unincorporated association,
governmental authority or other entity.
"Prime Rate" shall mean a rate of interest equal to the rate per annum
announced from time to time by Citibank, N.A. at its principal office as its
prime rate (which rate shall change when and as such announced prime rate
changes) but in no event more than the maximum rate of interest permitted to be
collected from time to time under applicable usury laws.
"Prime Time" shall mean between the hours of 6:00 p.m. and 12 a.m.
"Profits" shall have the meaning set forth in Section 3.5(a) hereof.
"Put" shall have the meaning set forth in Section 8.5(a) hereof.
"Regulatory Allocations" shall have the meaning set forth in
subparagraph 3.5(c)(viii) hereof.
"Representatives" shall have the meaning set forth in Section 4.2(a)
hereof.
"Super Majority Vote" shall mean a vote of 100% of the Percentage
Interests.
"Section 704(c) Property" shall have the meaning set forth in Section
1.704-3(a)(3) of the Treasury Regulations and shall include assets treated as
Section 704(c) Property by virtue of Section 1.704-1(b)(2)(iv)(f) of the
Treasury Regulations.
"Tax Matters Member" shall mean the "tax matters partner," as that
term is defined in Section 6231(a)(7) of the Code.
"Transfer" shall mean a sale, exchange, assignment, transfer, pledge
or other disposition of all or any part of an Interest (whether voluntary,
involuntary or by operation of law).
"Transferee" shall mean a Person to whom an Interest is Transferred in
compliance with this Agreement.
"Transferor" shall mean a Person who Transfers all or any part of an
Interest in compliance with this Agreement.
"Treasury Regulations" shall mean the income tax regulations (including
temporary and proposed) promulgated under the Code.
<PAGE> 11
ARTICLE II
FORMATION
2.1 Formation. The Company was formed as a limited liability company
pursuant to the Act by the filing on January 10, 2000 of the Certificate with
the Secretary of State of the State of Delaware.
2.2 Name. The business of the Company shall be conducted under the
name The H/W Health & Fitness LLC or such other or additional name or names and
variations thereof as the Managing Member may from time to time determine. The
Managing Member shall file, or cause to be filed, any fictitious name
certificate and similar filings, and any amendments thereto, as may be directed
by the Board from time to time.
2.3 Office and Agent.
(a) The initial registered office of the Company in Delaware will
be at 1013 Centre Road, Wilmington, Delaware 19805-1297, and its initial
registered agent will be Corporation Service Company. The Company may, upon
compliance with the applicable provisions of the Act, change its registered
office or registered agent in Delaware.
(b) The initial principal office of the Company will be at 1300
North Market Street, Suite 404, Wilmington, Delaware 19801. The Company may
maintain any other offices at any other places that the Managing Member deems
advisable.
2.4 Purposes. The purposes of the Company shall be (a) to own and
operate Internet services devoted exclusively to health and fitness content,
consisting of audio-visual data and information, and a transaction platform
that facilitates and streamlines interactions among participants in the
healthcare industry (the "Business"), (b) to acquire, own, hold, sell or
otherwise dispose of interests in the assets used to conduct the Business, (c)
to make and perform all contracts and engage in all activities and transactions
and to do any and all things necessary or advisable to carry out the foregoing
purpose, and (d) to otherwise engage in any lawful activity incidental thereto
for which limited liability companies may be organized under the Act.
2.5 Powers. The Company shall have all the powers granted to a limited
liability company under the Act, as well as all powers necessary or convenient
to achieve its purposes and to further its business.
2.6 Ownership of Property. Legal title to all assets, rights and
property, whether real, personal or mixed, owned by the Company (collectively,
the "Company Property") shall be acquired, held and conveyed only in the name
of the Company.
2.7 Qualification in Other Jurisdictions. The Managing Member shall
cause the Company to be qualified or registered under applicable laws of any
jurisdiction in which the Company transacts business and shall be authorized to
execute, deliver and file any certificates and documents necessary to effect
such qualifications or registrations including, without limitation, the
<PAGE> 12
appointment of agents or service of process in such jurisdictions.
ARTICLE III
CAPITAL
3.1 Initial Capital Contributions by Members; Initial Capital
Accounts; Initial Tax Basis in Assets.
The Company was formed on January 10, 2000 and on the date hereof
the Fox Member contributed to the capital of the Company the assets, subject to
the liabilities, which constituted all of its assets, other than the Galaxy
Assets, as defined in the Purchase Agreement, and cash on hand, and all of its
liabilities, other than liabilities in respect of member loans. The Healtheon
Member then purchased a 50% Interest from the Fox Member pursuant to a purchase
agreement dated as of the date hereof. It is agreed that (i) the Healtheon
Member is admitted to the Company as a Member, (ii) this Agreement shall govern
the management, business and affairs of the Company, (iii) the purchase of its
Interest by the Healtheon Member shall be treated under the Code as a purchase
of an undivided one-half interest in each of the Company's assets, subject to
its liabilities, on the date hereof, followed by the contribution of such
assets subject to such liabilities to the capital of the Company by the
Healtheon Member and the contribution of the remaining one-half undivided
interest in such assets subject to the remaining liabilities by the Fox Member
to the capital of the Company, (iv) the initial Capital Account of the
Healtheon Member and the Fox Member shall each equal (S750,000), (v) the
aggregate adjusted tax basis under the Code of the Healtheon Member's share of
the assets of the Company on the date hereof shall equal the Healtheon Member's
Capital Account plus one-half of the Company's liabilities on the date hereof,
(vi) the aggregate adjusted tax basis under the Code of the Fox Member's share
of the assets of the Company on the date hereof shall equal one-half of the
basis of such assets in the hands of the Company immediately prior to the
purchase by the Healtheon Member of its Interest, plus one-half of the
Company's liabilities at such time and (vii) the difference between amount
described in clauses (v) and (vi) above shall be treated as Section 704(c)
Property with respect to the Fox Member.
3.2 Percentage Interests. Subject to adjustment pursuant to Section
3.3 hereof, the Percentage Interest of each Member shall initially be as
follows:
Healtheon Member: 50%
Fox Member: 50%
The Percentage Interest of a Member may be adjusted from time to time pursuant
to Section 3.3 hereof.
3.3 Additional Capital.
(a) If, at any time, the Managing Member determines that the
Company requires additional funds for its continued operation or growth, the
Managing Member may make a loan (a "Member Loan") to the Company in an amount
equal to the funds so required, any such loan to bear
<PAGE> 13
interest, at the Prime Rate plus two percent on the date nearest the date of
the advance, which rate shall be adjusted annually, based on changes to the
Prime Rate on the anniversary of such Member Loan. For so long as any Member
Loan remains unpaid, no distributions shall be made by the Company to the
Members (whether before or after the Dissolution of the Company) in respect of
their Percentage Interests. Instead all of the Company's Available Cash shall
be paid to the Managing Member until each Member Loan and all interest accrued
thereon has been paid in full to the Managing Member. Payments in respect of
any Member Loan will be applied in the order that such loans were made, and all
payments will be applied first to accrued but unpaid interest and then to
reduce the outstanding principal amount of the loan. A Member Loan shall not
become due and payable until the earlier of: (A) the sale of the Fox Member's
Interest pursuant to Section 8.5 hereof or (B) the Dissolution of the Company.
Any Member Loan shall be prepayable in whole or in part at any time without
penalty.
(b) Except as set forth in this Section 3.3, no Member shall have
any obligation to make additional capital contributions to the Company.
3.4 Capital Accounts.
(a) A separate capital account (each a "Capital Account") shall be
maintained for each Member. Such Member's initial Capital Account shall be as
described in Section 3.1 above. Subject to the provisions of subsections (b),
(c) and (d) of this Section 3.4, the Capital Account of each Member shall be
(i) increased by (A) the amount of cash and the Gross Asset Value of any
property contributed to the Company by such Member (net of liabilities secured
by the property or to which the property is subject), and (B) Profits and any
other items of income and gain allocated to such Member pursuant to Section 3.5
hereof and (ii) decreased by (A) the amount of cash and the Gross Asset Value
of any property distributed to such Member (net of liabilities secured by the
property or to which the property is subject) and (B) the Losses and any other
items of deduction and loss allocated to such Member pursuant to Section 3.5,
and otherwise maintained in accordance with Treasury Regulations in order for
the allocation of Profits and Losses pursuant to Section 3.5.
(b) For purposes of this Section 3.4, an assumption of a Member's
unsecured liability by the Company shall be treated as a distribution of money
to that Member. An assumption of the Company's unsecured liability by a Member
shall be treated as a cash contribution to the Company by that Member.
(c) In the event a contribution of money or other property is made
to the Company other than a contribution made ratably by all existing Members,
then the Capital Accounts for the Members shall be adjusted for the
hypothetical "book" gain or loss that would have been realized by the Company
if all Company assets had been sold for their Gross Asset Values in a cash
sale, and shall be in proportion to the Percentage Interests of the Members. If
a determination of the Fair Market Value of the Company is made pursuant to
Section 3.3 in connection with any Additional Capital Contribution which would
also be subject to this Section 3.4(c), the Gross Asset Value of the Company's
assets shall be deemed to be equal to the Fair Market Value of the Company plus
its liabilities as determined pursuant to Section 3.3 hereof.
<PAGE> 14
(d) In the event that assets of the Company other than money are
distributed to a Member in liquidation of the Company, or in the event that
assets of the Company other than money are distributed to a Member in kind, in
order to reflect unrealized gain or loss, Capital Accounts for the Members
shall be adjusted for the hypothetical "book" gain or loss that would have been
realized by the Company if the distributed assets had been sold for their Gross
Asset Values in a cash sale. In the event of the liquidation of a Member's
interest in the Company, in order to reflect unrealized gain or loss, Capital
Accounts for the Members shall be adjusted for the hypothetical "book" gain or
loss that would have been realized by the Company if all Company assets had
been sold for their Gross Asset Values in a cash sale.
(e) The foregoing provisions of this Section 3.4 and the other
provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Section 704(b) of the Treasury Regulations and will
be interpreted and applied in a manner consistent with such Treasury
Regulations and any amendment or successor provision thereto. The Members will
cause appropriate modifications to be made if unanticipated events might
otherwise cause this Agreement not to comply with Section 704(b) of the
Treasury Regulations, so long as such modifications do not cause a material
change in the relative economic benefits of the Members under this Agreement.
(f) If all or any part of an Interest is transferred in accordance
with this Agreement, the Capital Account of the Transferor that is attributable
to the transferred Interest will carry over to the Transferee.
3.5 Allocation of Items of Company Income, Gain, Loss, Deduction
and Credit.
(a) For purposes of this Agreement, the terms "Profits" and
"Losses" shall mean, for each Fiscal Year or other period, an amount equal to
the Company's taxable income or loss, as the case may be for such year or
period, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss and deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this paragraph shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Treasury
Regulations, and not otherwise taken into account in computing Profits or
Losses pursuant to this Section shall be subtracted from such taxable income or
loss;
(iii) in the event the Gross Asset Value of any Company asset
is adjusted pursuant to subsection (b) or (c) of the definition thereof, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
<PAGE> 15
(iv) gain or loss resulting from the disposition of any Company
asset with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the asset
disposed of, notwithstanding that the adjusted tax basis of such asset differs
from its Gross Asset Value;
(v) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year or
other period, computed in accordance with the definition thereof,
(vi) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Section 734(b) of the Code is required, pursuant
to Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations, to be taken
into account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Member's Interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) from the disposition of such asset and shall be taken into account for
purposes of computing Profits or Losses; and
(vii) notwithstanding any other provision of this Section, any
items which are specially allocated pursuant to Section 3.5(c) hereof shall not
be taken into account in computing Profits and Losses.
(b) After giving effect to the special allocations set forth in
Section 3.5(c):
(i) All Company Profits shall be allocated to the Members as
follows:
(A) first, pro rata to the Members in proportion to and
to the extent of Losses previously allocated to each
Member pursuant to Section 3.5(b)(ii)(B) hereof and
not previously recouped pursuant to this Section
3.5(b)(i)(A); and
(B) thereafter, to the Members in accordance with their
respective Percentage Interests.
(ii) All Company Losses shall be allocated to the Members as
follows:
(A) first, pro rata to the Members in proportion to and
to the extent of Profits previously allocated to
such Members pursuant to Section 3.5(b)(i)(B) hereof
and not previously recouped pursuant to this Section
3.5(b)(ii)(A); and
(B) thereafter, to the Members in accordance with their
respective Percentage Interests.
<PAGE> 16
(c) Special Allocations. The following special allocations shall
be made in the following order:
(i) Minimum Gain Chargeback. Subject to the exceptions set
forth in Section 1.704-2(f) of the Treasury Regulations, if there is a net
decrease in Company Minimum Gain during a Fiscal Year, each Member shall be
specially allocated items of income and gain for Capital Account purposes for
such year (and, if necessary, for subsequent years) in an amount equal to such
Member's share of the net decrease in Company Minimum Gain during such year
(which share of such net decrease shall be determined under Section
1.704-2(g)(2)) of the Treasury Regulations. It is intended that this Section
3.5(c)(i) shall constitute a "minimum gain chargeback" as provided by Section
1.704-2(f) of the Treasury Regulations and shall be interpreted consistently
therewith.
(ii) Member Nonrecourse Debt Minimum Gain Chargeback. Subject
to the exceptions contained in Section 1.704-2(i)(4) of the Treasury
Regulations, if there is a net decrease in Member Nonrecourse Debt Minimum Gain
during a Fiscal Year, any Member with a share of such Member Nonrecourse Debt
Minimum Gain (determined in accordance with Section 1.704-2(i)(5)) of the
Treasury Regulations as of the beginning of such year shall be specially
allocated items of income and gain for Capital Account purposes for such year
(and, if necessary, for subsequent years) in an amount equal to such Member's
share of the net decrease in Member Nonrecourse Debt Minimum Gain (which share
of such net decrease shall be determined under Sections 1.704-2(i)(4) and
1.704-2(j)(2)) of the Treasury Regulations. It is intended that this Section
3.5(c)(ii) shall constitute a "partner nonrecourse debt minimum gain
chargeback" as provided by Section 1.704-2(i)(4) of the Treasury Regulations
and shall be interpreted consistently therewith.
(iii) Nonrecourse Deductions. Any Nonrecourse Deductions shall
be allocated to the Members in the same manner as Net Losses are allocated
pursuant to Section 3.5(b)(ii) hereof
(iv) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions shall be allocated to the Member that bears the Economic Risk of
Loss for the Member Nonrecourse Debt to which such deductions relate as
provided in Section 1.704-2(i)(1) of the Treasury Regulations. If more than one
Member bears the Economic Risk of Loss, such deduction shall be allocated
between or among such Members in accordance with the ratios in which such
Members share such risk of loss.
(v) Qualified Income Offset. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations (modified as appropriate,
by Sections 1.704-2(g)(1) and 1.704-2(i)(5)) of the Treasury Regulations, items
of Company income and gain for Capital Account purposes for such Fiscal Year
shall be specially allocated to the Member in an amount and manner sufficient
to eliminate, to the extent required by he Treasury Regulations, any Adjusted
Capital Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 3.5(c)(v) shall be made if and only to the
extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made
as if this Section 3.5(c)(v) were
<PAGE> 17
not in the Agreement.
(vi) Certain Section 754 Adjustment. To the extent any
adjustment to the adjusted tax basis of any Company asset pursuant to Section
732(d), Section 734(b) or Section 743(b) of the Code is required, pursuant to
Section 1.704-1 (b)(2)(iv)(m) of the Treasury Regulations, to be taken into
account in determining Capital Accounts as the result of a distribution to a
Member in complete liquidation of its Interest in the Company, the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company as
determined under Section 1.704-1(b)(3) of the Treasury Regulations in the event
Section 1. 704-1(b)(2)(iv)(m)(2) of the Treasury Regulations applies, or to the
Member to whom such distribution was made in the event Section
1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations applies.
(vii) Limit on Loss Allocations. Notwithstanding the provisions
of Section 3.5(b)(11) hereof or any other provision of this Agreement to the
contrary, Net Losses (or items thereof) will not be allocated to a Member if
such allocation would cause or increase a Member's Adjusted Capital Account
Deficit and will be reallocated to the other Members in proportion to their
Percentage Interests, subject to the limitations of this Section 3.5(c)(vii).
(viii) Curative Allocations. The allocations under Section
3.5(c)(1) through (c)(vii) (such allocations, the "Regulatory Allocations") are
intended to comply with certain requirements of the Treasury Regulations. It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of income, gain, loss or deduction pursuant
to this Agreement. Therefore, notwithstanding any other provision of this
Agreement (other than the Regulatory Allocations), the Company shall make such
offsetting special allocations of income, gain, loss or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement and all items were allocated
pursuant to Section 3.5(b), as the case may be. In exercising its discretion
under this Section 3.5(c)(viii), the Company shall take into account future
Regulatory Allocations under Section 3.5(c)(i) through (c)(vii) that are likely
to offset other Regulatory Allocations previously made.
3.6 Distributions.
(a) The Company shall repay all principal and accrued interest on
Member Loans (in the order of payment contemplated by Section 3.3(b) hereof)
prior to making any cash distributions to the Members from Available Cash.
(b) No Member shall have the right to withdraw any amount from its
Capital Account. No Member shall have the right to demand or, to receive any
distribution other than distributions of Available Cash pursuant to Section
3.6(c) hereof, without the unanimous approval of the Members. No Member shall
have the right to receive a distribution of property other than cash
<PAGE> 18
from the Company, unless otherwise agreed by all the Members.
(c) The Company shall, from time to time, but not without consent
of the Board, distribute Available Cash to the Members. Any such distributions
shall be made in accordance with the Members' Percentage Interests. Nothing set
forth in this Section 3.6 shall impair the right or relieve the duty of the
Managing Member, or if there is no Managing Member the Board, as provided in
this Agreement to establish reasonable cash reserves,
3.7 Withholding. If required by the Code or by state or local law, the
Company will withhold any required amount from distribution to a Member for
payment to the appropriate taxing authority. Any amount so withheld from a
Member will be treated as a distribution by the Company to such Member. Each
Member will timely file any agreement that is required by any taxing authority
in order to avoid any withholding obligation that would otherwise be imposed on
the Company.
3.8 Distribution Limitation. Notwithstanding any other provision of
this Agreement, the Company will not make any distribution to the Members if,
after the distribution, the liabilities of the Company (other than liabilities
to Members on account of their Percentage Interests) would exceed the Fair
Market Value of the Company's assets. With respect to any property subject to a
liability for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the extent the
property's Fair Market Value exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
3.9 Company Funds. The funds of the Company shall be deposited in such
bank accounts or invested in investments as shall be determined by the Managing
Member, or if there is no Managing Member, the Board. The Company's funds shall
not be commingled with funds not belonging to the Company and shall be used
only for the affairs or business of the Company. It shall be the responsibility
of the Managing Member to establish a cash management plan pursuant to which
the funds of the Company will be managed.
3.10 Capital Contribution. Each Member is liable to the Company for
any Capital Contribution or distribution that has been wrongfully or
erroneously returned or made to such Person in violation of the Act or this
Agreement.
ARTICLE IV
MANAGEMENT
4.1 Management of the Company's Business.
(a) The management of the Company shall be vested in the Managing
Member. Except as provided in Section 4.3 hereof, or for actions and
determinations which pursuant to this Agreement can be taken or made only with
the consent of all of the Members, the Managing Member shall manage the affairs
and business of the Company, and the Managing Member shall possess all powers
necessary, convenient or appropriate to carrying out the purposes and business
of the Company, including, without limitation. doing all things and taking all
actions necessary to
<PAGE> 19
carry out the terms and provisions of this Agreement.
(b) Nothing contained in this Article IV shall impose any
obligation on any Person doing business or dealing with the Company to inquire
as to whether the Managing Member has exceeded its authority in executing any
contract, lease, mortgage, note, deed or other instrument on behalf of the
Company, and any such Person shall be fully protected in relying upon the
plenary authority of the Managing Member.
(c) The Managing Member shall serve without compensation for its
services. The Managing Member may delegate such of its respective powers and
authority to officers, employees and agents of the Company as the Managing
Member shall deem necessary or appropriate for the conduct of the Business.
(d) Other than the Managing Member, no Member shall have any
authority to act for, or to assume any obligation or responsibility on behalf
of, the Company, except as expressly provided herein or as expressly approved
by written consent of all the Members.
4.2 Board.
(a) The Members hereby form a supervisory board (the "Board"),
which shall be responsible for taking all action required under this Agreement
to be taken by the Board. The Board shall consist of three representatives (the
"Representatives"), all of whom shall be appointed by the Healtheon Member The
Healtheon Member agrees to notify the Fox Member of the initial Representatives
appointed by it.
(b) The Healtheon Member may at any time remove the
Representative(s) and appoint substitute Representative(s) in their stead, by
delivering written notice of such substitution to the Fox Member. The presence
or participation of at least two of the three Representatives shall constitute
a quorum for the taking of any action. Except as otherwise provided in Section
4.3 or as otherwise provided in this Agreement, all actions required or
permitted to be taken by the Board must be by the affirmative vote, at a
meeting at which a quorum is present, of a majority of Representatives. The Fox
Member shall have the right to bring non-voting representatives to any meeting
of the Board. No Representative shall be entitled to compensation from the
Company for serving in such capacity.
(c) The Board shall meet no less often than quarterly and shall
establish meeting times, dates and places and requisite notice requirements and
adopt rules or procedures consistent with the terms of this Agreement, which
shall include rules and procedures for the dissemination of written information
to the Members concerning the items to be acted upon at any regular or special
meeting of the Board. Any Member may call a special meeting of the Board for
any purpose by giving the other Member at least five (5) Business Days' notice
thereof, except in the case of an emergency, in which case, such notice as is
practicable shall be sufficient. The Board may meet by means of conference
telephone call, and any Representative or non-voting representative may
participate in any Board meeting by conference telephone call. Any action that
may be taken at a meeting of the Board may be taken without a meeting by
written consent of the number of
<PAGE> 20
Representatives needed to authorize the action; provided, that all Members, are
given notice of such written consent at least 15 Business Days prior to its
effective date.
(d) The Managing Member shall keep the Board informed with respect
to all matters of material interest to the Members and shall in any event
report to the Board not less frequently than once each quarter with respect to
material matters relating to the business and affairs of the Company.
4.3 Extraordinary Actions. Neither the Company nor the Managing Member
nor the Board shall take any of the following actions without the prior
approval of the Fox Member.
(a) entry into areas of business other than the Business;
(b) any amendment of this Agreement, including changing the
Company's name, or any other organizational document of the Company;
(c) any action relating to the merger, sale, consolidation,
reorganization, Dissolution, winding up, Liquidation or similar transaction
involving all or substantially all of the Company or all or substantially all
of its assets;
(d) approval or adoption of accounting or tax principles
applicable to the Company;
(e) any decision to distribute cash or other assets of the
Company, except any distribution made pursuant to Section 3.6 hereof;
(f) the admission of additional Members (except as provided in
Section 8.1) or the issuance of any additional Interests to the Members;
(g) Subject to Section 8.1 hereof, approve the Transfer of any
Interest including a repurchase of an Interest by the Company; or
(h) any agreement by the Company to take any of the foregoing
actions.
4.4 Indemnification.
(a) No Member, Managing Member or Representative (including the
Tax Matters Member) (each, an "Indemnitee") shall be liable, in damages or
otherwise, to the Company or any Member for any act or omission performed or
omitted to be performed by it or him pursuant to the authority granted by this
Agreement, except if such act or omission results from such Person's own bad
faith, fraud, gross negligence, willful breach of this Agreement or willful or
wanton misconduct. To the fullest extent permitted by law, the Company shall
indemnify and hold harmless each Indemnitee from and against any and all
losses, claims, demands, costs, damages, liabilities (joint or several),
expenses of any nature (including reasonable attorneys' fees and
disbursements), judgments, fines, settlements, and other amounts ("Damages")
arising from any and all claims,
<PAGE> 21
demands, actions, suits or proceedings, whether civil, criminal, administrative
or investigative, in which an Indemnitee may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the business
of the Company, regardless of whether an Indemnitee continues to be a Member,
Managing Member or Representative, or an officer, director, shareholder, member
or partner of such Member, Managing Member or Representative, at the time any
such liability or expense is paid or incurred, if (i) the Indemnitee acted in
good faith and in a manner it or he reasonably believed to be in, or not
opposed to, the interests of the Company, and, with respect to any criminal
proceeding, had no reason to believe this conduct was unlawful, and (ii) the
Indemnitee's conduct did not constitute bad faith, fraud, gross negligence,
willful breach of this Agreement, or willful or wanton misconduct. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in
and of itself, create a presumption or otherwise constitute evidence that the
Indemnitee acted in a manner contrary to that specified in (i) or (ii) above.
(b) Notwithstanding anything contained in this Section 4.4, the
Company shall not indemnify and hold harmless any Indemnitee if a judgment or
other final adjudication adverse to such Indemnitee establishes: (i) that such
Indemnitee's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated
or (ii) that such Indemnitee personally gained financial profit or other
advantage to which he was not legally entitled.
(c) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, hereof,
shall be paid by the Company in advance of the final disposition of such claim,
demand, action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction from which no further appeal
may be taken or the time for any appeal has lapsed (or otherwise, as the case
may be) that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereunder.
(d) The indemnification provided by this Section 4.4 shall be in
addition to any other rights to which each Indemnitee may be entitled under any
agreement or vote of the Members, as a matter of law or otherwise, both (i) as
to action in the Indemnitee's capacity as a Member, Managing Member or
Representative or as an officer, director, shareholder, member or partner of
Member, Managing Member or Representative and (ii) as to action in another
capacity, and shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors, assigns,
administrators and personal representatives of the Indemnitee.
(e) The Company may purchase and maintain insurance on behalf of
one or more Indemnitees and other Persons against any liability which may be
asserted against, or expense which may be incurred by, any such Person in
connection with the Company's activities, whether or not the Company would have
the power to indemnify such Person against such liability under the provisions
of this Agreement.
<PAGE> 22
(f) Any indemnification hereunder shall be satisfied only out of
the assets of the Company, and the Members and the Representatives shall not be
subject to personal liability by reason of these indemnification provisions.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 4.4 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) To the same extent that the Company will indemnify and advance
expenses to a Member, the Company may indemnify and advance expenses to any
officer, employee or agent of the Company.
4.5 Officers.
(a) The Managing Member shall appoint a chief executive officer
("CEO") of the Company. The CEO shall appoint a chief financial officer ("CFO")
and a chief operating officer ("COO"). The CEO shall have the authority to
select such other officers (other than a CFO and a COO) as may be necessary or
desirable to carry out the day-to-day management of the business and the
Company.
(b) The appointment of any Person as an officer or agent of the
Company will not, in and of itself, create any contractual rights between such
Person and the Company. The officers of the Company, acting in their capacities
as such, will be agents acting on behalf of the Company as principal.
ARTICLE V
LIABILITY OF A MEMBER
5.1 Limited Liability. Except as otherwise provided in the Act, the
debts, obligations and liabilities of the Company (whether arising in contract,
tort or otherwise) will be solely the debts, obligations and liabilities of the
Company, and no Member of the Company (including any Person who formerly held
such status) is liable or will be obligated personally for any such debt,
obligation or liability of the Company solely by reason of such status. No
individual trustee, officer, director, employee or agent of any Member will
have any personal liability for the performance of any obligation of such
Member under this Agreement.
5.2 Capital Contribution. Each Member is liable to the Company for any
Capital Contribution or distribution that has been wrongfully or erroneously
returned or made to such Person in violation of the Act, the Certificate or
this Agreement.
5.3 Reliance. Any Member will be fully protected in relying in good
faith upon the records of the Company and upon such information, opinions,
reports or statements by (a) any of the Company's other Members, employees or
committees or (b) any other Person who has been selected with reasonable care
as to matters such Member reasonably believes are within such other Person's
professional or expert competence. Matters as to which such reliance may be
made include the value
<PAGE> 23
and amount of assets, liabilities, Profits and Losses of the Company, as well
as other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be made.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
As of the date hereof, each of the Members hereby makes to the other
Member each of the representations and warranties set forth in this Article V1,
and such warranties and representations shall survive the execution of this
Agreement.
6.1 Due Incorporation, Authorization. Such Member is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and has the requisite power and authority to own its
property and carry on its business as owned and carried on at the date hereof
and as contemplated hereby. Such Member is duly licensed or qualified to do
business and in good standing in each of the jurisdictions in which the failure
to be so licensed or qualified would have a material adverse effect on its
financial condition or its ability to perform its obligations hereunder. Such
Member has the requisite power and authority to execute and deliver this
Agreement and each other agreement to which it is to be a party as contemplated
hereby and to perform its obligations hereunder and thereunder and the
execution, delivery and performance of this Agreement and each such other
agreement has been duly authorized by all necessary corporate or limited
liability company action. This Agreement constitutes the legal, valid and
binding obligation of such Member.
6.2 No Conflict. Neither the execution, delivery and performance of
this Agreement nor the consummation by such Member of the transactions
contemplated hereby will (a) conflict with, violate or result in a breach of
any of the terms, conditions or provisions of any law, regulation, order, writ,
injunction, decree, determination or award of any court, governmental
department, board, agency or instrumentality, domestic or foreign, or any
arbitrator, applicable to such Member, (b) conflict with, violate, result in a
breach of or constitute a default under any of the terms, conditions or
provisions of the articles of incorporation or bylaws or similar constituent
documents of such Member or of any material agreement or instrument to which
such Member is a party or by which such Member is or may be bound or to which
any of its material properties or assets is subject, (c) conflict with,
violate, result in a breach of, constitute a default under (whether with notice
or lapse of time or both), accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval
under any indenture, mortgage, lease agreement or instrument to which such
Member is a party or by which such Member is or may be bound, or (d) result in
the creation or imposition of any lien upon any of the material properties or
assets of such Member, the effect of which could reasonably be expected to
materially impair such Member's ability to perform its obligations under this
Agreement.
6.3 No Conflict, No Default. There are no actions, suits, proceedings
or investigations pending or to the knowledge of such Member, threatened
against or affecting such Member or any of its properties, assets or businesses
in any court or before or by any governmental department,
<PAGE> 24
board, agency or instrumentality, domestic or foreign, or any arbitrator which
could, if adversely determined (or, in the case of an investigation could lead
to any action, suit, or proceeding, which if adversely determined could)
reasonably be expected to materially impair such Member's ability to perform
its obligations under this Agreement.
6.4 Unregistered Interests. Such Member (a) acknowledges that the
Interests are being acquired without registration under the Securities Act of
1933, as amended, or under similar provisions of state law, (b) represents and
warrants to the Company and the other Member that it is acquiring the Interest
for its own account, for investment and with no view to the distribution of the
Interest, and (c) agrees not to transfer or attempt to transfer such Interest
in the absence of registration under that Act and any applicable state
securities laws or an available exemption from such registration.
ARTICLE VII
BOOKS AND RECORDS; REPORTS TO MEMBERS
7.1 Books and Records.
(a) The following books and records of the Company shall be kept
at its principal office:
(i) a current list of the full name and last known business,
residence or mailing address of each Member;
(ii) originals of the Certificate and of this Agreement, and
any amendments thereto (and any signed powers of attorney pursuant to which any
such document was executed);
(iii) a copy of the Company's federal, state and local income
tax returns and reports and annual financial statements of the Company, for the
five most recent years; and
(iv) minutes, or minutes of action or written consent, of every
meeting of the Board.
At the Company's expense, there will also be kept at the Company's principal
office separate books of accounts for the Business, which will be a true and
accurate record of all costs and expenses incurred, all credits made and
received and all income derived in connection with the operation of the
Business in accordance with GAAP.
(b) Each of the Members or its duly authorized representatives
shall have the right, upon reasonable notice, at its own expense, to examine
and inspect, during normal business hours and for any lawful purpose related to
the affairs of the Company or the investment in the Company by such Member, any
of the books of account, and business records of the Company, and to copy any
such books of account and business records of the Company. The Company's books
of account and business records shall be filed and preserved for a period of at
least five years or such
<PAGE> 25
longer period as required by law.
7.2 Financial Reports; Subscriber Reports. The Managing Member shall
deliver or cause to be delivered to each Member, no later than forty-five (45)
days after the close of each of the first three quarters of the Company's
Fiscal Year, and sixty (60) days after the end of each such Fiscal Year, a
financial report of the business and operations of the Company prepared in
accordance with GAAP, relating to such period, which report shall include a
balance sheet as of the end of such period, a statement of income (loss) and
members' Capital Accounts and cash flows (including sources and uses of funds)
for the period then ended, and in each case a comparison of the period then
ended with the corresponding period in the Fiscal Year immediately preceding
such periods, which, in the case of the report furnished after the close of the
Fiscal Year, shall be audited by the Company's independent certified public
accountants. The quarterly financial reports may in each case be subject to
normal year-end adjustments. In addition to the foregoing financial statements,
the financial report furnished after the close of each Fiscal Year shall also
include a statement of cash flows, and allocations to the Members of the
Company's taxable income, gains, losses, deductions and credits. The Company
will initially engage Arthur Andersen LLP as its independent certified public
accountants and thereafter such other accounting firm as the Members shall
determine. The Company shall bear the cost of each annual audit and the cost of
any other services furnished to the Company by its independent certified public
accountants as provided herein.
7.3 Tax Returns and Information.
(a) The Managing Member is hereby designated "Tax Matters Member"
for the Company and shall be so designated in each Federal information return
filed on behalf of the Company. The Tax Matters Member shall not be liable to
the Company or any Member for any act or omission taken or suffered by it in
such capacity in good faith and in the belief that such act or mission is in or
is not opposed to the best interests of the Company; provided, however that
such act or omission is not in violation of this Agreement and does not
constitute gross negligence, fraud or a willful violation of law. Within five
Business Days of receipt, each Member shall give to each other Member written
notice of receipt from any taxing authority of any notification of an audit or
investigation of the Company.
(b) The Tax Matters Member shall cause income and other required
Federal, state and local tax returns for the Company to be prepared. The Tax
Matters Member shall make or maintain in effect an election under Section 754
of the Code to adjust the basis of Company Property under Sections 734 and 743
of the Code for taxable years ending subsequent to the Effective Date upon the
request of any Member. The Tax Matters Member shall make such other elections
as it shall deem to be in the best interests of the Company and the Members.
The cost of preparation of such returns by outside preparers, if any, shall
become by the Company.
(c) The Tax Matters Member shall cause to be provided to each
Member no later than December 31 of each year information concerning the
Company's projected taxable income or loss and each class of income, gain,
loss, deduction or credit which is relevant to reporting a Member's share of
Company income, gain, loss, deduction or credit for purposes of Federal or
state income tax. Information required for the preparation of a Member's income
tax returns shall be
<PAGE> 26
furnished to the Members as soon as possible after the close of the Company's
Fiscal Year.
ARTICLE VIII
COMPANY INTERESTS; RESTRICTIONS ON TRANSFER
8.1 Transfer. No Member shall Transfer any Interest owned by it except
for (a) Transfers to an Affiliate of the Transferor at the time, provided that
the Transferee remains an Affiliate of the Transferor immediately after the
Transfer; (b) pledges or grants of a security interest to secure loans to the
Company; or (c) Transfers made in compliance with Section 8.5 hereof, if
applicable. Any Transfer of an Interest other than as specifically permitted by
this Section 8.1 shall be void and of no effect. It is agreed that if the Fair
Market Value of any Member's Interest equals 25% or more of the Fair Market
Value of such Member's total assets determined on the date any proposed
Transfer of any equity interest in such Member is to be consummated, any
Transfer of any equity interest in such Member shall constitute a Transfer
hereunder. The Members shall be responsible to cause the owners of their
respective equity interests to enter into agreements as may be necessary to
enable such Member to ensure compliance with this provision.
8.2 Admission as a Member. No Transferee of any Interests from a
Member shall be admitted to the Company as a Member unless the Transfer shall
have been made in accordance with this Agreement and the Transferee shall have
executed an instrument satisfactory to the non-Transferring Member, whereby
such Transferee agrees to abide by the terms and conditions of this Agreement
and become a Member of the Company.
8.3 No Right to Withdraw. No Member shall have any right to resign or
otherwise withdraw from the Company prior to the dissolution and winding up of
the Company, without the express written consent of the other Member.
8.4 Corporate Conversion
(a) Upon the execution of this Agreement, it is the express
intention and understanding of the existing Members and those Persons who
became Members at the time of the execution of this Agreement that upon the
occurrence of certain events the Company shall be converted into a corporation
in the manner set forth herein by the action of the Board and without the
necessity of any action or any investment decision on the part of any Member.
(b) Upon the determination by the Board, the Managing Member shall
cause a Corporate Conversion by merger into another corporation or otherwise,
and in connection therewith cause the conversion of the Interests into the
capital stock of any resulting corporation having relative rights, limitations,
preferences and other terms consistent with the Interests so converted.
(c) The Members shall have no appraisal rights pursuant to the
Act, applicable law or otherwise in connection with a Corporate Conversion or
any other transaction authorized under this Agreement.
<PAGE> 27
(d) In connection with the consummation of a Corporate Conversion,
the Board shall have the authority to merge, consolidate or reorganize one or
more of the subsidiaries with one or more other subsidiaries or other entities
wholly-owned directly or indirectly by the Company or the surviving corporation
in the Corporate Conversion.
(e) The Board is specifically authorized to take any and all
further action, and to execute, deliver and file any and all additional
agreements, documents or instruments, as it may determine to be necessary or
appropriate in order to effectuate the provisions of this Section 8.4, and each
Member hereby agrees to execute, deliver and File any such agreements,
documents or instruments or to take such action as may be reasonably requested
by the Board for the purpose of effectuating the provisions of this Section
8.4.
8.5 Put/Call.
(a) At any time within the 45 day period commencing on the fifth
anniversary of the Effective Date, the Fox Member shall have the right to
require the Healtheon Member to purchase (the "Put") from the Fox Member, and
the Healtheon Member shall have the right to require the Fox Member to sell to
the Healtheon Member (the "Call"), all (but not less than all) of he Fox
Member's Interests in the Company; provided, however, that if the Fox
Entertainment Group, Inc. or any of its Affiliates acquire all of the member
interests in the Fox Member, the Fox Member shall notify the Healtheon Member
of such acquisition and the Put/Call shall be exercisable within the 45-day
period commencing on the date of such notice. The parties shall structure the
Transfer of Interests pursuant to the Section as a transaction which qualifies
as a tax-free reorganization under Section 368 of the Code. The consideration
due upon consummation of the Put or the Call, as the case may be, shall be
$1.00.
(b) The closing of the purchase and sale pursuant to this Section
8.5 shall be held t the principal place of business of the Company or at such
other mutually acceptable place on a mutually acceptable date no later than 10
days after the expiration or early termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR") or the
completion of other applicable regulatory proceedings. The parties agree to
cooperate with each other in filing all necessary notices and related materials
to comply with the provisions of HSR or other regulatory requirements, if
applicable. At such closing, the Fox Member shall assign to the Healtheon
Member, or its designees, the Company Interest of the Fox Member, and shall
execute such documents and instruments as may be necessary to effectuate the
sale of the Interest free and clear of all Liens. The Fox Member shall
represent and warrant in writing that it is the owner and older of the Interest
which it is selling, free and clear of all Liens (other than pledges or
security interests that secure indebtedness of the Company), that the Fox
Member is the record and beneficial owner of the such Interest, and that it has
the full right, power and authority to convey such Interest of the Healtheon
Member.
<PAGE> 28
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.1 Dissolution. Dissolution of the Company will occur upon the
happening of any of the following events:
(a) the sale or other disposition of all or substantially
all of the Company's assets;
(b) the affirmative vote of all of the Members; or
(c) the entry of a decree of judicial dissolution under the
Act.
9.2 Exclusive Means of Dissolution. The exclusive means by which the
Company may be dissolved are set forth in 9.1. The Company will not be
dissolved upon the death, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or upon the occurrence of any other event which
terminates the continued membership of any Member in the Company.
9.3 Liquidation. Upon Dissolution of the Company, the Company will
immediately proceed to wind up its affairs and liquidate pursuant to this 9.3.
Following Dissolution, the Members shall appoint a person to serve as the
liquidating trustee and thus be charged with the duty to wind up the affairs of
the Company and distribute its assets as provided herein. A reasonable time
will be allowed for the orderly Liquidation of the Company and the discharge of
liabilities to creditors so as to enable the Company to minimize any losses
attendant upon Liquidation. Any gain or loss on disposition of any Company
assets in Liquidation will be allocated to Members in accordance with the
provisions of Section 3.6. Any liquidating trustee is entitled to reasonable
compensation or services actually performed, as approved by the Board; and may
contract for such assistance in the liquidating process as such Person deems
necessary or desirable. Until the filing of a certificate of cancellation under
9.9, and without affecting the liability of the Members and without imposing
liability on the liquidating trustee, the liquidating trustee may settle and
close the Company's business, prosecute and defend suits, dispose of its
property, discharge or make provision for its liabilities, and make
Distributions in accordance with the priorities set forth in this Article.
9.4 Priority of Payment. If the Company is dissolved the assets of the
Company will be distributed in Liquidation in the following order:
(a) First, to creditors by the payment or provision for payment of
the debts and liabilities of the Company (other than any loans or advances that
may have been made by any member or Affiliate) and the expenses of Liquidation;
(b) Second, to the setting up of any reserves that are reasonably
necessary for any contingent, conditional or unmatured liabilities or
obligations of the Company;
(c) Third, to the repayment of any loans or advances to the
Company that may have been made by any Member or any Affiliate of a Member
(according to the relative priority of repayment of such loans or advances and
proportionally among loans or advances of equal priority if the amount
available for repayment is insufficient for payment in full); and
<PAGE> 29
(d) Fourth, to the Members in proportion to the positive balances
in their respective Capital Accounts after such Capital Accounts have been
adjusted for all allocations of Profits and Losses and items thereof for the
Fiscal Year during which such liquidation occurs.
9.5 Liquidating Distributions. If the Company is dissolved, the
liquidating distributions due to the Members will be made by selling the assets
of the Company and distributing the net proceeds. Notwithstanding the preceding
sentence, but only upon the affirmative vote of all Members, the liquidating
distributions may be made by distributing the assets of the Company in kind to
the Members in proportion to the amounts distributable to them pursuant to
Section 9.4, valuing such assets at their Fair Market Value (net of liabilities
secured by such property that the Member takes subject to or assumes) on the
date of distribution. Each Member agrees to save and hold harmless the other
Members from such Member's proportionate share of any and all such liabilities
which are taken subject to or assumed. Appropriate and customary prorations and
adjustments will be made incident to any distribution in kind. The Members will
look solely to the assets of the Company for the return of their Capital
Contributions, and if the assets of the Company remaining after the payment or
discharge of the debts and liabilities of the Company are insufficient to
return such contributions, they will have no recourse against any other Member.
The Members acknowledge that Section 9.4 may establish distribution priorities
different from those set forth in the provisions of the Act applicable to
distributions upon Liquidation, and the Members agree that they intend, to that
extent, to vary those provisions by this Agreement.
9.6 No Restoration Obligation. Nothing contained in this Agreement
imposes on any Member an obligation to make an Additional Capital Contribution
in order to restore a deficit Capital Account upon Liquidation of the Company.
9.7 Timing. Final distributions in Liquidation will be made by the end
of the Company's Fiscal Year in which such actual Liquidation occurs (or, if
later, within 90 days after such event) in the manner required to comply with
the Section 704(b) of the Treasury Regulations. Payments or distributions in
Liquidation may be made to a liquidating trust established by the Company for
the benefit of those entitled to payments under Section 9.4, in any manner
consistent with this agreement and the Section 704(b) of the Treasury
Regulations.
9.8 Liquidating Reports. A report will be submitted with each
liquidating distribution to Members made pursuant to 9.5, showing the
collections, disbursements and distributions during he period which is
subsequent to any previous report. A final report, showing cumulative
collections, disbursements and distributions, will be submitted upon completion
of the Liquidation.
9.9 Certificate of Cancellation. Upon Dissolution of the Company and
the completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate of Formation) with the
Delaware Secretary of State pursuant to the Act. At such time, the Company will
also file an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business. A certificate of
cancellation will also be filed at any time when there are no Members.
<PAGE> 30
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 Indemnification.
(a) To the fullest extent permitted by law, the Fox Member shall
indemnify and hold harmless the Healtheon Member and the Company from and
against any and all Damages arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
brought or threatened to be brought by any member or former member of the Fox
Member against the Company or the Healtheon Member, as a party or otherwise,
arising out of the Healtheon Member's acquisition of its Membership Interest or
any transaction contemplated pursuant to this Agreement.
(b) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, hereof,
shall be paid by the Fox Member in advance of the final disposition of such
claim, demand, action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Company or Healtheon Member to repay such amount if it shall
ultimately be determined, by a court of competent jurisdiction from which no
further appeal may be taken or the time for any appeal has lapsed (or
otherwise, as the case may be) that the Company or Healtheon Member is not
entitled to be indemnified by the Fox Member as authorized under 10.1 (a)
hereof.
10.2 Galaxy Asset License. The Fox Member shall grant to the Company
and to the Healtheon Member a non-exclusive, worldwide, royalty-free, perpetual
licenses to use the Galaxy Asset in forms and substance to be mutually agreed
upon by the parties.
ARTICLE XI
MISCELLANEOUS
11.1 Waiver of Partition. Except as may be otherwise provided by law
in connection with the winding-up, liquidation and dissolution of the Company,
each Member hereby irrevocably waives any and all rights that it may have to
maintain an action for partition of any of the Company Property.
11.2 Modification, Waivers. This Agreement may be modified or amended
only with the written consent of each Member. Except as otherwise specifically
provided herein, no Member shall be released from its obligations hereunder
without the written consent of the other Member. The observance of any terms of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party or parties entitled to
enforce such term, but any such waiver shall be effective only if in a writing
signed by the party or parties against which such waiver is to be asserted.
Except as otherwise specifically provided herein, no delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege hereunder operate as a waiver of any
other right, power or privilege hereunder nor shall any single
<PAGE> 31
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
11.3 Entire Agreement. This Agreement, and the documents expressly
referred to herein, and all related documents, each as amended, constitute the
entire agreement among the Members with respect to the subject matter hereof
and supersede any prior agreement or understanding between or among the Members
with respect to such subject matter.
11.4 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision
to other Persons or circumstances shall not be affected thereby; provided,
however, that the parties shall negotiate in good faith with respect to an
equitable modification of the provision or application thereof held to be
invalid.
11.5 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given on the date delivered by hand or on
the third Business Day after such notice is mailed by registered or certified
mail, postage prepaid, and, pending the designation by written notice of
another address, addressed as follows:
If to the Fox Member:
c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Telecopier: (212) 768-2029
Attn: Arthur M. Siskind, Esq.
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10 176
Attention: Joel I. Papernik, Esq.
Telecopier: (212) 697-6686
If to the Healtheon Member:
c/c, Healtheon/WebMD Corporation
400 The Lenox Building
Atlanta, Georgia 30326
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
Attention: Jeffrey T. Arnold
Chief Executive Officer
<PAGE> 32
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
100 N. Tryon Street, Suite 2600
Charlotte, North Carolina 28202
Telecopier: (704) 377-4814
Attention: H. Bryan Ives 111, Esq.
C. Mark Kelly, Esq.
11.6 Successors and Assigns. Except as otherwise specifically
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Members and their legal representatives, successors and permitted
assigns.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument.
11.8 Heading; Cross-references. The Article and Section headings in.
this Agreement are for convenience of reference only, and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
11.9 Construction. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditors of the Company. No one,
including but not limited to the Members or any creditor of the Company or any
of its Members, shall have any rights under this Agreement against any
Affiliate of any Member.
11.10 Property Rights; Confidentiality. All books, records and
accounts maintained exclusively for the Company (including, without limitation,
marketing reports and all other data whether stored on paper or in electronic
or other form), and any contracts or agreements (including, without limitation,
agreements for the purchase, lease or license of programming) entered into by
or exclusively on behalf of the Company, shall at all times be the exclusive
property of the Company. All property (real or personal or mixed) purchased
with Company funds, and all moneys held or collected for or on behalf of the
Company shall at all times be the exclusive property of the Company. Except as
expressly agreed to by the Members, no Member shall, during the period such
Member is a Member and for a period ending on the later of two (2) years after
such Member has ceased to be a Member, disclose any confidential or proprietary
information with respect to the Company to any Person, except (a) with the
prior written consent of the other Member; (b) to the extent necessary to
comply with law or the valid order of a court of competent jurisdiction, in
which event the party making such disclosure shall so notify the other Member
as promptly as practicable (and, if possible, prior to making such disclosure)
and shall seek confidential treatment of such information; (c) as part of its
normal reporting or review procedure to its parent company, its auditors and
its attorneys; provided, however. that such Member shall be liable for any
breach by such parent company, auditors or attorneys of any provision of this
Section 11.10; (d) in connection with the enforcement of such Member's rights
hereunder; (e) disclosures to an Affiliate of, or
<PAGE> 33
professional advisor to, such Member in connection with the performance by such
Member of its obligations hereunder; provided, however, that such Member shall
be liable for any breach by such Affiliate or professional advisor of any
provision of this Section; and (f) to a prospective purchaser of all or a
portion of such Member's Interest in connection with a sale in accordance with
the terms of this Agreement; provided, however, that such Member shall be
liable for any breach by such prospective purchaser of any provision of this
Section. Except as provided in the preceding sentence, no Member, nor any of
its Affiliates, shall, during the periods referred to in such sentence, use any
confidential or proprietary information with respect to the Company other than
for the benefit of the Company. This Section 11.10 hereof shall survive the
termination of this Agreement, the Dissolution of the Company, the withdrawal
of any Member and the Transfer of the Interest of any Member.
11.11 Further Actions. Each Member shall execute and deliver such
other certificates, agreements and documents, and take such other actions, as
may reasonably be required in connection with the formation and continuation of
the Company and the achievement of its purposes.
11.12 Governing Law; Forum. This Agreement will be governed by, and
construed in accordance with the laws of the State of Delaware without regard
to any conflicts of laws rules. Any conflict or apparent conflict between this
Agreement and the Act will be resolved in favor of this Agreement, except as
otherwise required by the Act.
11.13 Expenses of the Parties. All expenses incurred by or on behalf
of the parties hereto in connection with the authorization, preparation and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the authorization, preparation, execution and
consummation of this Agreement shall be borne solely by the party who shall
have incurred the same.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers or members hereunto duly authorized as of the
date first written above.
HEALTHEON/WEBMD INTERNET
CORPORATION
By: /s/
------------------------
Name: W. Michael Heekin
Title: Vice President
AHN/FIT INTERNET, LLC
By: /s/
-----------------------
Name: Daniel Fawcett
Title: Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of
the Healtheon Member set forth in this Agreement. This is a guaranty of payment
and not of collection.
HEALTHEON/WEBMD CORPORATION
By: /s/
------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of
the Fox Member set forth in this Agreement. This is a guaranty of payment and
not of collection.
THE NEWS CORPORATION LIMITED
By: /s/
------------------------
Name: Arthur Siskind
Title: Director
<PAGE> 35
<PAGE> 1
EXHIBIT 10.3
CONTENT LICENSE AGREEMENT
Dated as of
January 26, 2000
Between
FOX ENTERTAINMENT GROUP, INC.
and
HEALTHEON/WEBMD CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 ................................................................................................ 1
DEFINITIONS ................................................................................................ 1
ARTICLE 2 ................................................................................................ 2
CREATION OF LICENSE RELATIONSHIP............................................................................. 2
2.1 GRANT OF LICENSE................................................................................ 2
2.2 SCOPE OF LICENSE; RESTRICTIONS ON USE OF FOX CONTENT............................................ 2
2.3 GRANT OF RIGHT IN FOX LOGO............................................................................... 3
2.4 NO OTHER RIGHTS GRANTED......................................................................... 4
2.5 ROYALTY......................................................................................... 5
ARTICLE 3 ................................................................................................ 5
FOX CONTENT 5
3.1 Selection, Format, Design and Updating.......................................................... 5
3.2 REMOVAL OF FOX CONTENT.......................................................................... 5
3.4 OWNERSHIP OF FOX CONTENT........................................................................ 5
3.5 OTHER AGREEMENTS................................................................................ 5
3.5 OTHER AGREEMENTS................................................................................ 5
ARTICLE ................................................................................................ 6
REPRESENTATIONS AND WARRANTIES............................................................................... 6
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY........................................ 6
ARTICLE 5 ................................................................................................ 7
TERM; TERMINATION............................................................................................ 7
5.1 TERM ................................................................................................ 7
5.2 RIGHT TO TERMINATE BY FAX....................................................................... 7
5.3 RIGHT TO TERMINATE BY THE COMPANY............................................................... 7
5.4 EFFECT OF TERMINATION........................................................................... 7
5.5 CONTINUING OBLIGATIONS.......................................................................... 7
ARTICLE 6 ................................................................................................ 7
INDEMNIFICATION.............................................................................................. 7
6.1 AGREEMENT OF FOX TO INDEMNIFY................................................................... 7
6.2 AGREEMENT OF THE COMPANY TO INDEMNIFY \F C \L................................................................ 8
6.3 THIRD PARTY CLAIMS....................................................................................... 8
6.4 SPECIAL DAMAGES AND LIMITATION OF LIABILITY.............................................................. 9
ARTICLE 7 ................................................................................................ 9
ADDITIONAL AGREEMENTS........................................................................................ 9
7.1 CONFIDENTIALITY AND USE OF PROPRIETARY INFORMATION....................................................... 9
7.2 DEFINITION OF PROPRIETARY INFORMATION.................................................................... 9
7.3 CONTENTS OF THIS AGREEMENT.............................................................................. 10
7.4 COMMUNICATIONS.......................................................................................... 10
7.5 PRESS RELEASES.......................................................................................... 11
7.6 GOVERNING LAW; CONSENT TO JURISDICTION.................................................................. 11
7.7 BINDING EFFECT; SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT................................................ 12
7.8 AMENDMENTS AND WAIVERS.................................................................................. 12
7.9 HEADINGS ............................................................................................... 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.10 NO IMPLIED WAIVERS..................................................................................... 12
7.11 COUNTERPARTS........................................................................................... 12
7.12 FURTHER ASSURANCE...................................................................................... 12
7.13 SEVERABILITY........................................................................................... 13
7.14 SEVERABILITY........................................................................................... 13
7.14 INJUNCTIVE RELIEF...................................................................................... 13
7.15 NO PARTNERSHIP, ETC................................................................................... 13
7.16 CONSTRUCTION........................................................................................... 13
7.17 DISCLAIMER OF WARRANTIES............................................................................... 13
7.18 PLURALS ............................................................................................... 13
7.19 EFFECTIVENESS.......................................................................................... 13
</TABLE>
<PAGE> 4
CONTENT LICENSE AGREEMENT
THIS CONTENT LICENSE AGREEMENT (THE "AGREEMENT"), dated as of January
26, 2000 (the "Effective Date"), by and between FOX ENTERTAINMENT GROUP, INC., a
Delaware corporation ("Fox"), THE NEWS CORPORATION LIMITED ("News Corp" and
collectively with Fox, the "Fox Parties" and together with their respective
subsidiaries and controlled and non-controlled affiliates, the "Fox Group") and
HEALTHEON/WEBMD CORPORATION, a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the members of the Fox Group own and operate networks, television
broadcast stations, Non-Standard Television Services and other content creation
and distribution businesses worldwide (the "Fox Distribution Channels"); and
WHEREAS, the members of the Fox Group own or license the Fox Content which
they use in connection with the development and 'operation of the Fox
Distribution Channels; and
WHEREAS, pursuant to a Master Strategic Alliance Agreement dated December
6, 1999, by and between The News Corporation Limited, a South Australia,
Australia corporation ("News Corp"), Fox and the Company (the "Strategic
Alliance Agreement"), the Fox Parties desire to license, and cause other members
of the Fox Group to license, to the Company the right to use the Fox Content for
the purpose of adapting the Fox Content for use on the WebMD Sites.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and covenants herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties do hereby agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms used in this Agreement without definition shall
have the meanings ascribed to such terms in Exhibit A.
<PAGE> 5
ARTICLE 2
CREATION OF LICENSE RELATIONSHIP
2.1 GRANT OF LICENSE. Except as may be prohibited or otherwise
limited by the terms of any other obligations binding upon the Fox Parties, any
member of the Fox Group or any of the Fox Distribution Channels, other than
obligations that were incurred with the prior primary intent to frustrate the
purpose of this Agreement, and subject to the terms and conditions of this
Agreement, the Fox Parties agree to provide, to cause Controlled Affiliates to
provide, and to use commercially reasonable efforts to cause Non-Controlled
Affiliates to provide, to the Company a non-exclusive license (the "License")
during the term hereof throughout the Territory to:
(a) use, copy, translate, display, publish and transmit the
Fox Content solely for the purpose of developing and operating the
WebMD Sites; and
(b) subject at all times to the obligations and duties of the
Company contained herein, sublicense only to Operating Companies the
rights granted hereunder; provided, however, that the Company shall (i)
obtain Fox's prior written consent to each such sublicense (other than
with respect to Operating Companies which are directly or indirectly
majority owned and Controlled by the Company); (ii) obtain from such
Operating Companies a written instrument approved as to form and
substance by Fox, pursuant to which each such Operating Company shall
agree to be bound and comply with the terms of this Agreement and (iii)
at all times remain fully liable for the actions of its Operating
Companies. Operating Companies with respect to which the foregoing
conditions have been satisfied shall hereinafter be referred to as
"Sublicensees." The Sublicensees shall be prohibited from granting any
further sublicenses of the rights granted hereunder to any other Person
without the express prior written approval of Fox. Fox agrees that any
consent or approval required by it under this Section 2.1(b) will not
be unreasonably denied or delayed and that Fox will cooperate with the
Company in completing any approval process required hereunder in a
reasonably expeditious manner given the facts and circumstances
pertaining to such approval.
As used herein, "Controlled Affiliates" means any corporation
or other entity more than 50% of whose outstanding voting securities or
other equity interests are directly or indirectly owned by News Corp;
"Non-Controlled Affiliates" means any corporation or other entity in
which News Corp directly or indirectly has a greater than 20% but no
more than 50% equity interest.
2.2 SCOPE OF LICENSE; RESTRICTIONS ON USE OF FOX CONTENT.
(a) The License granted hereunder is non-exclusive and the
Company agrees to use the Fox Content in accordance with the terms
hereof and solely for the purpose of engaging in the Licensed
Activities. The Company acknowledges that the grant of rights hereunder
excludes the right to use the Fox Content other than in connection with
the development or operation of the WebMD Sites. The parties hereto
agree that the covenants and agreements set forth in this Section
2.2(a) are in addition to the restrictive covenants set forth in
Section 10.5 of the Strategic Alliance Agreement. The Company
<PAGE> 6
acknowledges that any sublicense of the rights granted hereunder shall
be strictly limited in accordance with the terms hereof.
(b) The Company acknowledges and agrees that the scope of the
License granted hereunder is limited by and is subject to any and all
other obligations of Fox, any member of the Fox Group or any of the Fox
Distribution Channels. Accordingly, the Company agrees to conduct the
activities hereunder in accordance with all such limitations or
restrictions which may exist of which the Company has received notice.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Fox shall have no obligation whatsoever to license to the
Company, or to authorize the Company to sublicense any of the rights
granted hereunder with respect to any particular country unless and
until Fox shall determine, in the exercise of its reasonable
discretion, that (i) such country's laws afford adequate protection of
the Fox's interests in or ownership of Fox Content, the Fox Property
and the Fox Logos (collectively the "Fox Intellectual Property"), and
(ii) the use of the Fox Intellectual Property (or any part thereof) in
such country will not violate any Requirement of Law or expose Fox or
any of its Affiliates to any unreasonable risk or liability which might
anise as a result of the use or display of any of the Fox Intellectual
Property in such country. In its exercise of its reasonable discretion
under this Section 2.2(c), Fox shall have the night to request from the
Company or a Sublicensee an opinion of counsel or such other
information to Fox's reasonable satisfaction opining about or providing
such other information on a Requirement of Law or such other matters
relating to the protection of Fox's interests as Fox may request, such
opinion or information to be obtained at the Company's or such
Sublicensee's expense. Fox agrees to exercise its rights in the
preceding sentence in a reasonable manner so as to avoid unnecessary
delays or interruptions in the business of the Company and the
Sublicensees.
2.3 GRANT OF RIGHT IN FOX LOGO
(a) Fox Logo. Fox hereby grants the Company a limited,
non-exclusive, royalty-free license to such trademarks, tradenames, service
marks logotypes, or brand identifiers of members of the Fox Group as Fox may
provide to the Company from time to time (collectively, the "Fox Logos") during
the Term of this Agreement. Such license is granted solely in connection with
the Company's rights and obligations under this Agreement. All such uses will be
in compliance with Fox's written trademark guidelines as provided by Fox to the
Company from time to time. The Company will also be allowed to use and reproduce
the Fox Logos for the promotion of the Fox Content, although to the extent such
promotions involve media placements outside of the WebMD Sites, then the Company
will only be allowed to make such uses and reproductions as Fox may approve in
writing in advance of such promotion or promotions.
(b) Limitations. The Company agrees that it will not in any
way suggest or imply by the use of the Fox Logos that the WebMD Sites or any of
the products or services affiliated with it, are endorsed or sponsored by or
created in association with Fox except as agreed by Fox. The Company
acknowledges that Fox owns all right, title and interest and to the Fox Logos
and retains all rights with respect thereto. The Company
<PAGE> 7
agrees not to do anything inconsistent with such ownership and all uses of the
Fox Logos will inure to the benefit of and on behalf of Fox. The Company further
agrees that it will not attack or assist others in attacking the title of the
Fox Logos.
(c) No Violation. The Company acknowledges and agrees that:
(i) it will not register any Fox Logo;
(ii) it will not knowingly permit any third party to use
any Fox Logo unless authorized to do so in writing by Fox in
this Agreement or otherwise;
(iii) it will not knowingly use or permit the use of any
mark, name, or image likely to cause confusion with any Fox
Logo other than the Fox Logos themselves unless authorized to
do so in writing by Fox; and
(iv) all goodwill associated with the Company's use of
the Fox Logos will inure to Fox.
(d) Prior Approval. The manner and form of use of the Fox
Logos will be subject to Fox's prior written approval, which approval
will not be unreasonably withheld or delayed following its receipt of a
sample, mock-up or other suitable example which provides a fair
representation of the proposed use of the Fox Logos concerned and
indicates the context in which the Fox Logos are to be used. Once a use
of a Fox Logo is approved for use under certain circumstances, then it
is agreed that the Company may subsequently make substantially similar
uses of such Fox Logo under similar circumstances, but only until Fox
revokes or limits its approval which it may do at its sole discretion.
The Company will conform to any alteration or revocation of the
approval as soon as is commercially reasonable.
The license granted pursuant to this Section 2.3 may
be terminated by Fox upon a material breach by WebMD, or any Affiliate of WebMD
or any Sublicensee, of any material agreement, covenant or obligation under this
Section 2.3, which breach, if curable, remains uncured for a period of sixty
(60) days following WebMD's receipt of written notice from Fox of the existence
of such breach.
2.4 NO OTHER RIGHTS GRANTED. Apart from the rights licensed under
Sections 2.1 and 2.3 above, this Agreement does not grant to the Company any
right to engage in any activity other than the Licensed Activities, nor any
ownership right, title, or interest, nor any security interest or other
interest, in any of the Fox Intellectual Property or any proprietary rights
relating to or created from such Fox Intellectual Property or any developments
or enhancements with respect thereto.
<PAGE> 8
ARTICLE 3
THE FOX CONTENT
3.1 SELECTION, FORMAT, DESIGN AND UPDATING.
(a) Fox may from time to time, modify and update the Fox
Content as such modifications and/or updates are deemed necessary or
desirable by Fox and the Company shall (to the extent that particular
Fox Content is used by the Company) use such Fox Content as modified or
updated.
(b) With respect to any content Fox obtains for use on the Fox
Distribution Channels, Fox shall, at the Company's request, use
reasonable commercial efforts to secure the approval of third parties
for the use by the Company of such content in accordance herewith. Fox
shall not be required to incur any additional cost in securing such
approval; provided, however, that in the event approval to use such
content may only be obtained by payment of any fee by Fox, Fox shall
incur such cost only at the Company's request and the Company shall
have the obligation to reimburse Fox for such cost.
(c) With respect to the Fox Content licensed hereunder, the
Company shall have the right to determine, in its reasonable
discretion, the Fox Content it selects to adapt for use on the WebMD
Sites at any time, and from time to time subject to the other
provisions hereof; provided, however, that the Company shall clearly
attribute all Fox Content used on the WebMD Sites to Fox, or a member
of the Fox Group, as applicable. Except as may be authorized in advance
in writing by Fox, or for the purpose of adapting the Fox Content for
use on the WebMD Sites and/or localizing the Fox Content, the Company
shall have no right to substantively modify in any manner whatsoever,
any of the Fox Content licensed hereunder. The Fox Content which is
owned or controlled by a third party shall incorporate such credit
designated by such third party or Fox and the Company and Sublicensees
shall preserve all such attributional rights.
3.2 REMOVAL OF FOX CONTENT. Fox may, for good reason, from time to
time require removal of any Fox Content from the WebMD Sites. If Fox requests
removal of certain Fox content from the WebMD Sites, the Company shall complete
such removal on the earlier of (i) the first commercially practicable date on
which the Company could remove such content or (ii) five business days following
receipt of Fox's request for such removal.
3.3 OWNERSHIP OF FOX CONTENT; FOX PROPERTY. The members of the Fox
Group shall at all times remain the owner of all right, title and interest in
and to the Fox Content or any parts or derivatives thereof or any variations
thereon. The members of the Fox Group shall own all right, title and interest in
all aspects of the look and feel, images and all other content, regardless of
whether it is capable of trademark, patent, copyright or other intellectual
property law protection, furnished by or on behalf of Fox to the Company or the
Sublicensees and displayed on the WebMD Sites or any parts or derivatives
thereof or any variations thereon collectively, the "Fox Property").
<PAGE> 9
3.4 OTHER AGREEMENTS. The Company:
(a) agrees to comply with all Requirements of Law in
connection with the use of the Fox Content;
(b) agrees that all rights in and to any of the Fox Content
not expressly licensed hereunder are reserved to the appropriate member
of the Fox Group;
(c) agrees not to sublicense, assign, transfer, pledge, offer
as security, or otherwise encumber the Fox Content or any of the rights
granted hereunder in any way other than as expressly provided in the
Agreement;
(d) agrees not to use any of the Fox Content in any manner or
for any purpose whatsoever in violation of the terms of this Agreement;
(e) acknowledges and agrees that it shall not at any time
during the Term or thereafter (i) challenge the title or any other
rights of members of the Fox Group or their respective licensors in or
to the Fox Content or any of the other Fox Intellectual Property or any
parts or derivatives thereof or any variations thereon, (ii) contest
the validity of the copyrights or other proprietary interests in and to
the Fox Content or any other Fox Intellectual Property held by Fox or
any third party or (iii) claim any right, title or interest in or to
the Fox Content or any other Fox Intellectual Property or any parts or
derivatives thereof or any variation thereon; and
(f) agrees to use its best efforts to cause the Sublicensees
to comply with the terms of this Section 3.4 to the extent this Section
creates obligations for the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY AND
FOX.
(a) Authority of the Company. The Company agrees and
represents that the Company has the authority to execute, deliver and
perform its obligations under this Agreement, having obtained all
required consents, and is duly organized or formed and validly existing
in good standing under the laws of the state of its incorporation or
formation.
(b) Conflict. The Company acknowledges that members of the Fox
Group have licensed, and may license, the Fox Content to other parties
to promote and enhance the goodwill of the Fox Content. The Company
agrees that in the event Fox determines that the Company's activities
taken pursuant to this Agreement come into conflict with the interests
or rights of other licensees, the Company shall in good faith cooperate
with Fox in order to resolve the conflict and, in the event the
conflict cannot be resolved, shall take the action requested by Fox as
long as it is commercially practical to do so.
(c) Authority of the Fox Parties. The Fox Parties represent
and warrant that the Fox Parties have (i) the authority to execute,
deliver and perform its obligations under this Agreement, having
obtained all required Board of Directors or other consents, (ii) are
<PAGE> 10
duly organized or formed and validly existing in good standing under
the laws of the state of its incorporation or formation and (iii) own
all right, title and interest in and to the Fox Content authored by the
Fox Parties and have all rights necessary to license the third party
content provided to the Company hereunder. The parties agree that the
Company's or any Sublicense's remedy with respect to a breach of the
Fox Parties' representation set forth in Section 4.1(c) above shall be
as set forth in Section 6.1(b) herein.
(d) EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN, THE FOX
PARTIES DO NOT MAKE ANY WARRANTY AS TO THE ACCURACY OF ANY FOX CONTENT
LICENSED HEREUNDER OR THE RESULTS TO BE OBTAINED FROM ANY WEBMD SITE
USING THE FOX CONTENT. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH
ABOVE, THE FOX CONTENT IS USED ON AN "AS-IS" BASIS WITHOUT WARRANTIES
OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NONINFRINGEMENT.
ARTICLE 5
TERM; TERMINATION
5.1 TERM.
This Agreement will be effective as of the date hereof and will
continue for a period of five (5) years, unless earlier terminated in accordance
with this agreement (the "Initial Term"). The term of this Agreement may be
extended for a period of five (5) years from and after the Initial Term (the
"Renewal Term"), at the Company's option; provided that the Operating Agreement
has not been terminated or the joint venture created by the Operating Agreement
has been dissolved prior such date; and provided, further, that the Company
agrees to extend the term of that certain Content License Agreement of even date
herewith by and between the Company and News Corp pursuant to which the Company
has agreed to license certain content to News Corp. Together, the Initial Term
and the Renewal Term are collectively referred to as the "Term."
5.2 CONTINUING OBLIGATIONS. Except as expressly provided in this
Agreement, the expiration of the Term shall not release any party from the
obligations set forth in Articles 3, 4, 6 and 7 and this Section 5.2, and each
party hereto shall be, and shall continue to be and remain liable to the other
parties for any and all damages which such party has or may sustain by reason of
such first party's default or breach of such provisions of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 AGREEMENT OF FOX TO INDEMNIFY. (a) Except as set forth in
Section 6.1(b) below and subject to the limitation of liability set forth in
Section 6.4 hereof, Fox hereby agrees to
<PAGE> 11
indemnify, defend and hold harmless the Company and its directors, officers,
employees and agents and their respective successors and assigns (collectively
the "Company Indemnitees") from and against any loss, costs, expenses (including
reasonable attorneys' fees and expenses), claims, demands, liabilities, causes
of action or damages incurred by any Company Indemnitee in connection with or
relating to any material breach of a representation, warranty, covenant or
agreement of Fox contained in this Agreement.
(b) The parties hereto agree that with respect to any claim
that the Company or any Sublicensee infringes any copyright or trademark or
other intellectual property right as a result of the Company's (or a
Sublicensee's) use or display of the Fox Content, Fox will only be responsible
for the payment of any judgment, fine and/or penalty finally awarded against the
Company or such Sublicensee as a result of such claim and any settlements agreed
to with respect to such claim.
6.2 AGREEMENT OF THE COMPANY TO INDEMNIFY. Subject to the
limitation of liability set forth in Section 6.4 hereof, the Company hereby
agrees to indemnify, defend and hold harmless Fox and its officers, directors,
shareholders, employees, agents and Affiliates and their respective successors
and assigns (collectively the "Fox Indemnitees") from and against any loss,
costs, expenses (including reasonable attorneys' fees and expenses), claims,
demands, liabilities, causes of action or damages incurred by any Fox Indemnitee
in connection with or relating to any material breach of a representation,
warranty, covenant or agreement contained in this Agreement by the Company, its
Affiliates, the Sublicensees or any of their respective officers, directors,
employees or agents.
6.3 THIRD PARTY CLAIMS. A Person entitled to indemnification for a
Claim hereunder (the "Indemnified Party") shall give the indemnifying party with
respect to such Claim (the "Indemnifying Party") reasonably prompt notice of
such Claim brought by a third party. Such notice shall describe the Claim in
reasonable detail. The failure of the Indemnified Party to give such notice to
the Indemnifying Party shall not impair any of the Indemnified Party's rights or
benefits under this Article 6 except to the extent such failure adversely
affects the Indemnifying Party's ability to defend such Claim. The Indemnifying
Party, within a reasonable time after receiving knowledge of a Claim by a third
party against the Indemnified Party, shall (a) notify the Indemnified Party in
writing of the preference of the Indemnifying Party to assume the defense
thereof, and (b) retain legal counsel reasonably acceptable to the Indemnifying
Party to conduct the defense of such Claim. The Indemnified Party shall
cooperate with the Indemnifying Party in any manner reasonably requested in
connection with the defense, compromise or settlement of any Claim. In any such
Claim which the Indemnifying Party chooses to defend, the Indemnified Party
shall have the right to engage separate counsel and to participate in the
prosecution, defense, compromise, or settlement thereof or to conduct its own
defense of such claim. The fees and expenses of such counsel engaged by the
Indemnified Party the Indemnifying Party is conducting its defense) shall be at
the expense of the Indemnified Party unless the named parties to any such Claim
(including any impleaded parties) include the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised by its
counsel that there is a conflict of interest between the Indemnified Party and
the Indemnifying Party in the conduct of the defense thereof. In such case, the
reasonable fees and expenses of such separate counsel to the Indemnified Party
shall be borne by the Indemnifying Party. The Indemnifying Party shall not,
without written consent of the Indemnified Party,
<PAGE> 12
compromise, settle or consent to entry of any order or judgment with respect to
any Claim (i) which involves any relief other than the payment of money damages
against the Indemnified Party or (ii) which does not include as an unconditional
term thereof, the giving by the defendant or Person conducting such
investigation or initiating such hearing, to the Indemnified Party, of a release
from all liability with respect to such Claim and all other Claims or causes of
action (known or unknown) arising or which might arise out of the same facts.
6.4 SPECIAL DAMAGES, LIMITATION OF LIABILITY. EXCEPT FOR (i) A BREACH
OF SECTION 7.1, (ii) USE OF THE FOX INTELLECTUAL PROPERTY (OR ANY OTHER
PROPRIETARY INFORMATION) IN VIOLATION OF THIS AGREEMENT, (iii) ANY ELEMENTS OF A
FINAL AWARD OR SETTLEMENT PURSUANT TO THE PARTIES' OBLIGATIONS UNDER SECTION
6.1(a) AND 6.2(a) HEREOF, AND (iv) FRAUD OR WILLFUL, INTENTIONAL OR GROSSLY
NEGLIGENT CONDUCT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES ARISING OUT OF OR RELATED
TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND THE LIKE, EVEN
IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 CONFIDENTIALITY AND USE OF PROPRIETARY INFORMATION. Before, at the
time of or following the execution and delivery of this Agreement, the Company
shall not disclose any Proprietary Information to any Person, except (a) with
the prior written consent of Fox; (b) to the extent necessary to comply with law
or the valid order of a court of competent jurisdiction, in which event the
Company shall so notify Fox as promptly as practicable (and, if possible, prior
to making such disclosure) and shall seek confidential treatment of such
information; (c) as part of its normal reporting or review procedure to its
auditors and its attorneys; provided, however, that the Company shall be liable
for any breach by such auditors or attorneys of any provision of this Section
7.1; (d) in connection with the enforcement of the Company's rights hereunder;
and (e) disclosures to an Affiliate or Sublicensee of, or professional advisor
to, the Company in connection with the performance by the Company of its
obligations hereunder; provided, however, that the Company shall be liable for
any breach by such Affiliate, Sublicensee or professional advisor of any
provision of this Section 7.1. This Section 7.1 shall survive the termination of
this Agreement.
7.2 DEFINITION OF PROPRIETARY INFORMATION. "Proprietary Information,"
as used herein, shall mean the Fox Intellectual Property, and any other
proprietary ideas, plans and information, including information of a
technological or business nature, trade secrets, trade names, slogans,
copyrights, computer software, source code, object code, technology, know-how,
intellectual property, data, marketing plans, summaries, reports, or mailing
lists, in each case whether in tangible or intangible form. The parties agree
that the term "Proprietary
<PAGE> 13
Information" shall also include the contents of this Agreement. Information will
not be deemed to be Proprietary Information, and the Company shall have no
obligation with respect thereto, or to any part thereof, to the extent such
information: (i) is already known to the Company at the time of receipt or
disclosure, free of any obligation to keep it confidential, as evidenced by
written records made prior to such receipt or disclosure, and did not become
known to the Company through disclosure by a third party known to the Company to
be subject to an obligation to maintain the confidentiality thereof, or (ii) is
already publicly available prior to receipt or disclosure or subsequently
becomes publicly available without any fault of the Company or any of its
Agents.
7.3 CONTENTS OF THIS AGREEMENT. The parties acknowledge however that,
notwithstanding Section 7.2 above, this Agreement, or portions hereof, may be
required under applicable law to be disclosed as part of or an exhibit to a
party's required public disclosure documents. If either party is advised by its
legal counsel that such disclosure is required, it will notify the other party
in writing and the parties will jointly seek confidential treatment of this
Agreement to the maximum extent reasonably possible in documents filed with the
applicable governmental or regulatory authorities.
7.4 COMMUNICATIONS. Unless otherwise provided therein, all notices and
other communications or designations required or permitted by this Agreement
shall be in writing, and,
If to the Fox Parties to:
Fox Entertainment Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Telecopier: (212) 768-2029
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopier: (212) 697-6686
or at such other address as the Fox Parties may designate in a written notice to
the Company.
If to the Company, to:
Healtheon/WebMD Corporation
400 The Lenox Building
3399 Peachtree Road NE
Atlanta, GA 30326
<PAGE> 14
Attention: W. Michael Heekin, Esq.
Telecopier: (404) 479-7603
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Christopher D. Mangum, Esq.
Telecopier: (404) 881-4777
or to such other address as the Company may designate in a written notice to
Fox.
All notices and other communications required or permitted by this Agreement
shall be deemed to have been duly given if personally delivered to the intended
recipient at the proper address determined pursuant to this Section 7.4 or sent
to such recipient at such address by air courier, facsimile transmission,
followed by delivery by overnight, courier, or by hand and will be deemed given,
unless earlier received: (a) if sent by air courier when recorded on the records
of the air courier as received by the receiving party; (b) if sent by facsimile
followed by delivery of overnight courier transmission upon transmission if on a
Business Day and during business hours i the country of receipt, otherwise, at
9:00 a.m. on the next Business Day in the country of receipt, subject to receipt
of a facsimile machine generated confirmation, and (c) if delivered by and, on
the date of receipt.
7.5 PRESS RELEASES. Neither party will issue any press release or make
a public announcement relating in any way whatsoever to this Agreement or the
relationship established by this Agreement without the written consent of the
other party (which consent shall not be unreasonably withheld or delayed),
unless required by law or the rules of an applicable stock exchange or
over-the-counter market. If a press release or announcement of this Agreement or
the transactions contemplated hereby is required as aforesaid, the parties will
consult with each other in advance as to the contents and timing hereof.
7.6 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement will be
governed by, and construed in accordance with, the laws of the State of Delaware
without regard to any conflicts of law rules. Any controversy or claim arising
out of or relating to this Agreement, or breach thereof, shall be settled by
arbitration in accordance with the Arbitration Rules of the American Arbitration
Association. The Arbitration Tribunal shall consist of three arbitrators, of
whom one shall be nominated by Fox, one by the Company, and the third, who shall
serve as chairman, shall be chosen by the two party-nominated arbitrators or, in
the event the party-oriented arbitrators are unable to designate the third
arbitrator, by the American Arbitration Association. The situs of the
arbitration shall be Washington, D.C. The language of the arbitration shall be
English. The award of the arbitrator shall be final and binding. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The Parties waive any right to appeal the arbitral award,
to the extent a right to appeal may be lawfully waived. Each Party retains the
right to seek judicial assistance: (a) to compel arbitration; (b) to obtain
interim measures of protection pending arbitration; and (c) to enforce
<PAGE> 15
any decision of the arbitrators, including the final arbitral award. The
prevailing Party in the arbitration shall be entitled to receive reimbursement
of its reasonable expenses incurred in connection therewith.
7.7 BINDING EFFECT, SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT Except as
expressly provided in this Agreement, nothing in this Agreement, express or
implied, is intended or shall be construed to confer upon or give any Person
(including creditors and Affiliates of any party) other than the parties hereto
any remedy or claim under or by reason of this Agreement or any term, covenant
or condition hereof, all of which shall be for the sole and exclusive benefit of
the parties. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors,
legal representatives and permitted assigns; provided, however, that, except as
otherwise specifically permitted by this Agreement, neither this Agreement nor
any of the rights, interests or obligations of the Company or Fox hereunder
shall be assigned or delegated without the prior written consent of the other
party. This Agreement sets forth the entire agreement and understanding among
the parties hereto as to the subject matter hereof.
7.8 AMENDMENTS AND WAIVERS. This Agreement may not be amended, modified
or supplemented unless approved in writing by each party to this Agreement. No
waiver of any right or remedy or of compliance with any provisions hereof, and
no consent provided for herein, shall be effective unless evidenced by an
instrument in writing executed by the party sought to be charged with such
waiver or consent. The rights and remedies herein expressly provided are
cumulative and not exclusive of any other rights or remedies which any party
hereto would otherwise have at law, in equity, by statute or otherwise.
7.9 HEADINGS. The headings of the Sections contained in this Agreement
are solely for convenience of reference, are not part of the agreement of the
parties and shall not affect the meaning or interpretation of this Agreement.
7.10 NO IMPLIED WAIVERS. No action taken pursuant to this Agreement,
including, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, agreements, covenants, obligations or commitments
contained herein or made pursuant hereto. The waiver by any party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by any party to exercise any
right, privilege or remedy hereunder shall be deemed a waiver of such party's
rights, privileges or remedies hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
7.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original of the party or
parties executing the same and all of which together shall be deemed to
constitute one and the same agreement.
7.12 FURTHER ASSURANCE. Each party shall cooperate and take such
actions as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
<PAGE> 16
7.13 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby; provided that, if any provision
hereof or the application thereof shall be so held to be invalid, void or
unenforceable by a final Judgment of a court of competent jurisdiction, then
such court may substitute therefor a suitable and equitable provision in order
to carry out, so far as may be valid and enforceable, the intent and purpose of
the invalid, void or unenforceable provision and if such court shall fail or
decline to do so, the parties shall negotiate in good faith a suitable and
equitable substitute provision. To the extent that any provision shall be
judicially unenforceable in any one or more states of the United States or in
any foreign jurisdiction, such provision shall not be affected with respect to
any other state within the United States or any other foreign jurisdiction, each
provision with respect to each state of the United States or foreign
jurisdiction being construed as several and independent.
7.14 INJUNCTIVE RELIEF. Each party acknowledges that a breach or
threatened breach by it or any Sublicensee or Affiliate of this Agreement will
result in immediate and irremediable damage to the other party and that money
damages alone would be inadequate to compensate such other party. Therefore, in
the event of a breach or threatened breach of this Agreement by either of the
parties (or any Sublicensee or Affiliate), the other party may, in addition to
other remedies, immediately obtain and enforce injunctive relief prohibiting the
breach or threatened breach or compelling specific performance.
7.15 NO PARTNERSHIP, ETC. Nothing contained herein shall be construed
as creating a joint venture, Company, agency, employment relationship or other
enterprise between the parties.
7.16 CONSTRUCTION. The Company and Fox have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Company and Fox and no presumption or burden of
proof shall anise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
7.17 DISCLAIMER OF WARRANTIES. The Company hereby acknowledges and
agrees that Fox has made no promises, representations, guarantees or warranties,
of any nature, other than those which may be made expressly in this Agreement.
7.18 PLURAL. When necessary for appropriate meaning, a plural shall be
deemed to be the singular and singular shall be deemed to be the plural.
7.19 EFFECTIVENESS. The submission of this Agreement does not
constitute an offer to license and this Agreement shall become effective only
upon execution thereof by the Company and Fox.
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FOX ENTERTAINMENT GROUP, INC.
By: /s/
----------------------------------
Name:
Title: Lawrence A. Jacobs
Secretary
HEALTHEON/WEBMD CORPORATION
By: /s/
----------------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
<PAGE> 18
EXHIBIT A
DEFINITIONS
DEFINED TERMS. As used in this Agreement, the following terms have the
meanings indicated:
Affiliate: With respect to any Person, any other Person that, directly
or indirectly through or with one or more intermediaries, controls, is
controlled by or is under common control with such Person. The term "affiliated"
(whether or not capitalized) shall have a correlative meaning. For the purposes
of this definition, "control", as used with respect to any Person, shall mean
the possession, directly or indirectly through or with one or more
intermediaries, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities, by
contract or otherwise. The terms "controlled by" and "under common control with"
shall have correlative meanings.
Agreement: This Agreement and any Exhibits hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
Business Day: Any day other than a Saturday, a Sunday or a day on which
national banking institutions in the United States are not open for business.
Claims: Claims, suits, proceedings, actions, demands, investigations or
causes of action.
The Company: Defined in the introductory paragraph of this Agreement
Company Indemnitees: Defined in Section 6.1.
Control: The possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
Effective Date: The date of execution and delivery of this Agreement by
all of the parties hereto.
Entity or collectively Entities: Corporations, Limited Liability
Companies, Partnerships, Joint Ventures or other forms of legal entity.
Fox Content: All Health Related Materials owned or licensed by or on
behalf of Fox or the Fox Group for inclusion on the Fox Distribution Channels
(excluding any Distribution Channel that is a Web Site). The parties acknowledge
that the Fox Content shall include only those portions of content available from
time to time on the Fox Distribution Channels that are (i) owned exclusively by
members of the Fox Group, (ii) are licensed to members of the Fox Group under an
arrangement pursuant to which members of the Fox Group are legally permitted to
license same to the Company at no additional cost to members of the Fox Group or
at additional cost to the Company as provided in Section 3.1(b) for the purposes
contemplated by
<PAGE> 19
this Agreement, and (iii) is content the exploitation and distribution of which
by the Company or Sublicensees will in all respects comport with all
Requirements of Law.
Fox Distribution Channel: Defined in the recitals to this Agreement;
provided, however, that for purposes of this Agreement, the Fox Distribution
Channels shall exclude Web Sites.
Fox Group: Defined in the introductory paragraph of this Agreement
Fox Indemnitees: Defined in Section 6.2.
Fox Intellectual Property: Defined in Section 2.2 (d).
Fox Logos: Defined in Section 2.3.
Fox Property: Defined in Section 3.3.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof and any court, panel, judge, board, bureau,
commission, agency or other entity, body or other Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Health Related Material: Any written, photographic or audiovisual work,
as defined in the United States Copyright Act, that consists predominantly of
coverage of topics related to health, fitness, disease, medicine (including
holistic medicine and other non-western medicine), pharmaceuticals or natural
health products, including coverage of related news, commentary and analysis.
Indemnified Party: Defined in Section 6.3.
Indemnifying Party: Defined in Section 6.3.
Initial Term: Defined in Section 5.1.
Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any Governmental Authority or any
arbitrator.
Licensed Activities: The activities described in Sections 2.1(a),
2.1(b), and 2.3.
Non-Standard Television Service: Audiovisual programming delivered by
any means of transmission, whether now existing or developed in the future
(including all forms of fixed-line or wireless, narrow band or broadband,
transmission) other than (a) audiovisual programming which is made available to
viewers free-of-charge (e.g., free-to-air UHF or VHF television), even if
retransmitted via cable or any other means of retransmission for which a
facilities fee is charged, and (b) home video distribution.
Operating Agreement: That certain Operating Agreement of even date
herewith by and among News Corp, the Company and WebMD International LLC.
<PAGE> 20
Operating Company: The Company's subsidiaries or operating divisions,
formed either wholly by the Company (or by members in or Affiliates thereof) or
with third parties or entities that are not subsidiaries of the Company.
Person: Any natural person, Entity, Governmental Authority, or other
entity, whether acting in an individual, fiduciary or other capacity.
Proprietary Information: Defined in Section 7.2
Renewal Term: Defined in Section 5.1.
Requirement of Law: As to any Person, all rules, regulations,
Judgments, injunctions, standards, codes, limitations, restrictions, conditions,
prohibitions, notices, demands or other requirements or determinations of a
Governmental Authority or an arbitrator, applicable to or binding upon such
Person, any of its property or any business conducted by it or to which such
Person, any of its property or any business conducted by it is subject.
Term: Defined in Section 5.1.
Territory: The entire world.
Web Site: Any network of Internet Web pages accessible electronically
by a computer or other device and located in a single Internet domain.
WebMD Site: Any Web Site which is owned and operated by the Company
and/or its Operating Companies and which displays health and medical content
intended for consumers and healthcare professionals and provides, promotes and
sells healthcare related information, services and products to consumers and
healthcare professionals, currently accessible through the URL www.webmd.com.
<PAGE> 1
EXHIBIT 10.4
HEALTHEON/WEBMD CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of the 26th day of January, 2000, among Healtheon/WebMD
Corporation, a Delaware corporation (the "COMPANY"), and the parties set forth
on signature pages hereto (each a "PURCHASER" and collectively, the
"PURCHASERS").
RECITALS:
A. The Purchasers have purchased 2 million shares of the
Company's Common Stock, par value $0.0001 per share (the "COMMON STOCK") and
155,951 shares of the Company's Series A Preferred Stock, par value $0.0001 per
share (the "SERIES A STOCK") pursuant to a Purchase Agreement dated as of the
26th day of January, 2000, (the "PURCHASE AGREEMENT") between the Company, the
Purchasers and the other parties thereto.
B. The Company may issue to the Purchasers up to an additional
10,291,939 shares of Common Stock upon the occurrence of certain events set
forth in the Amended and Restated Limited Liability Company Agreement of Health
Network LLC dated as of the 26th day of January, 2000, and in the Limited
Liability Company Agreement of WebMD International LLC dated as of the 26th day
of January, 2000.
C. The Company and the Purchasers desire to set forth the
registration rights to be granted by the Company to the Purchasers.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth herein and in
the other Transaction Documents (as defined below), the parties mutually agree
as follows:
AGREEMENT:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company as filed with the Secretary of
State of the State of Delaware, as amended from time to time.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, par value $0.0001 per
share, of the Company and any and all shares of capital stock or other equity
securities of: (i) the Company which are added to or exchanged or substituted
for the Common Stock by reason of the declaration of any stock dividend or
stock split, the issuance of any distribution or the reclassification,
readjustment, recapitalization or other such modification of the capital
structure of the Company; and (ii) any other corporation, now or hereafter
organized under the laws of any state or other governmental authority, with
which the
<PAGE> 2
Company is merged, which results from any consolidation or reorganization to
which the Company is a party, or to which is sold all or substantially all of
the shares or assets of the Company, if immediately after such merger,
consolidation, reorganization or sale, the Company or any Stockholders of the
Company own equity securities having in the aggregate more than fifty percent
(50%) of the total voting power of such other corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Family Member" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the
process of adoption), any trust all of the beneficial interests of which are
owned by any of such individuals or by any of such individuals together with
any organization described in Code Section 501(c)(3), the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"Form S-3" means such form under the Securities Act as in effect on
the date hereof or any registration form under the Securities Act subsequently
adopted by the Commission which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.
"HCNLLC LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of Health Network LLC as of the 26th day of
January, 2000.
"Holder" shall mean each of the Purchasers or any of such Holder's
respective successors and assigns who acquire rights in accordance with this
Agreement with respect to the Registrable Securities directly or indirectly
from such Holder.
"Initiating Holders" shall mean any Holder or Holders of not less than
50% of the then outstanding Registrable Securities.
"News Corp" means The News Corporation Limited, a South Australia,
Australia corporation.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means shares of Common Stock issued pursuant
to the Purchase Agreement, the HCNLLC LLC Agreement and the WebMD International
LLC Agreement and the shares of Common Stock into which the shares of Preferred
Stock issued pursuant to the Purchase Agreement are convertible pursuant to the
Certificate of Incorporation, excluding in all cases, however (including
exclusion from the calculation of the number of outstanding Registrable
Securities), any Registrable Securities sold by a person in a transaction (i)
pursuant to a registration statement under Section 2, 3 or 4 hereof or (ii)
pursuant to Rule 144 (or any successor provision) of the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute promulgated in replacement thereof, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
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<PAGE> 3
"Transaction Documents" shall have the meaning set forth in the Master
Strategic Alliance Agreement dated December 6, 1999 among the Company, News
Corp and Fox Entertainment Group, Inc., a Delaware corporation which is
controlled by News Corp.
"WebMD International LLC Agreement" means the Limited Liability
Company Agreement of WebMD International Limited dated as of the 26th day of
January, 2000.
2. Demand Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect a registration
with respect to at least 2,000,000 shares of Common Stock that constitute
Registrable Securities (as adjusted for stock splits, stock dividends,
recapitalizations and similar events) the Company will:
(a) promptly give written notice of the proposed registration to
all other Holders so they may have an opportunity to consider joining in such
registration, which they may do (subject to the terms and provisions of this
Agreement) at their election within ten (10) days after receipt of the notice
of the proposed registration by the Company; and
(b) as soon as practicable, use its reasonable best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request given
within ten (10) days after receipt of notice from the Company pursuant to
Section 2(a); provided that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(ii) Prior to June 30, 2000;
(iii) Within the one hundred twenty (120) day period
immediately following the effective date of a registration statement pertaining
to a firm commitment underwritten public offering of Common Stock for the
account of a shareholder (including Purchaser) of the Company who has exercised
a demand right to register shares of Common Stock (other than a registration
relating solely to a Commission Rule 145 transaction, a registration relating
solely to employee benefit plans, or a registration statement on Form S-3 (or
any similar short-form registration statement));
(iv) Within the sixty (60) day period immediately
following the effective date of a registration statement on Form S-3 (or any
similar short-form registration statement) pertaining to a firm commitment
underwritten public offering of Common Stock for the account of another
shareholder of the Company who has exercised a demand right to register shares
of Common Stock (other than a
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<PAGE> 4
registration relating solely to a Commission Rule 145 transaction or a
registration relating solely to employee benefit plans); or
(v) After the Company has effected three (3)
registrations pursuant to this Section 2 and such registrations have been
declared or ordered effective and have remained effective for a period of at
least ninety (90) consecutive days.
Subject to the foregoing clauses (i) through (v), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request of the
Initiating Holders. The Initiating Holders may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request, without liability (except as set forth in Section 6
hereof) to the Initiating Holders or any other Holders of Registrable
Securities requested to be registered pursuant to Section 2(a) hereof, by
providing a written notice to the Company revoking such request.
Notwithstanding the above, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 2 during the period starting with the date ninety (90) days prior to
the Company's good faith estimate of the date of filing of (or in the case of
any registration on Form S-3, forty-five (45) days prior), and ending on a date
one hundred twenty(120) days after the effective date of (or in the case of any
registration on Form S-3, ninety (90) days after), a Company-initiated
registration statement in connection with a bona fide firm commitment
underwritten registration for securities to be offered for the Company's own
account (the "Intended Registration"); provided that the Company is actively
employing in good faith all reasonable efforts to cause the Intended
Registration to become effective and provided further that the Company gives
notice to all Holders upon commencement of such period. The Holders shall be
entitled to exercise their rights pursuant to Section 4 hereof with respect to
an Intended Registration. An Intended Registration shall not be deemed to be a
demand registration of the Holders pursuant to this Section 2.
(c) Underwriting. If the Holders propose an underwritten
offering, the sale of Registrable Securities pursuant to this Section 2 must be
made by means of a firm commitment underwriting through underwriters who are
reasonably acceptable to the Company and the holders of a majority of the
Registrable Securities that are proposed to be distributed through such
underwriting. The right of any Holder to registration pursuant to this Section
2 shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
to the extent requested by such Holder (unless mutually otherwise agreed by a
majority in interest of the Holders and such Holder) to the extent provided
herein.
The Company and all Holders proposing to distribute Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 2(c), if the
underwriter determines that in its good faith view marketing factors require a
limitation of the number of shares to be underwritten and so advises the
Initiating Holders in writing, then the Initiating Holders shall so advise the
Company and all Holders (except those Holders who have indicated to the Company
their decision not to distribute any of their Registrable Securities through
such underwriting) and the number of Registrable Securities that may be
included in the registration and underwriting shall be allocated first to the
Holders on a pro rata basis according to the number of Registrable Securities
requested to be included by the Holders; second to the Company; and third to
other shareholders of the Company who have requested to sell in the
registration. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration.
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<PAGE> 5
If at least eighty percent (80%) of the Registrable Securities requested to be
registered by the Initiating Holders are not included in such registration,
then the Initiating Holders may request that the Company effect an additional
registration under the Securities Act of all or part of the Initiating Holders'
Registrable Securities in accordance with the provisions of this Section 2, and
the Company shall effect such additional registration.
If any Holder disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn from such underwriting shall also be withdrawn from
such registration; provided, however, that, if by the withdrawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the maximum of any
limitation imposed by the underwriters), then the Company shall offer to all
Holders who have included Registrable Securities in the registration the right
to include additional Registrable Securities in the same proportion used above
in determining the underwriter limitation.
If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account or the account of others in such registration if the underwriter so
agrees and if the number of Registrable Securities which would otherwise have
been included in such registration and underwriting will not thereby be
limited.
(d) If the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would (because of
the existence of, or in anticipation of, any acquisition, financing activity,
or other transaction involving the Company, or the unavailability for reasons
beyond the Company's control of any required financial statements, disclosure
of information which is in its best interest not to publicly disclose, or any
other event or condition of similar significance to the Company) be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed on or before the date filing would be required and it is therefore
essential to defer the filing of such registration statement, then the Company
may direct that such request for registration be delayed for a period not in
excess of ninety (90) days, such right to delay a request to be exercised by
the Company not more than twice in any twelve (12) month period.
(e) Effective Registration Statement. A demand registration
requested pursuant to this Section 2 shall not be deemed to have been effected
unless the registration statement relating thereto (i) has become effective
under the Securities Act and any of the Registrable Securities of the
Initiating Holders included in such registration have actually been sold
thereunder, and (ii) has remained effective for a period of at least ninety
(90) days (or such shorter period in which all Registrable Securities included
in such registration have actually been sold thereunder).
3. S-3 Registration. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
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<PAGE> 6
(b) as soon as practicable, and in any event within 30 days of
the receipt of such notice, file a registration statement on Form S-3 and
effect all other qualifications and compliances as may be so requested and as
would permit or facilitate the sale, distribution, transfer or hedging (through
market transactions using brokers, in a firm commitment underwriting, in
negotiated transactions or otherwise) of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 3:
(i) if Form S-3 is not available for such offering by
the Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to register Registrable Securities and such other securities (if any)
at an aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $20 million;
(iii) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected three (3)
registrations for the Holders pursuant to this Section 1.3; or
(iv) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders and shall keep it continuously effective
until such Registrable Securities have been sold pursuant thereto.
(d) Notwithstanding the other provisions of this Section 3, the
Company shall have the right to delay the filing of any registration statement
on Form S-3 (an "S-3 Registration") otherwise required to be prepared and filed
by the Company pursuant to this Section 3, or to suspend the use of any S-3
Registration, for a period not in excess of 60 days (a "S-3 BLACKOUT PERIOD")
if the Company, in the good faith judgment of its Board of Directors,
determines (because of the existence of, or in anticipation of, any
acquisition, financing activity, or other transaction involving the Company, or
the unavailability for reasons beyond the Company's control of any required
financial statements, disclosure of information which is in its best interest
not to publicly disclose, or any other event or condition of similar
significance to the Company) that the registration and distribution of the
Registrable Securities to be covered by such S-3 Registration would be
seriously detrimental to the Company and its shareholders, provided that the
S-3 Blackout Period shall earlier terminate on the second business day
following the completion or abandonment of the relevant financing, acquisition
or other transaction or upon public disclosure by the Company or public
admission by the Company of such material nonpublic information or such time as
such material nonpublic information shall be publicly disclosed; and provided,
further, that the Company shall furnish to the Holders a certificate of an
executive officer of the Company to the effect that an event permitting a S-3
Blackout Period has occurred (and no other reason need be given). The Company
will promptly give the Holders written notice of such determination and an
approximation of the period of the anticipated delay; provided, however, that
the aggregate number of days included in all S-3 Blackout Periods during any
consecutive 12 months shall not exceed 180 days. Each Holder agrees to cease
all disposition efforts under such S-
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<PAGE> 7
3 Registration with respect to Registrable Securities held by such Holder
immediately upon receipt of notice of the beginning of any S-3 Blackout Period.
The Company shall provide written notice to the Holders of the end of each S-3
Blackout Period.
4. Piggyback Registration.
(a) If the Company shall determine to register for sale for cash
any of its Common Stock, for its own account or for the account of others
(other than the Holders), other than a registration relating solely to employee
benefit plans or securities issued or issuable to employees, consultants (to
the extent the securities owned or to be owned by such consultants could be
registered on Form S-8) or any of their Family Members (including a
registration on Form S-8), or a registration relating solely to a Commission
Rule 145 transaction, a registration on Form S-4 in connection with a merger,
acquisition, divestiture, reorganization or similar event, the Company promptly
will give to each Holder written notice thereof and shall use its reasonable
best efforts to include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders. However, the Company may, without the
consent of the Holders, withdraw such registration statement prior to its
becoming effective if the Company has abandoned its proposal to register the
securities proposed to be registered thereby.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 4(a). In such event the right of any Holder to registration
pursuant to Section 4(a) shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and any other shareholders of the Company distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 4(b), if the
underwriter or the Company determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting. The Company shall so advise all Holders (except those Holders who
have indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting), and the number of shares of
Registrable Securities that may be included in the registration and
underwriting, if any, shall be allocated among such Holders as follows:
(i) In the event of a piggyback registration pursuant to
Section 4(a) that is initiated by the Company, then the number of shares that
may be included in the registration and underwriting shall be allocated first
to the Company and then to all selling shareholders, including the Holders, who
have requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included; provided, however, that no
allocation pursuant to this Section 4(b) shall have the effect of reducing the
Shares sold by Holders to less than 20% of the proposed offering; and
(ii) In the event of a piggyback registration pursuant to
Section 4(a) that is initiated by the exercise of demand registration rights by
a shareholder or shareholders of the Company (other than the Holders), then the
number of shares that may be included in the registration and underwriting
shall be allocated first to such selling shareholders who exercised such demand
and then to all selling
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<PAGE> 8
shareholders, including the Holders, who have requested to sell in the
registration, on a pro rata basis according to the number of shares requested
to be included.
(c) No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Holder disapproves of the terms of any such underwriting,
such person may elect to withdraw therefrom by written notice to the Company
and the underwriter. The Registrable Securities and/or other securities so
withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed
by the underwriters), then the Company shall offer to all Holders who have
included Registrable Securities in the registration the right to include
additional Registrable Securities pursuant to the terms and limitations set
forth herein in the same proportion used above in determining the underwriter
limitation.
5. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to Section 2, 3 or
4 hereof, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense, the Company will use its reasonable best
efforts to:
(a) prepare and file with the Commission within ninety (90) days
(or in the case of any registration on Form S-3, thirty (30) days) after
receipt of a request for registration with respect to such Registrable
Securities, a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate, subject to
Section 2 hereof, and which form shall be available for the sale of the
Registrable Securities in accordance with the intended method(s) of
distribution thereof, and use its best efforts to cause such registration
statement to become and remain effective; provided that before filing with the
Commission a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of any registration statement, the Company shall (i) furnish to
the underwriters, if any, and to one (1) counsel selected by the Holders of a
majority of the Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents shall be
subject to the review of the underwriters and such counsel, and (ii) notify
each Holder of Registrable Securities covered by such registration statement of
any stop order issued or threatened by the Commission and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than ninety (90) days or such shorter period
which shall terminate when all Registrable Securities covered by such
registration statement have been sold (but not before the expiration of the
90-day period referred to in Section 4(3) of the Securities Act and Rule 174,
or any successor thereto, thereunder, if applicable), and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended method(s) of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish, without charge, to each Holder and each underwriter,
if any, of Registrable Securities covered by such registration statement one
(1) signed copy of such registration statement, each amendment and supplement
thereto (including one (1) conformed copy to each Holder and one (1)
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<PAGE> 9
signed copy to each managing underwriter and in each case including all
exhibits thereto), and such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any other
prospectus filed under Rule 424 under the Securities Act) as such Holders may
request, in conformity with the requirements of the Securities Act, and such
other documents as such Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Holder, but only
while the Company shall be required under the provisions hereof to cause the
registration statement to remain effective;
(d) use its best efforts to register or qualify such Registrable
Securities under such other applicable securities or blue sky laws of such
jurisdictions as any Holder, and underwriter, if any, of Registrable Securities
covered by such registration statement reasonably requests as may be necessary
for the marketability of the Registrable Securities (such request to be made by
the time the applicable registration statement is deemed effective by the
Commission) and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder and each underwriter, if any, to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holder; provided that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary by virtue
of the business and operations of the Company to enable the Holder or Holders
thereof to consummate the disposition of such Registrable Securities;
(f) immediately notify the managing underwriter, if any, and each
Holder of such Registrable Securities at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening
of any event which comes to the Company's attention if as a result of such
event the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
the Company shall promptly prepare and furnish to such Holder a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless suspension of the use of such prospectus otherwise is authorized herein
or in the event of a S-3 Blackout Period, in which case no supplement or
amendment need be furnished;
(g) use its best efforts to cause all such Registrable Securities
covered by the registration statement to be listed on the Nasdaq Stock Market
or the national securities exchange on which similar securities issued by the
Company are then listed, and enter into such customary agreements including a
listing application and indemnification agreement in customary form (provided
that the applicable listing requirements are satisfied), and to provide a
transfer agent and registrar for such Registrable Securities covered by such
registration statement no later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
the Initiating Holders or the underwriters retained by such Holders, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities, including customary indemnification;
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<PAGE> 10
(i) make available for inspection during normal business hours by
any Holder of Registrable Securities covered by such registration statement,
any underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, "Records"), if any, as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's and its subsidiaries' officers, directors and employees to
supply all information and respond to all inquiries reasonably requested by any
such Inspector in connection with such registration statement. Notwithstanding
the foregoing, the Company shall have no obligation to disclose any Records to
the Inspectors in the event the Company determines that such disclosure is
reasonably likely to have an adverse effect on the Company's ability to assert
the existence of an attorney-client privilege with respect thereto;
(j) in the event that any contemplated public offering is
underwritten, use its best efforts to obtain a "comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "comfort" letters as the Holders of
a majority (by number of shares) of the Registrable Securities being sold
reasonably request, and provided that such request is reasonable in the
underwriter's point of view;
(k) use its best efforts to obtain an obtain an opinion of
counsel from the Company's counsel in customary form and covering such matters
of the type customarily covered in opinions of counsel in connection with such
transactions;
(l) comply, and continue to comply during the period that such
registration statement is effective under the Securities Act, in all material
respects with the Securities Act and the Securities Exchange Act of 1934 and
with all applicable rules and regulations of the Commission with respect to the
disposition of all securities covered by such registration statement, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act,
and not file any amendment or supplement to such registration statement or
prospectus to which Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects with the
requirements of the Securities Act, having been furnished with a copy thereof
at least five (5) business days prior to the filing thereof; and
(m) in the event the offering is underwritten, develop a
presentation reasonably acceptable to the underwriters to facilitate the
offering and to make its chief executive officer and chief financial officer
available for participation in such meetings and presentations (e.g., road show
for the offering) at such locations (including Europe) as the underwriter
reasonably requests.
Each Holder of Registrable Securities agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(f) hereof, such Holder shall discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5(f) hereof, and, if so directed by
the Company, such Holder shall deliver to the Company (at the Company's
expense) all copies (including, without limitation, any and all drafts), other
than permanent file copies, then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give
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<PAGE> 11
any such notice, the period mentioned in Section 5(b) hereof shall be extended
by the greater of (i) ten (10) business days or (ii) the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 5(f) hereof to and including the date when each Holder of Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by Section 5(f)
hereof.
6. Rule 144. Notwithstanding anything to the contrary contained
herein, no Holder shall have rights to a registration under Section 2, 3 or 4
hereof after the time that such Holder could sell, within ninety (90) days, all
of its Registrable Securities pursuant to Rule 144(e) promulgated under the
Securities Act or any successor rule thereto; provided that the Company hereby
agrees to take the following actions to ensure the availability of Rule 144 to
each such Holder (or such similar actions as shall be required under any
successor rule thereto):
(a) make and keep public information available as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as any Holder owns any Registrable Securities,
furnish to a Holder upon request, a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the registration
statement relating to an Initial Public Offering), and of the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request.
7. Registration Expenses. The Company shall pay all expenses in
connection with any registration, including, without limitation, all
registration, filing and NASD fees, printing expenses, all fees and expenses of
complying with securities or blue sky laws, the fees and disbursements of one
counsel for the Holders and the fees and disbursements of counsel for the
Company and of its independent accountants; provided that, in any registration,
each party shall pay for its own underwriting discounts and commissions and
transfer taxes. The Company shall not, however, be required to pay for expenses
of any registration proceeding begun pursuant to Section 2, 3 or 4 hereof, the
request of which has been subsequently withdrawn by the Initiating Holders
(unless the withdrawal is based upon material adverse information concerning
the Company of which the Initiating Holders were unaware at the time of such
request), in which case such expenses shall be borne by the Holders whose
securities were to be included in the registration in proportion to the number
of shares for which such registration was requested.
8. Assignment of Rights. Any Holder may assign its rights under
this Agreement to any party acquiring 2,400,000 shares or more of Registrable
Securities; provided, however, that a Holder may assign its rights under this
Agreement without such restrictions to a transferee or assignee that controls,
is controlled by or is under common control with such Holder.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing.
11
<PAGE> 12
10. "Market Stand-off" Agreement. Each Holder agrees not to sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by it during such period of time following the effective date
of an underwritten public offering of the Company's securities as the
underwriters in such underwritten offering deem appropriate; provided, however,
that no such market stand off agreement shall be required of any Holder (i) who
is not identified as a selling shareholder on the registration statement for
such underwritten offering or any other registration statement filed by the
Company pursuant to Sections 2, 3 or 4 hereof and (ii) unless the executive
officers, directors and greater than 10% stockholders of the Company enter into
similar agreements; provided, however, that in no event shall such period be
more than 90 days. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing restriction
until the end of such period.
11. Indemnification.
(a) In the event of the offer and sale of Registrable Securities
held by Holders under the 1933 Act, the Company shall, and hereby does,
indemnify and hold harmless, to the fullest extent permitted by law, each
Holder, its directors, officers, partners, each other person who participates
as an underwriter in the offering or sale of such securities, and each other
Person, if any, who controls or is under common control with such Holder or any
such underwriter within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, and expenses to which
the Holder or any such director, officer, partner or underwriter or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such shares were registered
under the 1933 Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading or any violation by the
Company of any federal, state or common law rule or regulation applicable to
the Company and relating to action required of or inaction by the Company in
connection with any such registration, and the Company shall reimburse the
Holder, and each such director, officer, partner, underwriter and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating, defending or settling any such loss, claim,
damage, liability, action or proceeding; provided that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by or on behalf of such Holder
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Holders, or any such director, officer, partner,
underwriter or controlling person and shall survive the transfer of such shares
by the Holder.
(b) The Company may require, as a condition to including any
Registrable Securities to be offered by a Holder in any registration statement
filed pursuant to this Agreement, that the Company shall have received an
agreement from such Holder to be bound by the terms of this Section 11,
including an undertaking reasonably satisfactory to it from such Holder, to
indemnify and hold the
12
<PAGE> 13
Company, its directors and officers and each other Person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which the Company
or any such director or officer or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information about such Holder as a Holder of the
Company furnished to the Company through an instrument duly executed by such
Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that such indemnity
agreement found in this Section 11(b) shall in no event exceed the gross
proceeds from the offering received by such Holder. Such indemnity shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and shall
survive the transfer by any Holder of such shares.
(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
Section 11(a) or (b) hereof (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 11(a) or (b) hereof, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defenses thereof, other than reasonable costs of
investigation. Neither an indemnified nor an indemnifying party shall be liable
for any settlement of any action or proceeding effected without its consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party
shall have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
(d) The indemnification required by Section 11(a) and (b) hereof
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expenses,
losses, damages or liabilities are incurred.
(e) If the indemnification provided for in this Section 11 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
13
<PAGE> 14
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense as is
appropriate to reflect the proportionate relative fault of the indemnifying
party on the one hand and the indemnified party on the other (determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission), or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, not only the
proportionate relative fault of the indemnifying party and the indemnified
party, but also the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other, as well as any other relevant
equitable considerations. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not
guilty of such fraudulent misrepresentation.
(f) Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 11 (with appropriate
modifications) shall be given by the Company and each Holder of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
12. Miscellaneous
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(b) Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, executors and administrators of the parties hereto. In the
event the Company merges with, or is otherwise acquired by, a direct or
indirect subsidiary of a publicly-traded company, the Company shall condition
the merger or acquisition on the assumption by such parent company of the
Company's obligations under this Agreement.
(c) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
(d) Notices, etc. All notices or other communications which are
required or permitted under the Transaction Documents shall be in writing and
sufficient if delivered by hand, by facsimile transmission, by registered or
certified mail, postage pre-paid, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
14
<PAGE> 15
If to the Company: Healtheon/WebMD Corporation
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attention: W. Michael Heekin, Esq.
Healtheon/WebMD Corporation
4600 Patrick Henry Road
Santa Clara CA 95054
Attention: Jack Dennison, Esq.
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
Suite 2600
100 North Tryon Street
Charlotte, North Carolina 28202
Attention: H. Bryan Ives III, Esq.
C. Mark Kelly, Esq.
If to Purchaser: The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
With a copy to: Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
or at such other address as any party shall have furnished to the other parties
in writing.
(e) Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Holder of any Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair
any such right, power or remedy of such Holder nor shall it be construed to be
a waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
15
<PAGE> 16
(g) Severability. In the case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(h) Amendments. The provisions of this Agreement may be amended
at any time and from time to time, and particular provisions of this Agreement
may be waived, with and only with an agreement or consent in writing signed by
the Company and by the holders of a majority of the number of shares of
Registrable Securities outstanding as of the date of such amendment or waiver.
The Purchaser acknowledges that by the operation of this Section 12(h), the
holders of a majority of the outstanding Registrable Securities may have the
right and power to diminish or eliminate all rights of the Purchaser under this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE> 17
This Registration Rights Agreement is hereby executed as of the date first
above written.
COMPANY:
HEALTHEON/WEBMD CORPORATION
By: /s/
-------------------------------------------
Its: W. Michael Heekin
Exec. Vice President
PURCHASERS:
EASTRISE PROFITS LIMITED
By: /s/
-------------------------------------------
Its: Lawrence A. Jacobs
Director
AHN/FIT CABLE, LLC
By: /s/
-------------------------------------------
Its: Daniel Fawcett
Exec. Vice President
AHN/FIT INTERNET, LLC
By: /s/
-------------------------------------------
Its: Daniel Fawcett
Exec. Vice President
NEWS AMERICA INCORPORATED
By: /s/
-------------------------------------------
Its: Lawrence A. Jacobs
Sr. Vice President
FOX BROADCASTING COMPANY
By: /s/
-------------------------------------------
Its: Paul Haggerty
Exec. Vice President
17
<PAGE> 1
EXHIBIT 10.5
HEALTHEON/WEBMD MEDIA SERVICES AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of the 26th day of January,
2000, is made by and between Healtheon/WebMD Corporation, a Delaware corporation
(the "Company"), and Eastrise Profits Limited, an international business company
incorporated under the laws of the British Virgin Islands corporation ("Star")
which is controlled by The News Corporation Limited ("News Corp"), and Fox
Entertainment Group, Inc., a Delaware corporation ("FEG" and collectively with
Star and News Corp, the "News Parties") (each referred to herein as a "Party",
and collectively referred to as the "Parties").
WHEREAS, the Company has developed and has expertise in the development
of Internet-related services and programming of interest to the health and
medical industries and owns or otherwise has the rights in and to certain
branded data, text, images, software, audio files, video files, graphic or other
similar materials related thereto ("Health Related Content"); and
WHEREAS, the News Parties through their respective subsidiaries and
affiliates have controlling and non-controlling interests in programs, networks
and other media properties of various kinds (the "Media Properties"); and
WHEREAS, the Company, the News Parties and affiliates of the News
Parties have entered into agreements and arrangements (together, the "Related
Agreements") as a result of which the News Parties and their affiliates are
obligated to provide media services of various kinds as hereinafter provided;
and
WHEREAS, it is a condition of the Related Agreements that the Parties
enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
MEDIA SERVICES/ACCOUNTING
1.1 MEDIA SERVICES. In response to requests by the Company made in
consultation with the News Parties from time to time, the News Parties agree to
provide, to cause Controlled Affiliates to provide, and to use commercially
reasonable efforts to cause Non-Controlled Affiliates to provide, to the Company
(i) advertising and marketing services (the "Advertising Services") and (ii)
promotion, programming and distribution services (the "Promotional Services" and
together with the Advertising Services, the "Media Services") in the Territory
during the period commencing on the date hereof and ending on August 31, 2010
(the "Effective Period"). As used herein, "Controlled Affiliates" means any
corporation or other entity more than 50% of whose outstanding voting securities
or other equity interests are directly or indirectly owned by News Corp.;
"Non-Controlled Affiliates" means any corporation or other entity in which News
Corp. directly or indirectly has a greater than 20% but no more than 50% equity
interest; and "Territory" means the world.
1.2 ACCOUNTING AND REPORTING STATEMENTS. The News Parties shall
accurately account for the rendition of the Media Services to the Company unless
otherwise agreed upon in connection with particular Media Services. The News
Parties shall prepare and deliver to the Company at the beginning and the end of
each television broadcast season a statement (the "Services Statements")
indicating in
<PAGE> 2
reasonable detail the value (determined as provided herein) of the Media
Services to be furnished and furnished under this Agreement during such
television broadcast season computed in good faith in accordance with Sections
2.2 and 3.5 of this Agreement. All such Services Statements, and the information
contained therein, shall constitute confidential "Information" of the News
Parties, which shall be subject to Article 8 hereof. Disputes with respect to
any valuations of Media Services shall be resolved in accordance with Article 7.
ARTICLE 2
ADVERTISING AND MARKETING
2.1 ADVERTISING MEDIA. During the Effective Period, the News
Parties agree to provide, to cause Controlled Affiliates to provide and to use
commercially reasonable efforts to cause Non-Controlled Affiliates to provide,
an aggregate of $240 million of Advertising Services on television and cable
properties, film properties, print advertising media and News America Digital
Publishing's Internet sites owned by the News Parties, the Controlled Affiliates
and the Non-Controlled Affiliates ("Advertising Space"). The dollar amount of
Advertising Services to be provided to the Company during each television
broadcast season is set forth opposite the respective season on Schedule 1
attached hereto. Attached as Schedule 2 is a representative allocation of the
Advertising Space to be provided to the Company during a television broadcast
season (the "Representative Allocation"). The Parties shall use the
Representative Allocation as a benchmark for their determination of the amount,
placement and pricing of Advertising Space to be provided to the Company each
season. The Parties shall meet during the upfront selling period for each
television broadcast season (the "Upfront Period") to determine the Advertising
Space to be allocated to the Company for the season beginning in September of
such year. The Parties intend that all of such Advertising Space for that season
will be allocated at that time, subject to reasonable flexibility as required
for changes in unforeseen circumstances. After the allocation of Advertising
Services is decided upon during the Upfront Period, the Company shall coordinate
directly with the particular Controlled Affiliate or Non-Controlled Affiliate
with which the Company has chosen to advertise. The News Parties shall use
commercially reasonable efforts to satisfy, and to cause the Controlled
Affiliates and Non-Controlled Affiliates to satisfy, all requests made by the
Company in connection with the placement and scheduling of all advertisements.
The Parties also agree that they will pro rate, to the extent practicable,
Advertising Space based on the Representative Allocation during the period
commencing on the date hereof and ending on August 31, 2000 (the "Short
Season"), subject to the understanding that a majority of the Short Season has
been previously sold. Any amounts attributable to Advertising Space provided to
the Company during the Short Season shall reduce the amount of Advertising Space
to be provided to the Company in the tenth (10th) television broadcast season.
2.2 DETERMINATION OF DOLLAR AMOUNT OF ADVERTISING SERVICES. The
News Parties agree that the dollar amount of Advertising Services to be provided
to the Company pursuant to this Agreement shall be based upon advertising prices
which are charged by the News Parties to similarly situated parties based upon
similar volume, placement, amount and other factors relevant to the pricing of
advertising services, but in no event shall the dollar amount charged for
Advertising Services to be provided to the Company pursuant to this Agreement be
greater than the prices charged, on average, to the top twenty advertisers on
the Advertising Space platform in question.
2.3 APPROVAL OVER CONTENT. The News Parties shall have final
approval over all content exhibited under this Agreement to insure that such
content meets the News Parties' editorial standards, which approval shall not be
unreasonably withheld.
2
<PAGE> 3
ARTICLE 3
PROMOTION, PROGRAMMING AND DISTRIBUTION
3.1 PROMOTIONAL SERVICES. During the Effective Period, the News
Parties agree to provide, to cause Controlled Affiliates to provide and to use
commercially reasonable efforts to cause Non-Controlled Affiliates to provide,
at least $160 million (valued pursuant to Section 3.5) of Promotional Services
(as more fully described in Section 3.2, 3.3 and 3.4) on television and cable
properties, film properties, print media and News America Digital Publishing's
Internet sites owned by the News Parties, the Controlled Affiliates and the
Non-Controlled Affiliates (the "Promotional Channels"). The minimum inherent
market value of Promotional Services to be provided to the Company during each
television broadcast season is set forth opposite the respective season on
Schedule 3 attached hereto.
3.2 PROMOTIONS. Attached as Schedule 4 is a list of various forms
of Promotional Service that may be provided to the Company during a television
broadcast season (the "Promotional List"). The Parties shall use the Promotional
List as a benchmark for their determination of the nature, volume and placement
of the Promotional Services (in addition to Promotional Services that may be
provided pursuant to Section 3.3 and 3.4) to be provided to the Company each
season. The Parties shall meet during the Upfront Period to determine the
Promotional Services to be allocated to the Company on which Promotional
Channels for the season beginning in September of such year. The Parties intend
that all of such Promotional Services for that season will be allocated at that
time, subject to reasonable flexibility as required for changes in unforeseen
circumstances. After the allocation of Promotional Services is decided upon
during the Upfront Period, the Company shall coordinate directly with the
particular Controlled Affiliate or Non-Controlled Affiliate with which the
Company has chosen to place such Promotional Services. The News Parties shall
use commercially reasonable efforts to satisfy, and to cause the Controlled
Affiliates and Non-Controlled Affiliates to satisfy, all requests made by the
Company in connection with the placement of all Promotional Services. The
Parties agree that they will pro rate, to the extent practicable, Promotional
Services during the Short Season, subject to the understanding that a majority
of the Short Season has been previously produced. Any amounts attributable to
Promotional Services provided to the Company during the Short Season shall
reduce the amount of Promotional Services to be provided to the Company in the
tenth (10th) television broadcast season.
3.3 PROGRAMMING - TIMING, PRODUCTION AND CONTENT. The Company and
the News Parties shall use commercially reasonable efforts to enter into
co-production agreements covering the timing, budgeting, production,
intellectual property rights, talent utilized, scheduling, locations,
exhibition, distribution and content of the following production services and
any additional production services:
(a) one half-hour weekly program on the Fox News Channel
(or its successor) at such time or times as the Parties mutually agree. The
Company will control 50% of the advertising inventory (and be entitled to the
revenues therefrom) and pay 50% of the production cost thereof, all as more
fully set forth in a co-production agreement to be negotiated in good faith,
containing customary or otherwise agreed upon terms and conditions with respect
to such weekly show.
(b) one half-hour weekly program on Fox Sports Net (or
its successor) at such time or times as the Parties mutually agree, which show,
among other things, may contain local components furnished by the Company. The
Company will control 50% of the advertising inventory (and be entitled to file
revenues therefrom) and pay 50% of the production cost thereof, all as more
fully set forth in a co-production agreement to be negotiated in good faith
containing customary or otherwise agreed upon terms and conditions with respect
to such weekly show.
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(c) one nightly segment on the Fox News Channel (or its
successors) which will be sponsored by the Company and with respect to which the
Company shall receive one 30 second advertising spot which spot may be sold by
the Company for the Company's own account, subject to the News Parties' approval
as to the terms of such sale (which approval shall not be unreasonably
withheld), all as more fully set forth in an agreement to be negotiated in good
faith containing customary or otherwise agreed upon terms and conditions with
respect to such segment.
(d) one weekly segment on the evening news program and
one weekly segment on a morning news program on Fox's owned and operated
stations, in each case sponsored by the Company all as more fully set forth in
an agreement to be negotiated in good faith containing customary or otherwise
agreed upon terms and conditions with respect to such segments.
3.4 DISTRIBUTION. The News Parties agree to cause Controlled
Affiliates to obtain or provide (as and when available, subject to existing
obligations and business plans) and to use commercially reasonable efforts to
cause Non-Controlled Affiliates to obtain or provide distribution for Health
Related Content.
3.5 DETERMINATION OF INHERENT MARKET VALUE OF PROMOTIONAL
SERVICES. The News Parties agree that they will provide at least the Inherent
Market Value of Promotional Services to the Company during each broadcast season
as set forth opposite such season on Schedule 3. As used herein, "Inherent
Market Value" means a value determined after taking into consideration (i) the
prices which are charged by the News Parties to similarly situated parties (to
the extent the News Parties shall sell such services), the opportunity costs of
the News Parties and its out of pocket costs and expenses, (ii) the value
derived by the Company from such Promotional Services and (iii) similar pricing
structures employed in comparable relationships, including the relationship
among CBS and Medscape, Sportsline and MarketWatch. The Company shall have the
right to audit the Inherent Market Value of Promotional Services provided to the
Company each broadcast season pursuant to Article 7 hereof.
3.6 PAYMENT OF EXPENSES FOR PROMOTIONAL SERVICES. The News Parties
shall invoice the Company on a monthly basis during each broadcast season for
the Company's share of production costs associated with the Promotional Services
provided during the previous month. The Company shall remit such production
costs to the News Parties within 30 days of the Company's receipt of the
invoice.
ARTICLE 4
MAINTENANCE OF RECORDS
4.1 RECORDS. Each Party shall maintain books and records directly
related to the subject matter of this Agreement that are sufficient to verify
any amounts deemed paid, payable or credited pursuant to this Agreement. Not
more than once during any twelve month period, each Party may conduct an
inspection of the other's books and records for the sole purpose of verifying
such amounts and/or statistics. Such inspections shall be conducted upon
reasonable prior notice, at the Parties' normal places of business, during
normal business hours and in a manner so as to minimize disruptions to the
Parties' normal course of business. No Party shall be permitted to copy or
duplicate any of the books and records of the other Party during the course of
such inspection. The Parties acknowledge that the books and records of the other
Party, including the information contained therein are of a confidential nature
and, accordingly, shall be included in the "Information" that is subject to the
provisions of Article 8 hereof.
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<PAGE> 5
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each of the News
Parties represents and warrants to the Company and the Company represents and
warrants to the News Parties that:
(a) it is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
the full power and authority to carry out its business as now conducted and to
own its assets, property and business;
(b) all corporate and other proceedings required to be
taken by it or on its behalf to authorize its entry into this Agreement have
been duly and validly taken, and this Agreement has been duly and validly
executed and delivered by it and constitutes a valid and binding agreement in
accordance with its terms; and
(c) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
default under or violate any material agreement to which it is a party or by
which it is bound, or violate any provisions of its organizational documents.
5.2 NEWS PARTIES COVENANTS. Each of the News Parties covenants and
agrees that News Corp shall be able to procure from the News Parties, their
Controlled Affiliates, Non-Controlled Affiliates or others during the Effective
Period promotional channels and advertising space comparable to the Promotional
Channels and Advertising Space owned or available to them as of the date hereof,
to the extent necessary to provide the Media Services.
ARTICLE 6
INDEMNIFICATION
6.1 The further agreements entered into pursuant to this Agreement
shall contain customary indemnification provisions with respect to content and
other matters.
ARTICLE 7
DISPUTE RESOLUTION REVALUATION
7.1 DISPUTE RESOLUTION. If the Company shall dispute the News
Parties valuation of any Media Services provided by the News Parties hereunder,
the Company shall (no later than 60 days after receipt of the Services Statement
after the end of the applicable broadcast season) send a notice to the News
Parties detailing the claimed error and the amount and nature of the error and
naming an independent nationally recognized accounting firm (the "Dispute
Notice"). If the News Parties do not agree with the Dispute Notice or the
Parties fail to resolve all matters set forth in the Dispute Notice within 30
days after receipt of the Dispute Notice, the News Parties shall forward a copy
of the Dispute Notice along with a statement of the News Parties' position to
the Media Valuation Expert (defined below), which shall resolve the valuation
dispute within 90 days of receipt of such Dispute Notice in accordance with
valuation standards set forth in Sections 2.2 and 3.5 hereof. If the agreed upon
value of the Media Services as determined pursuant to this Section 7.1 is less
than the value of Media Services to be provided to the Company in the applicable
television broadcast season as set forth on Schedules 1 and 3 hereof, the
difference between such values shall be added to the amount of Advertising
Services and Promotional Services, as applicable, to be provided to the Company
during the next broadcast season. If the agreed upon value of the Media Services
as determined pursuant to this Section 7.1 is more than the
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<PAGE> 6
value of Media Services to be provided to the Company in the applicable
television broadcast season as set forth on Schedules 1 and 3 hereof, the
difference between such values shall be subtracted from the amount of
Advertising Services and Promotional Services, as applicable, to be provided to
the Company during the next broadcast season.
7.2 FEES AND EXPENSES. The fees and expenses of the Media
Valuation Expert shall be borne by the News Parties, unless the Media Valuation
Expert determines that the valuation set forth in the Services Statement is
correct or the value of the Media Services is greater than that set forth in the
Services Statement, in which event the fees and expenses of the Media Valuation
Expert shall be borne by the Company. The determination of value pursuant to
this Article 7 shall be final and binding on the Parties. As used herein, the
term "Media Valuation Expert" means an independent nationally recognized
accounting firm mutually selected by the accounting firm set forth in the
Dispute Notice and an independent nationally recognized accounting firm selected
by the News Parties. The Parties shall cause the Media Valuation Expert to enter
into a confidentiality agreement in form and substance acceptable to the Parties
and the Media Valuation Expert.
ARTICLE 8
CONFIDENTIALITY
8.1 NONDISCLOSURE. Each Party acknowledges that it will have
access to certain information and materials concerning the other Party's
business, plans, customers, technology and products that are confidential and of
substantial value to such Party (referred to in this Agreement as
"Information"), which value would be impaired if such Information were disclosed
to third persons. Except as otherwise expressly provided herein, each Party
agrees to maintain all Information received from the other (the "Disclosing
Party"), including the terms and conditions of this Agreement, in confidence and
agrees not to disclose or otherwise make such Information available to any third
Person without the prior written consent of the Disclosing Party. Subject to the
use restrictions set forth in this Section 8.1, the News Parties may disclose
Information provided by the Company hereunder to Controlled Affiliates and
Non-Controlled Affiliates and their Authorized Representatives to the extent
such disclosure is necessary for the News Parties to perform their obligations
under this Agreement. Subject to the use restrictions set forth in this Section
8.1, the Company may disclose Information provided by News Parties hereunder to
Affiliates of the Company and its Authorized Representatives to the extent such
disclosure is necessary for the Company to purchase Media Services pursuant to
this Agreement. As used herein, the term "Affiliate" means, with respect to any
Person, any other Person that controls, through the ability to exercise 50% or
more of the voting power of such Person, or is so controlled by or is under such
common control with such Person; the term "Authorized Representative" means,
with respect to any Person, only those employees and agents of such Person that
have been appraised of the obligations contained in this Article 8 and have
agreed to adhere thereto; provided that under no circumstances shall Authorized
Representatives include any Person that has an affiliation of any nature with
any Competitor of the Disclosing Party, including without limitation, any
advertising agency which has, or may, do business with the Disclosing Party; and
the term "Person" means any individual person, corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.
8.2 EXCLUSIONS. The foregoing shall not apply to Information
which:
(a) is or becomes a matter of public knowledge through no
fault of or action by the receiving Party;
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<PAGE> 7
(b) was rightfully in the receiving Party's possession
prior to disclosure by the Disclosing Party;
(c) subsequent to disclosure, is rightfully obtained by
the receiving Party from a third Person who is lawfully in possession of such
Information without restriction;
(d) is independently developed by the receiving Party
without resort to Information which is confidential under this Agreement; or
(e) is required by law, regulation, governmental agency,
or judicial order to be disclosed.
8.3 RETURN OF INFORMATION. Whenever reasonably requested by a
Disclosing Party, a receiving Party shall immediately return to the Disclosing
Party all Information or, at the Disclosing Party's option, shall destroy all
such Information as the Disclosing Party may designate and provide to the
Disclosing Party written certification of destruction.
8.4 PUBLICITY. The timing and content of any press release
regarding any aspect of this Agreement or the Related Agreements (whether in
electronic, print or other media) shall be subject to the prior written approval
of both Parties, which approval shall not be unreasonably withheld.
8.5 SURVIVAL. Each receiving Party's obligation of confidentiality
pursuant to this Article 10 shall survive any termination or expiration of this
Agreement or of a period of two years from the date of any such expiration or
termination, and thereafter shall terminate and be of no further force or
effect.
ARTICLE 9
GENERAL PROVISIONS
9.1 GOVERNING LAW. This Agreement will be interpreted and governed
by the laws of the State of Delaware.
9.2 INDEPENDENT CONTRACTORS. The relationship of the Company and
the News Parties established by this Agreement is that of independent
contractors, and nothing contained in this Agreement shall be construed to
constitute the Parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
9.3 SUBCONTRACTORS. Each Party shall have the right to appoint
third person subcontractors and to otherwise delegate its obligations hereunder,
it being understood and agreed that each Party shall remain in all respects
fully responsible for all of such Party's obligations hereunder and any Party's
appointment of a subcontractor or delegation of its obligations otherwise shall
not relieve such Party of any of its obligations hereunder.
9.4 MODIFICATION. No amendment or modification to this Agreement
shall be effective unless agreed to by the Parties in writing, and no waiver of
any rights hereunder shall be effective unless assented to in writing by the
Party waiving such right.
9.5 FORCE MAJEURE. Neither Party will be liable for any failure or
delay in its performance under this Agreement, except for payment obligations,
due to acts of God, acts of civil or military authority, fire, electrical
shortages, failure of telecommunication lines (including, without limitation,
7
<PAGE> 8
Internet access equipment or lines), epidemic, flood, earthquake, riot, war,
sabotage, governmental action or any other event beyond the reasonable control
of such Party, and its Affiliates (collectively, "Events of Force Majeure"). A
delayed party shall nevertheless give the other Party written notice of such
Event of Force Majeure promptly and shall use its reasonable efforts to correct
such failure or delay in performance. Notwithstanding the foregoing, an Event of
Force Majeure shall not relieve the News Parties from providing at a later date
the Media Services which were not provided as a result of the Force Majeure.
9.6 HEADINGS. The headings and captions used in this Agreement are
for convenience of reference only , and shall not in any way affect the
interpretation of the provisions of this Agreement.
9.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.8 ASSIGNMENT. Neither Party may assign its rights under this
Agreement, whether by operation of law or otherwise, without the prior written
consent of the other Party, except that either Party may assign its rights under
this Agreement to (a) an Affiliate, for so long as such entity remains an
Affiliate of the assigning Party during the term of the assignment, (b) any
entity into which the Party has merged or which has otherwise succeeded to all
or substantially all of its business and assets to which this Agreement
pertains, by merger, reorganization or otherwise, and which has assumed in
writing or by operation of law the assigning Party's obligations under this
Agreement; provided further that the assigning Party shall remain liable for all
obligations under this Agreement. Subject to the previous sentences, the rights
and liabilities of the Parties hereto will bind and inure to the benefit of
their respective permitted successors, executors and administrators, as the case
may be.
9.9 SEVERABILITY. If any provision of this Agreement is held to be
invalid by a court of competent jurisdiction, then the remaining provisions will
nevertheless remain in full force and effect. The Parties agree to renegotiate
in good faith any term held invalid and to be bound by the mutually agreed
substitute provision.
9.10 NOTICES. All notices required or permitted under this
Agreement will be in writing and will be deemed given:
(a) when delivered personally;
(b) when received, if sent by confirmed facsimile
transmission, or by registered or certified mail, return receipt requested,
postage prepaid; or
(c) one day after deposit with a commercial overnight
carrier specifying next day delivery, with written verification of receipt.
All communications will be sent to the following respective addresses
or to such other address as may be designated by a Party by giving written
notice to the other Party pursuant to this Section.
8
<PAGE> 9
If to the Company:
c/o Healtheon/WebMD Corporation
400 The Lenox Building
Atlanta, Georgia 30326, USA
Telephone: (404) 479-7600
Telecopier:(404) 479-7651
Attention: Jeffrey T. Arnold
Chief Executive Officer
With a copy to.
Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
Suite 2600
100 Tryon Street
Charlotte, North Carolina 28202
Telecopier: (704) 377-4814
Attention: H. Bryan Ives III, Esq.
C. Mark Kelly, Esq.
If to the News Parties:
c/o The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Phone: (212) 852-7007
Fax: (212) 768-2029
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President and
Group General Counsel
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Telecopier: (212) 697-6686
Attention: Joel I. Papernik, Esq.
9.11 JOINT VENTURE PROMOTION. In order to promote the global
partnership evidenced by the Related Agreements, Healtheon/WebMD agrees to
provide to the News Corp Parties and its Controlled Affiliates and
Non-Controlled Affiliates with added value across the WebMD Consumer and
Professional Portals. The following outlines ways in which Healtheon/WebMD can
drive traffic and reinforce branding for the Media Properties of the News Corp
Parties, their Controlled Affiliates and their Non-Controlled Affiliates. WebMD
will integrate Fox news updates, feeds and articles into content targeting
physicians and consumers. Additionally, Fox sports news can be integrated
throughout the WedMD Sports and Fitness Channel through Fox sports tips, updates
and articles. Healtheon/WedMD agrees to provide online traffic drivers to the
Media Properties through banners, buttons, text links, and text paragraphs
through the WebMD Consumer and Professional Portal
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(Carriage plan to be finalized. Content integration applies to areas without
current conflicting contracts.)
9.12 NO WAIVER. The failure of either Party to enforce any term or
condition of this Agreement will not constitute a waiver of such Parry's rights
to enforce subsequent breaches of any term or condition under this Agreement.
9.13 INJUNCTIVE RELIEF. Each Party agrees that there may be no
adequate remedy at law available to the other Party in the event of certain
breaches of this Agreement and that the other Party, in addition to any other
rights which may be available to it, shall have the right to seek specific
performance or relief, as applicable, in the event of any breach or threatened
breach of such provisions.
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<PAGE> 11
Each Party has read, understands and agrees to the terms and conditions
of this Agreement and the undersigned are duly authorized to sign this
Agreement.
EASTRISE PROFITS LIMITED
By: /s/
-----------------------------------------------
Name: Lawrence A. Jacobs
Title: Director
FOX ENTERTAINMENT GROUP, INC.
By: /s/
-----------------------------------------------
Name: Lawrence A. Jacobs
Title: Secretary
HEALTHEON/WEBMD CORPORATION
By: /s/
-----------------------------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
The undersigned, by its signature below, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
News Parties, their Controlled Affiliates and Non-Controlled Affiliates set
forth in this Agreement. This is a guaranty of payment and not of collection.
News Corp hereby waives the right to require the Company to proceed against the
News Parties or any other person or to require the Company to pursue any other
remedy or enforce any other right.
THE NEWS CORPORATION LIMITED
By: /s/
-----------------------------------------------
Its: Arthur Siskind
Director
<PAGE> 1
EXHIBIT 10.6
CONTENT LICENSE AGREEMENT
Dated as of
January 26, 2000
Between
THE NEWS CORPORATION LIMITED
and
HEALTHEON/WEBMD CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1.........................................................................................................1
DEFINITIONS....................................................................................................1
ARTICLE 2.........................................................................................................2
CREATION OF LICENSE RELATIONSHIP...............................................................................2
2.1 GRANT OF LICENSE......................................................................................2
2.2 SCOPE OF LICENSE; RESTRICTIONS ON USE OF WEBMD CONTENT................................................2
2.3 GRANT OF RIGHT IN WEBMD LOGO................................................................................3
2.4 NO OTHER RIGHTS GRANTED...............................................................................5
2.5 ROYALTY...............................................................................................5
ARTICLE 3.........................................................................................................5
WEBMD CONTENT..................................................................................................5
3.1 Selection, Format, Design and Updating................................................................5
3.2 REMOVAL OF WEBMD CONTENT..............................................................................5
3.4 OWNERSHIP OF WEBMD CONTENT............................................................................6
3.5 OTHER AGREEMENTS......................................................................................6
3.5 OTHER AGREEMENTS......................................................................................6
ARTICLE 4.........................................................................................................6
REPRESENTATIONS AND WARRANTIES.................................................................................6
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY..............................................7
ARTICLE 5.........................................................................................................6
TERM; TERMINATION..............................................................................................7
5.1 TERM....................................................................................................7
5.2 RIGHT TO TERMINATE BY WEBMD...........................................................................8
5.3 RIGHT TO TERMINATE BY THE COMPANY.....................................................................8
5.4 EFFECT OF TERMINATION.................................................................................8
5.5 CONTINUING OBLIGATIONS................................................................................9
ARTICLE 6........................................................................................................ 9
INDEMNIFICATION............................................................................................... 9
6.1 AGREEMENT OF WEBMD TO INDEMNIFY...................................................................... 9
6.2 AGREEMENT OF THE COMPANY TO INDEMNIFY\F C\L................................................................10
6.3 THIRD PARTY CLAIMS...................................................................................10
6.4 SPECIAL DAMAGES AND LIMITATION OF LIABILITY..........................................................11
ARTICLE 7........................................................................................................11
ADDITIONAL AGREEMENTS.........................................................................................11
7.1 CONFIDENTIALITY AND USE OF PROPRIETARY INFORMATION...................................................11
7.2 DEFINITION OF PROPRIETARY INFORMATION................................................................11
7.3 CONTENTS OF THIS AGREEMENT...........................................................................12
7.4 COMMUNICATIONS.......................................................................................12
7.5 PRESS RELEASES.......................................................................................13
7.6 GOVERNING LAW; CONSENT TO JURISDICTION...............................................................13
7.7 BINDING EFFECT; SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT.............................................13
7.8 AMENDMENTS AND WAIVERS...............................................................................14
7.9 HEADINGS.............................................................................................14
</TABLE>
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<TABLE>
<S> <C>
7.10 NO IMPLIED WAIVERS...................................................................................14
7.11 COUNTERPARTS.........................................................................................14
7.12 FURTHER ASSURANCES...................................................................................14
7.13 SEVERABILITY.........................................................................................14
7.14 SEVERABILITY.........................................................................................14
7.14 INJUNCTIVE RELIEF....................................................................................15
7.15 NO PARTNERSHIP, ETC..................................................................................15
7.16 CONSTRUCTION.........................................................................................15
7.17 DISCLAIMER OF WARRANTIES.............................................................................15
7.18 PLURALS..............................................................................................15
7.19 EFFECTIVENESS........................................................................................15
</TABLE>
ii
<PAGE> 4
CONTENT LICENSE AGREEMENT
THIS CONTENT LICENSE AGREEMENT (THE "AGREEMENT"), dated as of
26, 2000 (the "Effective Date"), by and between HEALTHEON/WEBMD CORPORATION, a
Delaware corporation ("WebMD"), and THE NEWS CORPORATION LIMITED a South
Australia, Australia corporation (the "Company").
W I T N E S S E T H:
WHEREAS, WebMD owns and operates a Web Site on the World Wide
Web currently accessible through the URL www.webmd.com which displays health and
medical content intended for consumers and healthcare professionals and
provides, promotes and sells healthcare related information, services and
products to consumers and healthcare professionals (the "WebMD Site"); and
WHEREAS, WebMD owns or licenses the WebMD Content which WebMD
uses in connection with the development and operation of the WebMD Site; and
WHEREAS, pursuant to a Master Strategic Alliance Agreement
dated December 6, 1999, by and between WebMD and the Company (the "Strategic
Alliance Agreement") WebMD desires to license to the Company the right to use
the WebMD Content for the purpose of using, displaying and publishing the WebMD
Content in any television, print, electronic or other medium now know or
hereinafter developed, owned or operated by the Company and/or its Operating
Companies (other than a Web Site) (individually a "News Channel" and
collectively the "News Channels").
NOW, THEREFORE, in consideration of the foregoing premises and
the agreements and covenants herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties do hereby agree as follows:
ARTICLE 1
DEFINITIONS
All capitalized terms used in this Agreement without definition shall
have the meanings ascribed to such terms in Exhibit A.
<PAGE> 5
ARTICLE 2
CREATION OF LICENSE RELATIONSHIP
2.1 GRANT OF LICENSE. Except as may be prohibited or otherwise
limited by the terms of any other obligations binding on the WebMD Group, other
than obligations that were incurred with the primary intent to frustrate the
purpose of this Agreement, and subject to terms and conditions of this
Agreement, WebMD for itself and on behalf of the other members of the WebMD
Group hereby agrees to provide, to cause Controlled Affiliates to provide, and
to use commercially reasonable efforts to cause Non-Controlled Affiliates to
provide, to the Company a non-exclusive license (the "License") during the term
hereof throughout the Territory to:
(a) use, copy, translate, display, publish and transmit
the WebMD Content solely for the purpose of developing and operating
the News Channels; and
(b) subject at all times to the obligations and duties of
the Company contained herein, sublicense only to Operating Companies
the rights granted hereunder; provided, however, that the Company shall
(i) obtain WebMD's prior written consent to each such sublicense (other
than with respect to Operating Companies directly or indirectly wholly
owned by the Company); (ii) obtain from such Operating Companies a
written instrument approved as to form and substance by WebMD, pursuant
to which each such Operating Company shall agree to be bound and comply
with the terms of this Agreement and (iii) at all times remain fully
liable for the actions of its Operating Companies. Operating Companies
with respect to which the foregoing conditions have been satisfied
shall hereinafter be referred to as "Sublicensees." The Sublicensees
shall be prohibited from granting any further sublicenses of the rights
granted hereunder to any other Person without the express prior written
approval of WebMD. WebMD agrees that any consent or approval required
by it under this Section 2.1(b) will not be unreasonably denied or
delayed and that WebMD will cooperate with the Company in completing
any approval process required hereunder in a reasonably expeditious
manner given the facts and circumstances pertaining to such approval.
As used herein, "Controlled Affiliates" means any corporation or other
entity more than 50% of whose outstanding voting securities or other equity
interest are directly or indirectly owned by WebMD; "Non-Controlled Affiliates"
means any corporation or other entity in which WebMD directly or indirectly has
a greater than 20% but no more than 50% equity interest.
2.2 SCOPE OF LICENSE; RESTRICTIONS ON USE OF WEBMD CONTENT.
(a) The License granted hereunder is non-exclusive and
the Company agrees to use the WebMD Content in accordance with the
terms hereof and solely for the purpose of engaging in the Licensed
Activities. The Company acknowledges that the grant of rights hereunder
excludes the right to use the WebMD Content in connection with (i) the
development or operation of any Web Site similar to the WebMD Site or
the development or operation of any Web Site which is otherwise
targeted or marketed primarily to health professionals anywhere in the
world; or (ii) the development or
<PAGE> 6
operation of any Web Site which is intended to display directly or
indirectly (through links or otherwise) health or medical content as a
distinct feature, section or subject matter anywhere in the world or
(iii) use the WebMD Content in connection with any Web Site described
(i) or (ii) above. The parties hereto agree that the covenants and
agreements set forth in this Section 2.2(a) are in addition to the
restrictive covenants set forth in Section 10.1 of the Strategic
Alliance Agreement. Additionally, the Company acknowledges that any
sublicense of the rights granted hereunder shall be strictly limited in
accordance with the terms hereof.
(b) The Company acknowledges and agrees that the scope of
the License granted hereunder is limited by and is subject to any and
all of WebMD's preexisting obligations, other than obligations that
were incurred with the primary intent to frustrate the purpose of this
Agreement. Accordingly, the Company agrees to conduct the activities
hereunder in accordance with all such limitations or restrictions which
may exist of which the Company has received written notice.
(c) Notwithstanding anything to the contrary contained in
this Agreement, WebMD shall have no obligation whatsoever to license to
the Company, or to authorize the Company to sublicense any of the
rights granted hereunder with respect to any particular country unless
and until WebMD shall determine, in the exercise of its reasonable
discretion, that (i) such country's laws afford adequate protection of
WebMD's interests in or ownership of the WebMD Content, WebMD Property
and WebMD Logos (collectively the "WebMD Intellectual Property"), and
(ii) the use of the WebMD Intellectual Property (or any part thereof)
in such country will not violate any Requirement of Law or expose WebMD
or any of its Affiliates to any unreasonable risk or liability which
might arise as a result of the use or display of any of the WebMD
Intellectual Property in such country. In its exercise of its
reasonable discretion under this Section 2.2(c), WebMD shall have the
right to request from the Company or a Sublicensee an opinion of
counsel or such other information to WebMD's reasonable satisfaction
opining about or providing such other information on a Requirement of
Law or such other matters relating to the protection of WebMD's
interests as WebMD may request, such opinion or information to be
obtained at the Company's or such Sublicensee's expense. WebMD agrees
to exercise its rights in the preceding sentence in a reasonable manner
so as to avoid unnecessary delays or interruptions in the business of
the Company and the Sublicensees.
2.3 GRANT OF RIGHT IN WEBMD LOGO
(a) WebMD Logo. WebMD hereby grants the Company a limited
non-exclusive license to use the WebMD logo in the form appearing in
Exhibit B attached hereto and any other WebMD marks, logotypes, or
brand identifiers as WebMD may provide to the Company from time to time
(collectively, the "WebMD Logo") during the Term of this Agreement.
Such license is granted solely in connection with the Company's rights
and obligations under this Agreement. All such uses will be in
compliance with WebMD's written trademark guidelines as provided by
WebMD to the Company from time to time. The Company will also be
allowed to use and reproduce the WebMD Logo for the promotion of the
WebMD Content, although to the extent such
<PAGE> 7
promotions involve media placements outside of the News Channels, then
the Company will only be allowed to make such uses and reproductions as
WebMD may approve in writing in advance of such promotion or
promotions.
(b) Limitations. The Company agrees that it will not in
any way suggest or imply by the use of the WebMD Logo that the News
Channels or any of their respective products or services are affiliated
with, endorsed or sponsored by or created in association with WebMD
except as agreed by WebMD. The Company acknowledges that WebMD owns all
right, title and interest and to the WebMD Logo and retains all rights
with respect thereto. The Company agrees not to do anything
inconsistent with such ownership and all uses of the WebMD Logo will
inure to the benefit of and on behalf of WebMD. The Company further
agrees that it will not attack or assist others in attacking the title
of the WebMD Logo.
(c) No Violation. The Company acknowledges and agrees
that:
(i) it will not register any WebMD Logo;
(ii) it will not knowingly permit any third party
to use any WebMD Logo unless authorized to do so in writing by
WebMD in this Agreement or otherwise;
(iii) it will not knowingly use or permit the use
of any mark, name, or image likely to cause confusion with any
WebMD Logo other than the WebMD Logo itself unless authorized
to do so in writing by WebMD; and
(iv) all goodwill associated with the Company's
use of the WebMD Logos will inure to WebMD.
(d) Prior Approval. The manner and form of use of the
WebMD Logos will be subject to WebMD's prior written approval, which
approval will not be unreasonably withheld or delayed following its
receipt of a sample, mock-up or other suitable example which provides
a fair representation of the proposed use of the WebMD Logo concerned
and indicates the context in which the WebMD Logo is to be used. Once
a use of a WebMD Logo is approved for use under certain
circumstances, then it is agreed that the Company may subsequently
make substantially similar uses of the WebMD Logo under similar
circumstances, but only until WebMD revokes or limits its approval
which it may do at its sole discretion. The Company will conform to
any alteration or revocation of the approval as soon as is
commercially reasonable.
The license granted pursuant to this Section 2.3 may be terminated
by WebMD upon a material breach by the Company, or any Affiliate of the
Company or any Sublicensee, of any material agreement, covenant or obligation
under this Section 2.3, which breach, if curable, remains uncured for a period
of sixty (60) days following the Company's receipt of written notice from
WebMD of the existence of such breach.
<PAGE> 8
2.4 NO OTHER RIGHTS GRANTED. Apart from the rights licensed under
Sections 2.1 and 2.3 above, this Agreement does not grant to the Company any
right to engage in any activity other than the Licensed Activities, nor any
ownership right, title, or interest, nor any security interest or other
interest, in any of the WebMD Intellectual Property or any proprietary rights
relating to or created from such WebMD Intellectual Property or any developments
or enhancements with respect thereto.
2.5 ROYALTY. In consideration of WebMD's commitments set forth
herein, the Company will, in addition to its other commitments hereunder, pay to
WebMD during the Initial Term an annual royalty of twelve million U.S. dollars
($12,000,000), which amount shall be payable annually in advance in four equal
quarterly installments, which shall be paid at the commencement of each
quarterly period beginning on the date hereof and on each April 1, July 1,
October 1 and January 1 thereafter.
ARTICLE 3
WEBMD CONTENT
3.1 SELECTION, FORMAT, DESIGN AND UPDATING.
(a) WebMD may from time to time, modify and update the
WebMD Content as such modifications and/or updates are deemed necessary
or desirable by WebMD and the Company shall (to the extent that
particular WebMD Content is used by the Company) use such WebMD content
as modified or updated.
(b) With respect to any content WebMD obtains for use on
the WebMD Site, WebMD shall use reasonable commercial efforts to secure
the approval of third parties for the use by the Company of such
content. WebMD shall not be required to incur any additional cost in
securing such approval; provided, however, that in the event approval
to use such content may only be obtained by payment of any fee by
WebMD, WebMD, WebMD shall incur such cost only at the Company's request
and the Company shall have the obligation to reimburse WebMD for such
cost.
(c) With respect to the WebMD Content licensed hereunder,
the Company shall have the right to determine, in its reasonable
discretion, the WebMD Content it selects to display and/or publish on
the News Channels at any time, and from time to time subject to the
other provisions hereof; provided, however, that the Company shall
clearly attribute all WebMD Content used on a News Channel to WebMD.
Except as may be authorized in advance in writing by WebMD, or for the
purpose of localizing the WebMD Content, the Company shall have no
right to substantively modify in any manner whatsoever, any of the
WebMD Content licensed hereunder. WebMD Content which is owned or
controlled by a third party shall incorporate such credit designated by
such third party or WebMD and the Company and Sublicensees shall
preserve all such attributional rights.
3.2 REMOVAL OF WEBMD CONTENT. WebMD may, for good reason, from
time to time require the removal of any WebMD Content from any News Channel. If
WebMD requests removal of certain WebMD Content from a News Channel, the Company
shall complete such
<PAGE> 9
removal on the earlier of (i) the first commercially practicable date on which
the Company could terminate distribution of such programming or (ii) five
business days following receipt of WebMD's request for such removal.
3.3 OWNERSHIP OF WEBMD CONTENT; WEBMD PROPERTY. WebMD shall at all
times remain the owner of all right, title and interest in and to the WebMD
Content or any parts or derivatives thereof or any variations thereon. WebMD
shall own all right, title and interest in all aspects of the Look and Feel,
images and all other content, regardless of whether it is capable of trademark,
patent or other intellectual property law protection, furnished by or on behalf
of WebMD to the Company or the Sublicensees and displayed on the News Channels
or any parts or derivatives thereof or any variations thereon (collectively, the
"WebMD Property").
3.4 USER INFORMATION. All data regarding any user of the WebMD
Site, their personal information, or information regarding their use of or
interaction with the WebMD Site shall at all times be and remain the sole and
exclusive property of WebMD ("WebMD User Information").
3.5 OTHER AGREEMENTS. The Company:
(a) agrees to comply with all Requirements of Law in
connection with the use of the WebMD Content;
(b) agrees that all rights in and to any of the WebMD
Content not expressly licensed hereunder are reserved to WebMD;
(c) agrees not to sublicense, assign, transfer, pledge,
offer as security, or otherwise encumber the WebMD Content or any of
the rights granted hereunder in any way other than as expressly
provided in the Agreement;
(d) agrees not to use any of the WebMD Content in any
manner or for any purpose whatsoever in violation of the terms of this
Agreement;
(e) acknowledges and agrees that it shall not at any time
during the Term or thereafter (i) challenge the title or any other
rights of WebMD or its licensors in or to the WebMD Content or any of
the other WebMD Intellectual Property or any parts or derivatives
thereof or any variations thereon, (ii) contest the validity of the
copyrights or other proprietary interests in and to the WebMD Content
or any other WebMD Intellectual Property held by WebMD or any third
party or (iii) claim any right, title or interest in or to the WebMD
Content or any other WebMD Intellectual Property or any parts or
derivatives thereof or any variation thereon; and
(f) agrees to use its best efforts to cause the
Sublicensees to comply with the terms of this Section 3.5 to the extent
this Section creates obligations for the Company.
<PAGE> 10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY AND WEBMD.
(a) Authority of the Company. The Company agrees and
represents that the Company has the authority to execute, deliver and
perform its obligations under this Agreement, having obtained all
required consents, and is duly organized or formed and validly existing
in good standing under the laws of the state of its incorporation or
formation.
(b) Conflicts. The Company acknowledges that WebMD has
licensed the WebMD Content to other parties to promote and enhance the
goodwill of the WebMD Content. The Company agrees that in the event
WebMD determines that the Company's activities taken pursuant to this
Agreement come into conflict with the interests or rights of other
licensees, the Company shall in good faith cooperate with WebMD in
order to resolve the conflict and, in the event the conflict cannot be
resolved, shall take the action requested by WebMD as long as it is
commercially practical to do so; provided, however, that WebMD
represents and warrants that there are no such licenses which might
reasonably be expected to have a material adverse effect on the
Company.
(c) Authority of WebMD. WebMD represents and warrants
that WebMD has (i) the authority to execute, deliver and perform its
obligations under this Agreement, having obtained all required Board of
Directors or other consents, (ii) is duly organized or formed and
validly existing in good standing under the laws of the state of its
incorporation or formation and (iii) owns all right, title and interest
in and to the WebMD Content authored by WebMD and has all rights
necessary to license the third party content provided to the Company
hereunder. The parties agree that the Company's or any Sublicensee's
remedy with respect to a breach of WebMD's representation set forth in
Section 4.1(c) above shall be as set forth in Section 6.1(b) herein.
(d) EXCEPT FOR THE EXPRESS WARRANTIES STATED HEREIN,
WEBMD DOES NOT MAKE ANY WARRANTY AS TO THE ACCURACY OF ANY WEBMD
CONTENT LICENSED HEREUNDER OR THE RESULTS TO BE OBTAINED FROM ANY NEWS
CHANNEL USING THE WEBMD CONTENT. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH ABOVE, THE WEBMD CONTENT IS USED ON AN "AS-IS" BASIS WITHOUT
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NON-INFRINGEMENT.
ARTICLE 5
TERM; TERMINATION
5.1 TERM.
This Agreement will be effective as of the date hereof and
will continue for a period of five (5) years, unless earlier terminated in
accordance with this agreement (the "Initial Term"). The term of this Agreement
may be extended for a period of five (5) years from and after the Initial Term
(the "Renewal Term"), at the Company's option; provided, however, that
<PAGE> 11
the Company agrees to extend the term of that certain Content License Agreement
of even date herewith by and between the Company and WebMD pursuant to which the
Company has agreed to license certain content to WebMD. The parties agree that
no royalty payment will be due or owing by the Company to WebMD during the
Renewal Term. Together, the Initial Term and the Renewal Term are collectively
referred to as the "Term."
5.2 RIGHT TO TERMINATE BY WEBMD. This Agreement may be terminated
upon the written consent of the parties or by WebMD upon any of the following
events:
(a) Upon the dissolution of WebMD International as
provided in Article 8 of the Operating Agreement.
(b) Upon termination or expiration of the Operating
Agreement.
(c) Upon a material breach by the Company or any
Affiliate of the Company or any Sublicensee of any material agreement,
covenant or obligation hereunder, which breach, if curable, remains
uncured for a period of sixty (60) days following the Company's receipt
of written notice from WebMD of the existence of such breach.
(d) Upon the exercise by the News Member (as defined in
the Operating Agreement) of its put rights as set for in the Operating
Agreement.
5.3 RIGHT TO TERMINATE BY THE COMPANY
This Agreement may be terminated upon the written consent of
the parties or by the Company upon any of the following events:
(a) Upon the dissolution of WebMD International as
provided in Article 8 of the Operating Agreement;
(b) Upon termination or expiration of the Operating
Agreement;
(c) Upon a material breach by WebMD or any Affiliate of
WebMD or any Sublicensee of any material agreement, covenant or
obligation hereunder, which breach, if curable, remains uncured for a
period of sixty (60) days following the WebMD's receipt of written
notice from the Company of the existence of such breach; and
(d) Upon the exercise by the News Member (as defined in
the Operating Agreement) of its put rights as set for in the Operating
Agreement.
5.4 EFFECT OF TERMINATION. Upon the expiration or termination of
the Term:
(a) the License will automatically terminate;
(b) the Company shall and shall cause all Sublicensees to
immediately cease to use, display, reproduce, sublicense, transmit
and/or distribute in any manner and for any purpose, directly or
indirectly, the WebMD Content, any other WebMD Intellectual Property or
any other material supplied by or on behalf of WebMD to the Company or
Sublicensees;
<PAGE> 12
(c) the Company shall and shall cause all Sublicensees to
immediately return to WebMD the WebMD Content and any other WebMD
Intellectual Property in its or their possession and/or destroy any and
all embodiments of any portion of any of the foregoing together with
any copies made from the same which are then under the possession or
control of the Company or sublicensees;
(d) in the event of termination by the Company pursuant
to 5.3(c) (material breach by WebMD), WebMD shall promptly pay the
Company a pro rata portion of the royalty for that quarter paid by the
Company for the portion of the quarter remaining after termination;
(e) in the event of termination by WebMD pursuant to
Section 5.2 hereof or termination by the Company pursuant to Sections
5.3(a), (b) or (d) hereof, the Company shall pay within fifteen (15)
days from the date of termination in immediately available funds, the
[present value of the] aggregate unpaid royalties which would otherwise
become due and payable to WebMD through the end of the Initial Term as
set forth in Section 2.5 hereof; and
(f) except as otherwise provided in Sections 5.4(d) and
(e) above, the Company shall promptly pay to WebMD any royalty or other
amounts which are due and owing to WebMD pursuant to the terms hereof,
and except as provided in Section 5.5 below, no further payments shall
be due by the Company.
5.5 CONTINUING OBLIGATIONS. Except as expressly provided in this
Agreement, the termination of this Agreement or expiration of the Term for any
reason shall not release any party from the obligations set forth in Articles 3,
4, 6 and 7, Section 2.5 and 5.4(d), and this Section 5.5, and each party hereto
shall be, and shall continue to be and remain liable to the other parties for
any and all damages which such party has or may sustain by reason of such first
party's default or breach of such provisions of this Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 AGREEMENT OF WEBMD TO INDEMNIFY. (a) Except as set forth in
Section 6.1(b) below and subject to the limitation of liability set
forth in Section 6.4 hereof, WebMD hereby agrees to indemnify, defend
and hold harmless the Company and its directors, officers, employees
and agents and their respective successors and assigns (collectively
the "Company Indemnitees") from and against any loss, costs, expenses
(including reasonable attorneys' fees and expenses), claims, demands,
liabilities, causes of action or damages incurred by any Company
Indemnitee in connection with or relating to any material breach of a
representation, warranty, covenant or agreement of WebMD contained in
this Agreement.
(b) The parties hereto agree that with respect to any
claim that the Company or any Sublicensee infringes any copyright or
trademark or other intellectual property
<PAGE> 13
right as a result of the Company's (or a Sublicensee's) use or display
of the WebMD Content, WebMD will only be responsible for the payment of
any judgment, fine and/or penalty finally awarded against the Company
or such Sublicensee as a result of such claim and any settlements
agreed to with respect to such claim.
6.2 AGREEMENT OF THE COMPANY TO INDEMNIFY. Subject to the
limitation of liability set forth in Section 6.4 hereof, the Company
hereby agrees to indemnify, defend and hold harmless WebMD and its
officers, directors, shareholders, employees, agents and Affiliates and
their respective successors and assigns (collectively the "WebMD
Indemnitees") from and against any loss, costs, expenses (including
reasonable attorneys' fees and expenses), claims, demands, liabilities,
causes of action or damages incurred by any WebMD Indemnitee in
connection with or relating to any material breach of a representation,
warranty, covenant or agreement contained in this Agreement by the
Company, its Affiliates, the Sublicensees or any of their respective
officers, directors, employees or agents.
6.3 THIRD PARTY CLAIMS. A Person entitled to
indemnification for a Claim hereunder (the "Indemnified Party") shall give the
indemnifying party with respect to such Claim (the "Indemnifying Party")
reasonably prompt notice of such Claim brought by a third party. Such notice
shall describe the Claim in reasonable detail. The failure of the Indemnified
Party to give such notice to the Indemnifying Party shall not impair any of the
Indemnified Party's rights or benefits under this Article 6 except to the extent
such failure adversely affects the Indemnifying Party's ability to defend such
Claim. The Indemnifying Party, within a reasonable time after receiving
knowledge of a Claim by a third party against the Indemnified Party, shall (a)
notify the Indemnified Party in writing of the preference of the Indemnifying
Party to assume the defense thereof, and (b) retain legal counsel reasonably
acceptable to the Indemnifying Party to conduct the defense of such Claim. The
Indemnified Party shall cooperate with the Indemnifying Party in any manner
reasonably requested in connection with the defense, compromise or settlement of
any Claim. In any such Claim which the Indemnifying Party chooses to defend, the
Indemnified Party shall have the right to engage separate counsel and to
participate in the prosecution, defense, compromise, or settlement thereof or to
conduct its own defense of such claim. The fees and expenses of such counsel
engaged by the Indemnified Party (if the Indemnifying Party is conducting its
defense) shall be at the expense of the Indemnified Party unless the named
parties to any such Claim (including any impleaded parties) include the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall
have been advised by its counsel that there is a conflict of interest between
the Indemnified Party and the Indemnifying Party in the conduct of the defense
thereof. In such case, the reasonable fees and expenses of such separate counsel
to the Indemnified Party shall be borne by the Indemnifying Party. The
Indemnifying Party shall not, without written consent of the Indemnified Party,
compromise, settle or consent to entry of any order or judgment with respect to
any Claim (i) which involves any relief other than the payment of money damages
against the Indemnified Party or (ii) which does not include as an unconditional
term thereof, the giving by the defendant or Person conducting such
investigation or initiating such hearing, to the Indemnified Party, of a release
from all liability with respect to such Claim and all other Claims or causes of
action (known or unknown) arising or which might arise out of the same facts.
<PAGE> 14
6.4 SPECIAL DAMAGES; LIMITATION OF LIABILITY. EXCEPT FOR (i) A
BREACH OF SECTION 7.1, (ii) USE OF THE WEBMD INTELLECTUAL PROPERTY (OR ANY OTHER
PROPRIETARY INFORMATION) IN VIOLATION OF THIS AGREEMENT, (iii) ANY ELEMENTS OF A
FINAL AWARD OR SETTLEMENT PURSUANT TO THE PARTIES' OBLIGATIONS UNDER SECTION
6.1(a) AND 6.2(a) HEREOF, AND (iv) FRAUD OR WILLFUL, INTENTIONAL OR GROSSLY
NEGLIGENT CONDUCT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES ARISING OUT OF OR RELATED
TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION AND THE LIKE, EVEN
IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 CONFIDENTIALITY AND USE OF PROPRIETARY INFORMATION. Before,
at the time of or following the execution and delivery of this Agreement, the
Company shall not disclose any Proprietary Information to any Person, except (a)
with the prior written consent of WebMD; (b) to the extent necessary to comply
with law or the valid order of a court of competent jurisdiction, in which event
the Company shall so notify WebMD as promptly as practicable (and, if possible,
prior to making such disclosure) and shall seek confidential treatment of such
information; (c) as part of its normal reporting or review procedure to its
auditors and its attorneys; provided, however, that the Company shall be liable
for any breach by such auditors or attorneys of any provision of this Section
7.1; (d) in connection with the enforcement of the Company's rights hereunder;
and (e) disclosures to an Affiliate or Sublicensee of, or professional advisor
to, the Company in connection with the performance by the Company of its
obligations hereunder; provided, however, that the Company shall be liable for
any breach by such Affiliate, Sublicensee or professional advisor of any
provision of this Section 7.1. This Section 7.1 shall survive the termination of
this Agreement.
7.2 DEFINITION OF PROPRIETARY INFORMATION. "Proprietary
Information," as used herein, shall mean the WebMD Intellectual Property, and
any other proprietary ideas, plans and information, including information of a
technological or business nature, trade secrets, trade names, slogans,
copyrights, computer software, source code, object code, technology, know-how,
intellectual property, data, marketing plans, summaries, reports, or mailing
lists, in each case whether in tangible or intangible form. The parties agree
that the term "Proprietary Information" shall also include the contents of this
Agreement. Information will not be deemed to be Proprietary Information, and the
Company shall have no obligation with respect thereto, or to any part thereof,
to the extent such information: (i) is already known to the Company at the time
of receipt or disclosure, free of any obligation to keep it confidential, as
evidenced by written records made prior to such receipt or disclosure, and did
not become known to the Company through disclosure by a third party known to the
Company to be subject to an obligation to maintain the confidentiality thereof;
or (ii) is already publicly available prior to
<PAGE> 15
receipt or disclosure or subsequently becomes publicly available without any
fault of the Company or any of its Agents.
7.3 CONTENTS OF THIS AGREEMENT. The parties acknowledge however
that, notwithstanding Section 7.2 above, this Agreement, or portions hereof, may
be required under applicable law to be disclosed as part of or an exhibit to a
party's required public disclosure documents. If either party is advised by its
legal counsel that such disclosure is required, it will notify the other party
in writing and the parties will jointly seek confidential treatment of this
Agreement to the maximum extent reasonably possible in documents filed with the
applicable governmental or regulatory authorities.
7.4 COMMUNICATIONS. Unless otherwise provided therein, all notices
and other communications or designations required or permitted by this Agreement
shall be in writing, and,
If to the Company to:
The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Telecopier: (212) 768-2029
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopier: (212) 697-6686
or at such other address as the Company may designate in a written notice to
WebMD.
If to WebMD, to:
Healtheon/WebMD Corporation
400 The Lenox Building
3399 Peachtree Road NE
Atlanta, GA 30326
Attention: W. Michael Heekin, Esq.
Telecopier: (404) 479-7603
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Christopher D. Mangum, Esq.
Telecopier: (404) 881-4777
<PAGE> 16
or to such other address as WebMD may designate in a written notice to the
Company.
All notices and other communications required or permitted by this Agreement
shall be deemed to have been duly given if personally delivered to the intended
recipient at the proper address determined pursuant to this Section 7.4 or sent
to such recipient at such address by air courier, facsimile transmission,
followed by delivery by overnight courier, or by hand and will be deemed given,
unless earlier received: (a) if sent by air courier when recorded on the records
of the air courier as received by the receiving party; (b) if sent by facsimile
followed by delivery of overnight courier transmission upon transmission if on a
Business Day and during business hours in the country of receipt, otherwise, at
9:00 a.m. on the next Business Day in the country of receipt, subject to receipt
of a facsimile machine generated confirmation, and (c) if delivered by hand, on
the date of receipt.
7.5 PRESS RELEASES. Neither party will issue any press release or
make a public announcement relating in any way whatsoever to this Agreement or
the relationship established by this Agreement without the written consent of
the other party (which consent shall not be unreasonably withheld or delayed),
unless required by law or the rules of an applicable stock exchange or
over-the-counter market. If a press release or announcement of this Agreement or
the transactions contemplated hereby is required as aforesaid, the parties will
consult with each other in advance as to the contents and timing hereof.
7.6 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement will be
governed by, and construed in accordance with, the laws of the State of Delaware
without regard to any conflicts of law rules. Any controversy or claim arising
out of or relating to this Agreement, or breach thereof, shall be settled by
arbitration in accordance with the Arbitration Rules of the American Arbitration
Association. The Arbitration Tribunal shall consist of three arbitrators, of
whom one shall be nominated by WebMD, one by the Company, and the third, who
shall serve as Chairman, shall be chosen by the two party-nominated arbitrators
or, in the event the party-nominated arbitrators are unable to designate the
third arbitrator, by the American Arbitration Association. The situs of the
arbitration shall be Washington, D.C. The language of the arbitration shall be
English. The award of the arbitrator shall be final and binding. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The Parties waive any right to appeal the arbitral award,
to the extent a right to appeal may be lawfully waived. Each Party retains the
right to seek judicial assistance: (a) to compel arbitration; (b) to obtain
interim measures of protection pending arbitration; and (c) to enforce any
decision of the arbitrators, including the final arbitral award. The prevailing
Party in the arbitration shall be entitled to receive reimbursement of its
reasonable expenses incurred in connection therewith.
7.7 BINDING EFFECT; SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT.
Except as expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon or give any
Person (including creditors and Affiliates of any party) other than the parties
hereto any remedy or claim under or by reason of this Agreement or
<PAGE> 17
any term, covenant or condition hereof, all of which shall be for the sole and
exclusive benefit of the parties. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors, legal representatives and permitted assigns; provided,
however, that, except as otherwise specifically permitted by this Agreement,
neither this Agreement nor any of the rights, interests or obligations of the
Company or WebMD hereunder shall be assigned or delegated without the prior
written consent of the other party. This Agreement sets forth the entire
agreement and understanding among the parties hereto as to the subject matter
hereof.
7.8 AMENDMENTS AND WAIVERS. This Agreement may not be amended,
modified or supplemented unless approved in writing by each party to this
Agreement. No waiver of any right or remedy or of compliance with any provisions
hereof, and no consent provided for herein, shall be effective unless evidenced
by an instrument in writing executed by the party sought to be charged with such
waiver or consent. The rights and remedies herein expressly provided are
cumulative and not exclusive of any other rights or remedies which any party
hereto would otherwise have at law, in equity, by statute or otherwise.
7.9 HEADINGS. The headings of the Sections contained in this
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not affect the meaning or interpretation of this
Agreement.
7.10 NO IMPLIED WAIVERS. No action taken pursuant to this
Agreement, including, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, agreements, covenants, obligations or
commitments contained herein or made pursuant hereto. The waiver by any party of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any preceding or succeeding breach and no failure by any party to
exercise any right, privilege or remedy hereunder shall be deemed a waiver of
such party's rights, privileges or remedies hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
7.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original of the party or
parties executing the same and all of which together shall be deemed to
constitute one and the same agreement.
7.12 FURTHER ASSURANCES. Each party shall cooperate and take such
actions as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
7.13 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby; provided that, if any provision
hereof or the application thereof shall be so held to be invalid, void or
unenforceable by a final Judgment of a court of competent jurisdiction, then
such court may substitute therefor a suitable and equitable provision in order
to carry out, so far as may be
<PAGE> 18
valid and enforceable, the intent and purpose of the invalid, void or
unenforceable provision and if such court shall fail or decline to do so, the
parties shall negotiate in good faith a suitable and equitable substitute
provision. To the extent that any provision shall be judicially unenforceable in
any one or more states of the United States or in any foreign jurisdiction, such
provision shall not be affected with respect to any other state within the
United States or any other foreign jurisdiction, each provision with respect to
each state of the United States or foreign jurisdiction being construed as
several and independent.
7.14 INJUNCTIVE RELIEF. Each party acknowledges that a breach or
threatened breach by it or any Sublicensee or Affiliate of this Agreement will
result in immediate and irremediable damage to the other party and that money
damages alone would be inadequate to compensate such other party. Therefore, in
the event of a breach or threatened breach of this Agreement by either of the
parties (or any Sublicensee or Affiliate), the other party may, in addition to
other remedies, immediately obtain and enforce injunctive relief prohibiting the
breach or threatened breach or compelling specific performance.
7.15 NO PARTNERSHIP, ETC. Nothing contained herein shall be
construed as creating a joint venture, Company, agency, employment relationship
or other enterprise between the parties.
7.16 CONSTRUCTION. The Company and WebMD have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Company and WebMD and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
7.17 DISCLAIMER OF WARRANTIES. The Company hereby acknowledges and
agrees that WebMD has made no promises, representations, guarantees or
warranties, of any nature, other than those which may be made expressly in this
Agreement.
7.18 PLURALS. When necessary for appropriate meaning, a plural
shall be deemed to be the singular and singular shall be deemed to be the
plural.
7.19 EFFECTIVENESS. The submission of this Agreement does not
constitute an offer to license and this Agreement shall become effective only
upon execution thereof by the Company and WebMD.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE NEWS CORPORATION LIMITED
By: /s/
------------------------------------------------
Name: Arthur Siskind
Title: Director
HEALTHEON/WEBMD CORPORATION
By: /s/
------------------------------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
<PAGE> 20
EXHIBIT A
DEFINITIONS
DEFINED TERMS. As used in this Agreement, the following terms have the
meanings indicated:
Affiliate: With respect to any Person, any other Person that, directly
or indirectly through or with one or more intermediaries, controls, is
controlled by or is under common control with such Person. The term "affiliated"
(whether or not capitalized) shall have a correlative meaning. For the purposes
of this definition, "control", as used with respect to any Person, shall mean
the possession, directly or indirectly through or with one or more
intermediaries, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities, by
contract or otherwise. The terms "controlled by" and "under common control with"
shall have correlative meanings.
Agreement: This Agreement and any Exhibits hereto, as the same may be
amended, supplemented or modified in accordance with the terms hereof.
Business Day: Any day other than a Saturday, a Sunday or a day on which
national banking institutions in the United States are not open for business.
Claim: Claims, suits, proceedings, actions, demands, investigations or
causes of action.
The Company: Defined in the introductory paragraph of this Agreement.
Company Indemnitees: Defined in Section 6.1.
Effective Date: The date of execution and delivery of this Agreement by
all of the parties hereto.
Entity or collectively Entities means corporations, limited liability
companies, partnerships, joint ventures or other forms of legal entity.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof and any court, panel, judge, board, bureau,
commission, agency or other entity, body or other Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Graphical User Interface: the graphical user interface, text, images,
navigational devices, icons, menus, menu instructions, help and other
operational instructions and other Content which is directly visible to Users
viewing a Web Site.
Indemnified Party: Defined in Section 6.3.
Indemnifying Party: Defined in Section 6.3.
<PAGE> 21
PAGES(S)
Initial Term: Defined in Section 5.1.
Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any Governmental Authority or any
arbitrator.
Licensed Activities: The activities described in Sections
2.1(a),2.1(b), and 2.3.
Look and Feel: With respect to a Web Site, those elements of the
Graphical User Interface of such Web Site comprising the visible features,
characteristics and style of such Web Site which are unique to such Web Site and
are consistent from page to page and which indicate the common identity of the
various pages and identify such pages as forming a part of a single Web Site
operated by a specific Entity.
The News Corporation Limited: Defined in the recitals to this
Agreement.
Operating Agreement: That certain Operating Agreement of even date
herewith by and among WebMD, the Company and WebMD International LLC.
Operating Company: The Company's subsidiaries or operating divisions,
formed either wholly by the Company (or by members in or Affiliates thereof) or
with third parties or entities that are not subsidiaries of the Company.
Person: Any natural person, Entity, Governmental Authority, or other
entity, whether acting in an individual, fiduciary or other capacity.
Proprietary Information: Defined in Section 7.2
Renewal Term: Defined in Section 5.1.
Requirement of Law: As to any Person, all rules, regulations,
Judgments, injunctions, standards, codes, limitations, restrictions, conditions,
prohibitions, notices, demands or other requirements or determinations of a
Governmental Authority or an arbitrator, applicable to or binding upon such
Person, any of its property or any business conducted by it or to which such
Person, any of its property or any business conducted by it is subject.
Term: Defined in Section 5.1.
Territory: The entire world.
User: Any Person who accesses a Web Site.
WebMD Content: All materials developed or owned by or on behalf of
WebMD or the WebMD Group for inclusion on the WebMD Site. The parties
acknowledge that the WebMD Content shall include only those portions of content
available from time to time on the WebMD Site that are (i) owned exclusively by
WebMD, (ii) are licensed to WebMD under an arrangement pursuant to which WebMD
is legally permitted to license same to the Company at
2
<PAGE> 22
PAGES(S)
no additional cost to WebMD or at additional cost to the Company as provided in
Section 3.1(b) for the purposes contemplated by this Agreement, and (iii) is
content the exploitation and distribution of which by the Company or
Sublicensees will in all respects comport with all Requirements of Law.
WebMD Group: WebMD and its subsidiaries and Affiliates.
WebMD Indemnitees: Defined in Section 6.2.
WebMD Intellectual Property: Defined in Section 2.2(d).
WebMDLogo: Defined in Section 2.3.
WebMD Property: Defined in Section 3.4.
WebMD Site: Defined in the recitals to this Agreement.
Web Sites: Any network of Internet Web pages accessible electronically
by a computer or other device and located in a single Internet domain.
WebMD User Information: Defined in Section 3.4.
3
<PAGE> 1
EXHIBIT 10.7
OPERATING AGREEMENT
OF
WEBMD INTERNATIONAL LLC
January 26, 2000
THE OWNERSHIP INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES
AUTHORITIES AND MAY NOT BE SOLD OR REGISTERED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE
OWNERSHIP INTERESTS IS ALSO RESTRICTED BY PROVISIONS OF THIS AGREEMENT AND
RELATED AGREEMENTS.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS..............................................................................1
ARTICLE II FORMATION...............................................................................8
2.1 Formation...........................................................................8
2.2 Name................................................................................8
2.3 Office and Agent....................................................................8
2.4 Purposes............................................................................8
2.5 Powers..............................................................................9
2.6 Ownership of Property...............................................................9
2.7 Qualification in Other Jurisdictions................................................9
ARTICLE III CAPITAL................................................................................9
3.1 Initial Capital Contributions.......................................................9
3.2 Percentage Interests...............................................................10
3.3 Additional Capital Contributions...................................................10
3.4 Dilution...........................................................................11
3.5 Capital Accounts...................................................................12
3.6 Allocation of Items of Company Income, Gain, Loss, Deduction and Credit............13
3.7 Distributions......................................................................16
3.8 Withholding........................................................................16
3.9 Distribution Limitation............................................................16
3.10 Company Funds......................................................................17
3.11 Capital Contribution...............................................................17
ARTICLE IV MANAGEMENT.............................................................................17
4.1 Management of the Company's Business...............................................17
4.2 Board..............................................................................17
4.3 Officers...........................................................................18
4.4 Actions Requiring a Super Majority Vote............................................18
4.5 Budgets and Business Plan..........................................................21
4.6 Indemnification....................................................................21
ARTICLE V LIABILITY OF A MEMBER...................................................................23
5.1 Limited Liability..................................................................23
5.2 Capital Contribution...............................................................23
5.3 Reliance...........................................................................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES.........................................................23
6.1 Due Incorporation; Authorization...................................................23
6.2 No Conflict........................................................................23
6.3 No Conflict; No Default............................................................24
6.4 Unregistered Interests.............................................................24
ARTICLE VII BOOKS AND RECORDS; REPORTS TO MEMBERS.................................................24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.1 Books and Records..................................................................24
7.2 Financial Reports..................................................................25
7.3 Tax Returns and Information........................................................26
ARTICLE VIII TRANSFERS, ADMISSIONS, WITHDRAWALS...................................................26
8.1 Transfer...........................................................................26
8.2 Corporate Conversion...............................................................27
8.4 Issuance of Additional Interests...................................................28
8.5 Admission as a Member..............................................................29
8.6 No Right to Withdraw...............................................................29
ARTICLE IX DISSOLUTION AND LIQUIDATION............................................................29
9.1 Dissolution........................................................................29
9.2 Exclusive Means of Dissolution.....................................................29
9.3 Liquidation........................................................................29
9.4 Priority of Payment................................................................29
9.5 Liquidating Distributions..........................................................30
9.6 No Restoration Obligation..........................................................30
9.7 Timing.............................................................................30
9.8 Liquidating Reports................................................................31
9.9 Certificate of Cancellation........................................................31
ARTICLE X ADDITIONAL AGREEMENTS...................................................................31
10.1 Provision of Services..............................................................31
ARTICLE XI MISCELLANEOUS..........................................................................33
11.1 Waiver of Partition................................................................33
11.2 Modification; Waivers..............................................................33
11.3 Entire Agreement...................................................................33
11.4 Severability.......................................................................33
11.5 Notices............................................................................33
11.6 Successors and Assigns.............................................................34
11.7 Counterparts.......................................................................35
11.8 Headings; Cross-references.........................................................35
11.9 Construction.......................................................................35
11.10 Property Rights; Confidentiality...................................................35
11.11 Further Actions....................................................................36
11.12 Governing Law; Forum...............................................................36
11.13 Expenses of the Parties............................................................36
</TABLE>
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<PAGE> 4
OPERATING AGREEMENT
OF
WEBMD INTERNATIONAL LLC
THIS OPERATING AGREEMENT is made as of the 26th day of January 2000, by
and between HW International Holdings, Inc., a Delaware corporation and
wholly-owned subsidiary of Healtheon/WebMD Corporation ("Healtheon/Web MD")
(together with any of its Affiliate Transferees as hereinafter defined, the
"Healtheon Member"), IJV Holdings Inc., a Delaware corporation and wholly-owned
subsidiary of Fox Entertainment Group, Inc., a Delaware corporation (together
with any of its Affiliate Transferees as hereinafter defined, the "News Member,"
and together with the Healtheon Member, the "Members").
WITNESSETH:
In consideration of the mutual promises and covenants contained in this
Agreement, and intending to be legally bound, the Members hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the meanings
assigned to them in this Article I (except as otherwise expressly provided) and
include the plural as well as the singular (and vice versa). All accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with GAAP.
"Act" shall mean the Delaware Limited Liability Company Act, as
amended.
"Additional Capital Contribution" shall have the meaning set forth in
Section 3.3(a) hereof.
"Additional Capital Notice" shall have the meaning set forth in Section
3.3(a) hereof.
"Adjusted Capital Account Deficit" shall mean the deficit balance (if
any) in such Member's Capital Account as of the end of any Fiscal Year, after
(a) crediting to such Capital Account any amount which such Member is obligated
to restore pursuant to this Agreement or is deemed obligated to restore pursuant
to the minimum gain chargeback provisions of the Section 704(b) Treasury
Regulations, and (b) charging to such Capital Account any adjustments,
allocations or
<PAGE> 5
distributions described in the qualified income offset provisions of the Section
704(b) Treasury Regulations which are required to be charged to such Capital
Account pursuant to this Agreement.
"Affiliate" shall mean with respect to any Person, any Person that
directly or indirectly Controls, is Controlled by, or is under common Control
with such Person.
"Agreement" shall mean this Operating Agreement, also known as a
"limited liability company agreement" under the Act, as amended from time to
time.
"Annual Budget" shall mean, as at any time, the Company's then
effective annual operating and capital budget approved or in effect pursuant to
Section 4.4(p) hereof.
"Available Cash" shall mean for any Fiscal Year or other period, the
positive amount, if any, obtained by calculating net income (or loss) of the
Company determined in accordance with GAAP for such period, adjusted, without
duplication, by (x) adding depreciation, amortization and other non-cash charges
to the extent deducted in determining net income and (y) deducting (i) the
current portion of indebtedness of the Company, (ii) prepaid expenses and other
cash expenditures to the extent not deducted in determining net income or loss
and (iii) reasonable reserves for working capital and contingent liabilities as
determined by the Members.
"Board" shall have the meaning set forth in Section 4.2 hereof.
"Business" shall mean the business of the Company as set forth in
Section 2.4 hereof.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday or
Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law to close.
"Business Plan" shall mean the business plan most recently approved by
the Members pursuant to Section 4.4 hereof.
"Capital Account" shall have the meaning set forth in Section 3.5(a)
hereof.
"Capital Call" shall have the meaning set forth in Section 3.3(a)
hereof.
"Capital Contribution" shall mean the amount which a Member shall
contribute to the capital of the Company as provided in Article III hereof.
"Certificate" shall mean the certificate of formation of the Company,
as amended from time to time.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time, or any successor statute or statutes.
"Common Stock" shall mean the common stock, par value $0.0001 per
share, of Healtheon/WebMD and any and all shares of capital stock or other
equity securities of: (i)
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<PAGE> 6
Healtheon/WebMD which are added to or exchanged or substituted for the Common
Stock by reason of the declaration of any stock dividend or stock split, the
issuance of any distribution or the reclassification, readjustment,
recapitalization or other such modification of the capital structure of
Healtheon/WebMD; and (ii) any other corporation, now or hereafter organized
under the laws of any state or other governmental authority, with which
Healtheon/WebMD is merged, which results from any consolidation or
reorganization to which Healtheon/WebMD is a party, or to which is sold all or
substantially all of the shares or assets of Healtheon/WebMD, if immediately
after such merger, consolidation, reorganization or sale, Healtheon/WebMD or any
stockholders of Healtheon/WebMD own equity securities having in the aggregate
more than fifty percent (50%) of the total voting power of such other
corporation.
"Company" shall mean the limited liability company formed pursuant to
the Certificate and governed by this Agreement and the Act.
"Company Minimum Gain" shall mean the amount determined in accordance
with the principles of Treasury Regulations Section 1.704-2(d).
"Company Property" shall have the meaning set forth in Section 2.6
hereof.
"Contribution Date" shall have the meaning set forth in Section 3.3(a)
hereof.
"Control" shall mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Corporate Conversion" shall mean any merger, consolidation, conversion
by filing, assignment of assets, or similar transaction or series of
transactions resulting in a corporation substantially all of the assets of which
consist of substantially all of the assets that were held directly or indirectly
by the Company immediately prior to such transaction and substantially all the
capital stock of which corporation is held by Persons who were either (i)
Members immediately prior to such transaction or (ii) the owners of a Member the
sole or principal asset of which Member was an Interest in the Company.
"Damages" shall have the meaning set forth in Section 4.6(a) hereof.
"Default Loan" shall have the meaning set forth in Section 3.3(b)
hereof.
"Defaulting Member" shall have the meaning set forth in Section 3.3(b)
hereof.
"Depreciation" shall mean, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Gross Asset Value of any asset differs from
its adjusted basis for federal income tax purposes at the beginning of such year
or other period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided,
-3-
<PAGE> 7
however, that if the federal income tax depreciation, amortization, or other
cost recovery deduction for such year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable method
selected by the Tax Matters Member.
"Dissolution" shall mean the happening of any of the events described
in 9.1.
"Economic Risk of Loss" shall have the meaning set forth in Sections
1.704-2(b)(4) and 1.752-2 of the Treasury Regulations.
"Effective Date" shall mean the date hereof, unless the parties
otherwise mutually agree in writing that some other date shall be the Effective
Date.
"Fair Market Value" shall mean, for purposes of this Agreement, the
cash price at which a willing seller would sell, and a willing buyer would buy,
the property in question, both having full knowledge of the relevant facts and
being under no compulsion to buy or sell, in an arm's length transaction without
time constraints. Fair Market Value may be determined by mutual agreement of the
Members. If the Members are unable to agree on a Fair Market Value within 15
days of the date on which a determination of Fair Market Value is required, or
if they determine that an appraisal should be used to determine Fair Market
Value, then each of the Members will cause the Fair Market Value as of the most
recent month end (or as of such other date as may be expressly provided herein)
to be determined by a qualified appraiser in accordance with the following
procedure. The Members shall, within 10 days of the date that an appraiser is
required, seek to select a mutually agreeable appraiser. If the Members are
unable to agree on a single qualified appraiser within 10 days, each Member will
have 10 additional days to select one appraiser internationally recognized in
valuing items of the kind required to be valued. Any Member not appointing an
appraiser pursuant to the preceding sentence within the allotted time shall have
no right to select an appraiser thereafter but shall be bound by the procedure
set forth herein using values determined by appraisers selected by the other
Member or Members, as applicable. The appointed appraiser, or appraisers, as the
case may be, will determine the Fair Market Value. The Members will use their
reasonable best efforts to cause such appraiser or appraisers to submit to them
written reports indicating the determination of Fair Market Value within 30 days
after the date such appraiser is selected. If there is more than one appointed
appraiser, and the highest of the appraisals is not more than 110% of the lowest
appraisal, the average of the two will be the Fair Market Value. If the highest
of the appraisals is more than 110% of the lowest appraisal, the Members will
immediately notify the appraisers and cause them to appoint another similarly
qualified appraiser within 10 days after such notice. The Members will use their
reasonable best efforts to cause such appraiser (who will not be apprised of the
determination of the other appraisers) to submit a written report to each of
them indicating such appraiser's determination of Fair Market Value within 30
days after the date such appraiser is selected. If three appraisals are
necessary, then the average of the two appraisals in which the determinations of
Fair Market Value are closest together will be the Fair Market Value or, if the
highest and lowest are equidistant from the middle determination, then the
middle determination will be the Fair Market Value. A determination of Fair
Market Value as provided herein will be final, binding and nonappealable. Each
Member will pay one half of the fees and costs of any appraiser involved in a
determination of Fair Market Value required by this Agreement.
-4-
<PAGE> 8
"Fiscal Year" shall mean the twelve-month period ending December 31 of
each year, or such other fiscal year as the Members may designate.
"GAAP" shall mean generally accepted accounting principles as in effect
in the United States from time to time and consistently applied, with such
exceptions thereto or deviations therefrom, if any, as the Members may approve.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the Fair Market Value of such
asset;
(b) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective Fair Market Value (taking Section 7701(g) of
the Code into account), as of the following times: (i) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for
more than a de minimis capital contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company Property as
consideration for an interest in the Company, in the case of either (i) or (ii),
if the Members reasonably determine that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company and (iii) the liquidation of a Member's interest in the Company or the
Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury
Regulations;
(c) the Gross Asset Value of any Company asset
distributed to any Member shall be the Fair Market Value (taking Section 7701(g)
of the Code into account) of such asset on the date of distribution;
(d) the Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Section 732(d), 734(b) or 743(b) of the Code, but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-l(b)(2)(iv)(m) of the Treasury
Regulations and Section 3.6 hereof, provided, however, that Gross Asset Values
shall not be adjusted pursuant to this subsection (d) to the extent that the
Members determine that an adjustment pursuant to subsection (b) of this
definition is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this subsection (d); and
(e) if the Gross Asset Value of any asset has been
determined or adjusted pursuant to subsection (a), (b) or (c) hereof, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing gains or losses from the
disposition of such asset.
"Healtheon Member" shall have the meaning set forth in the preamble to
this Agreement.
"Healtheon Representatives" shall have the meaning set forth in Section
4.2(a) hereof.
"Healtheon/WebMD" shall mean Healtheon/WebMD Corporation, a Delaware
corporation.
-5-
<PAGE> 9
"Indemnitee" shall have the meaning set forth in Section 4.6(a) hereof.
"Initial Capital Contribution" shall have the meaning set forth in
Section 3.1(a) hereof.
"Interest" shall mean, as to each Member, such Member's rights to
participate in the income, gains, losses, deductions and credits of the Company,
together with all other rights and obligations of such Member in the capital of
the Company under this Agreement.
"International Territory" shall mean the entire world, excluding the
United States of America and Japan.
"Internet" shall mean a decentralized worldwide network of computer
networks.
"Lien" shall mean a mortgage, lien, pledge, security interest or other
encumbrance.
"Liquidation" shall mean the process of winding up and terminating the
Company after its Dissolution.
"Losses" shall have the meaning set forth in Section 3.6(a) hereof.
"Master Strategic Alliance Agreement" shall mean the Master Strategic
Alliance Agreement dated as of December 6, 1999, by and among Affiliates of the
Members.
"Member" shall mean the News Member, the Healtheon Member and any
permitted transferee of an Interest or portion thereof who becomes a Member in
accordance with Article VIII. The News Member and the Healtheon Member (together
with such transferees) may be collectively referred to herein as the "Members."
"Member Nonrecourse Debt" shall mean liabilities of the Company treated
as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury
Regulations.
"Member Nonrecourse Deductions" shall mean any losses, deductions or
Code Section 705(a)(2)(b) expenditures characterized as "partner nonrecourse
deductions under Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury
Regulations.
"Member Nonrecourse Debt Minimum Gain" shall mean an amount of gain
characterized as "partner nonrecourse debt minimum gain" under Treasury
Regulations Sections 1.704-2(i)(2) and 1.704-2(i)(3).
"News Corporation" shall mean The News Corporation Limited, a South
Australia corporation.
"News Member" shall have the meaning set forth in the preamble to this
Agreement.
"News Representatives" shall have the meaning set forth in Section
4.2(a) hereof.
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<PAGE> 10
"Non-Defaulting Member " shall have the meaning set forth in Section
3.3(b) hereof.
"Nonrecourse Deductions" in any year shall mean the Company deductions
that are characterized as "nonrecourse deductions" under Sections 1.704-2(b)(1)
and 1.704-2(c) of the Treasury Regulations.
"Non-Standard Television Services" shall mean audiovisual programming
delivered by any means of transmission, whether now existing or developed in the
future (including all forms of fixed-line or wireless, narrowband or broadband,
transmission), other than (a) audio visual programming which is made available
to viewers free-of-charge (e.g. free-to-air UHF or VHF television), even if
retransmitted via cable or any other means of retransmission for which a
facilities fee is charged, and (b) home-video distribution.
"Operating Company" shall have the meaning set forth in Section 2.4
hereof.
"Percentage Interest" shall mean, with respect to each Member, such
Member's proportionate share of the total Interests in the Company, expressed as
a percentage, as set forth in Section 3.2 hereof and as may be adjusted from
time to time pursuant to this Agreement.
"Person" shall mean an individual or a corporation, limited liability
company, joint venture, partnership, trust, unincorporated association,
governmental authority or other entity.
"Prime Rate" shall mean a rate of interest equal to the rate per annum
announced from time to time by Citibank, N.A. at its principal office as its
prime rate (which rate shall change when and as such announced prime rate
changes) but in no event more than the maximum rate of interest permitted to be
collected from time to time under applicable usury laws.
"Prime Time" shall mean between the hours of 6:00 p.m. and 12 a.m.
"Profits" shall have the meaning set forth in Section 3.6(a) hereof.
"Regulatory Allocations" shall have the meaning set forth in
subparagraph 3.6(c)(viii) hereof.
"Representatives" shall have the meaning set forth in Section 4.2(a)
hereof.
"Scheduled Contracts" shall mean the contracts set forth on Schedule
10.2 hereto.
"Softbank" shall mean Softbank Corp., a Japanese corporation.
"Star" shall mean Eastrise Profits Limited, an international business
company incorporated under the laws of the British Virgin Islands.
"Super Majority Vote" shall mean a vote of the Representatives of 100%
of the Percentage Interests; provided, however, that if one or more additional
Members is admitted to the Company pursuant to Section 8.4, "Super Majority
Vote" shall mean a vote of 66 2/3% of the Percentage Interests.
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<PAGE> 11
"Tax Matters Member" shall mean the "tax matters partner," as that term
is defined in Section 6231(a)(7) of the Code.
"Transfer" shall mean a sale, exchange, assignment, transfer or other
disposition of all or any part of an Interest (whether voluntary, involuntary or
by operation of law).
"Transferee" shall mean a Person to whom an Interest is Transferred in
compliance with this Agreement.
"Transferor" shall mean a Person who Transfers all or part of an
Interest in compliance with this Agreement.
"Treasury Regulations" shall mean the income tax regulations (including
temporary and proposed) promulgated under the Code.
ARTICLE II
FORMATION
2.1 Formation. The Company was formed as a limited liability
company pursuant to the Act by the filing on January 14, 2000 of the Certificate
with the Secretary of State of the State of Delaware.
2.2 Name. The business of the Company shall be conducted under the
name WEBMD INTERNATIONAL LLC or such other or additional name or names and
variations thereof as the Members may from time to time determine. The Chief
Executive Officer of the Company ("the CEO") shall file, or cause to be filed,
any fictitious name certificate and similar filings, and any amendments thereto,
as may be directed by the Board from time to time.
2.3 Office and Agent.
(a) The initial registered office of the Company in
Delaware will be at 1013 Centre Road, Wilmington, Delaware 19805-1297, and its
initial registered agent will be Corporation Service Company. The Company may,
upon compliance with the applicable provisions of the Act, change its registered
office or registered agent in Delaware.
(b) The initial principal office of the Company will be
at 1300 North Market Street, Suite 404, Wilmington, DE 19801. The Company may
maintain any other offices at any other places that the Members deem advisable.
2.4 Purposes. The purposes of the Company shall be (a) to own and
operate Non-Standard Television Services and Internet services in the
International Territory devoted exclusively to health and fitness content,
consisting of audio-visual programming, data and information (the "Business")
through either one or more subsidiaries or operating divisions of the Company,
formed either wholly by the Company (or Members or Affiliates thereof) or with
third parties or entities that are not subsidiaries of the Company, (each an
"Operating Company"), (b) to
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acquire, own, hold, sell or otherwise dispose of interests in the assets used to
conduct the Business, (c) to make and perform all contracts and engage in all
activities and transactions and to do any and all things necessary or advisable
to carry out the foregoing purposes, and (d) to otherwise engage in any lawful
activity incidental thereto for which limited liability companies may be
organized under the Act. The Members acknowledge that for regulatory, tax or
other reasons it may be necessary or advisable to form Operating Companies with
the same ownership structure and, where applicable, governing documents as the
Company to conduct the Business in various portions of the International
Territory. The Members may cause the Company to immediately form two
wholly-owned Delaware limited liability companies which shall serve as holding
companies for the Operating Companies engaged in Non-Standard Television
Services and Internet services respectively.
2.5 Powers. The Company shall have all the powers granted to a
limited liability company under the Act, as well as all powers necessary or
convenient to achieve its purposes and to further its business.
2.6 Ownership of Property. Legal title to all assets, rights and
property, whether real, personal or mixed, owned by the Company (collectively,
the "Company Property") shall be acquired, held and conveyed only in the name of
the Company.
2.7 Qualification in Other Jurisdictions. The Members shall cause
the Company to be qualified or registered under applicable laws of any
jurisdiction in which the Company transacts business and shall be authorized to
execute, deliver and file any certificates and documents necessary to effect
such qualifications or registrations including, without limitation, the
appointment of agents or service of process in such jurisdictions.
ARTICLE III
CAPITAL
3.1 Initial Capital Contributions.
(a) Contemporaneously with the execution of this
Agreement, each Member will contribute or cause to be contributed to the Company
(an "Initial Capital Contribution") the assets set forth opposite its name in
Schedule 3.1. The Healtheon Member shall procure and contribute to the Company a
trademark license agreement, substantially in the form annexed as Exhibit C to
the Master Strategic Alliance Agreement. The amount of any contribution as
specified in Schedule 3.1 will be credited to the applicable Member's Capital
Account and such amount will be deemed to be the amount of such Member's Initial
Capital Contribution.
(b) If, at any time prior to the payment in full by the
News Member of the amount set forth on Schedule 3.1 hereto (the "News Funding
Commitment"), the CEO determines based on the then-Current Annual Budget and
Business Plan that the Company requires funds for the continued operation or
growth of the Company, the CEO shall cause the Company to request (a "News
Capital Call") that the News Member contribute to the Company such amounts as
the Company may direct on no less than five Business Days Notice to the News
Member, and the News
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Member shall be obligated to timely comply with such request. In no event shall
the News Member be required to contribute more than the News Funding Commitment
pursuant to this Section 3.1 (b).
(c) The initial Capital Accounts of the Members shall be
equal to the value of their initial Capital Contributions as set forth on
Schedule 3.1. At the time the News Member satisfies the News Funding Commitment,
the Capital Accounts of the Members shall reflect the equality of the Members'
Capital Contributions.
3.2 Percentage Interests. Subject to adjustment pursuant to
Section 3.3 hereof, the Percentage Interest of each Member shall initially be as
follows:
<TABLE>
<S> <C>
Healtheon Member: 50%
News Member: 50%
</TABLE>
The Percentage Interest of a Member may be adjusted from time to time pursuant
to Section 3.3 hereof.
3.3 Additional Capital Contributions.
(a) If, at any time after the News Member has fully
satisfied the News Funding Commitment, the CEO determines based on the
then-current Annual Budget and Business Plan that the Company requires funds for
the continued operation or growth of the Company, the CEO shall cause the
Company to request (a "Capital Call") that the Members contribute to the Company
such amounts as the Company may direct on no less than five Business Days' prior
notice to the Members. The notice (the "Additional Capital Notice") shall
specify the amount of funds to be provided by each Member (each, an "Additional
Capital Contribution"), the date on which funds are to be provided (the
"Contribution Date"), and the account of the Company to which such funds are to
be transmitted. All Additional Capital Contributions to be made by the Members
shall be in amounts that are in proportion to their respective Percentage
Interests, determined, in each case, as of the date of the Capital Call. Unless
otherwise agreed by the Members, all Additional Capital Contributions shall be
in cash or immediately available funds. No Additional Capital Contribution shall
be required to be paid by the Members unless (i) the need for additional capital
is specifically provided for in the then currently approved Annual Budget or
(ii) the Members approve the payment of such Additional Capital Contribution in
accordance with Section 4.4 hereof.
(b) Within five (5) days after receipt of an Additional
Capital Notice, each Member shall notify the Company whether it intends to
contribute its respective share of the Additional Capital Contribution referred
to in the Additional Capital Notice. If any Member (the "Defaulting Member")
fails to contribute timely all or any portion of any Additional Capital
Contribution that it is obligated to make pursuant to Section 3.3(a), the other
Member (the "Non-Defaulting Member") may, at its option, at any time following
the date of default, and prior to the date such default is cured, exercise on
five (5) days notice to the Defaulting Member any on of the following remedies
and the Defaulting Member shall not be permitted to vote with respect to the
election of any of the following remedies by the Non-Defaulting Member:
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(i) take such action, including court
proceedings, as the Non-Defaulting Member may deem appropriate to obtain payment
by the Defaulting Member of the Defaulting Member's Additional Capital
Contribution that is in default, together with interest thereon from the date
that the Additional Capital Contribution was due until the date that is it made,
all at the cost and expense of the Defaulting Member; and
(ii) advance all or any portion of the Additional
Capital Contribution required of the Defaulting Member as an Additional
Contribution of the Non-Defaulting Member and cause the Percentage Interests to
be recalculated in accordance with Section 3.4 of this Agreement;
(iii) make a payment to the Company in an amount
equal to the Additional Capital Contribution that is in default with the effect
that such payment shall constitute a loan (a "Default Loan") to the Defaulting
Member by the Non-Defaulting Member, any such Default Loan to bear interest at
the rate of 5% over the Prime Rate on the date nearest the date of the advance,
which rate shall be adjusted annually based on changes to the Prime Rate on the
anniversary of such Default Loan if such advance remains outstanding. For so
long as any Default Loan remains unpaid, all distributions from the Company that
otherwise would be made to the Defaulting Member (whether before or after the
Dissolution of the Company) instead shall be paid to the Non-Defaulting Member
until the Default Loan and all interest accrued thereon have been paid in full
to the Non-Defaulting Member. Payments in respect of any Default Loan will be
applied in the order that such Default Loan was made, and all payments will be
applied first to accrued but unpaid interest and then to reduce the outstanding
principal amount of such Default Loan. A Default Loan shall become automatically
immediately due and payable by the Defaulting Member, and shall constitute a
general obligation of the Defaulting Member upon the Dissolution of the Company
or a Put of the News Member's Interest to Healtheon/WebMD. Any Default Loan
shall be prepayable in whole or in part at any time without penalty.
(c) Except as set forth in this Section 3.3, no Member
shall have any obligation to make Additional Capital Contributions to the
Company.
3.4 Dilution. If a Non-Defaulting Member (i) pays all or any
portion of the Additional Capital Contribution due from a Defaulting Member and
(ii) properly elects the remedy set forth in Section 3.3(b)(ii), then as of the
Contribution Date the interest of the Non-Defaulting Member will be increased
such that the Percentage Interest of the Non-Defaulting Member equals the
percentage obtained by dividing (i) the sum of (x) the aggregate Additional
Capital Contribution (including the Contribution paid in respect of the amount
due from the Defaulting Partner) made by the Non-Defaulting Member, plus (y) the
product of the pre-dilution Fair Market Value of the Company and the Percentage
Interest of the Non-Defaulting Member (prior to adjustments under this
sentence), by (ii) the sum of (x) the aggregate Additional Capital Contribution
paid by the Non-Defaulting Member, including the Contribution paid in respect of
the amount due from the Defaulting Partner, and the Defaulting Member, plus (y)
the pre-dilution Fair Market Value of the Company. The Percentage Interest of
the Defaulting Member will be reduced by the amount of the increase in the
Percentage Interest of the Non-Defaulting Member.
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<PAGE> 15
3.5 Capital Accounts.
(a) A separate capital account (each, a "Capital
Account") shall be maintained for each Member. Such Member's initial Capital
Account shall be as set forth in Sections 3.1(a) and 3.1(b) hereof. Subject to
the provisions of subsections (b), (c) and (d) of this Section 3.5, the Capital
Account of each Member shall be (i) increased by (A) the amount of cash and the
Gross Asset Value of any property contributed to the Company by such Member (net
of liabilities secured by the property or to which the property is subject), and
(B) Profits and any other items of income and gain allocated to such Member
pursuant to Section 3.6 hereof, and (ii) decreased by (A) the amount of cash and
the Gross Asset Value of any property distributed to such Member (net of
liabilities secured by the property or to which the property is subject) and (B)
the Losses and any other items of deduction and loss allocated to such Member
pursuant to Section 3.6, and otherwise maintained in accordance with Treasury
Regulations in order for the allocation of Profits and Losses pursuant to
Section 3.6., and
(b) For purposes of this Section 3.5, an assumption of a
Member's unsecured liability by the Company shall be treated as a distribution
of money to that Member. An assumption of the Company's unsecured liability by a
Member shall be treated as a cash contribution to the Company by that Member.
(c) In the event a contribution of money or other
property is made to the Company other than a contribution made ratably by all
existing Members, then the Capital Accounts for the Members shall be adjusted
for the hypothetical "book" gain or loss that would have been realized by the
Company if all Company assets had been sold for their Gross Asset Values in a
cash sale, and shall be in proportion to the Percentage Interests of the
Members. If a determination of the Fair Market Value of the Company is made
pursuant to Section 3.4 in connection with any Additional Capital Contribution
which would also be subject to this Section 3.5(c), the Gross Asset Value of the
Company's assets shall be deemed to be equal to the Fair Market Value of the
Company plus its liabilities as determined pursuant to Section 3.4 hereof.
(d) In the event that assets of the Company other than
money are distributed to a Member in liquidation of the Company, or in the event
that assets of the Company other than money are distributed to a Member in kind,
in order to reflect unrealized gain or loss, Capital Accounts for the Members
shall be adjusted for the hypothetical "book" gain or loss that would have been
realized by the Company if the distributed assets had been sold for their Gross
Asset Values in a cash sale. In the event of the liquidation of a Member's
interest in the Company, in order to reflect unrealized gain or loss, Capital
Accounts for the Members shall be adjusted for the hypothetical "book" gain or
loss that would have been realized by the Company if all Company assets had been
sold for their Gross Asset Values in a cash sale.
(e) The foregoing provisions of this Section 3.5 and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 704(b) of the Treasury Regulations
and will be interpreted and applied in a manner consistent with such Treasury
Regulations and any amendment or successor provision thereto. The Members will
cause appropriate modifications to be made if unanticipated events might
otherwise cause this
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<PAGE> 16
Agreement not to comply with Section 704(b) of the Treasury Regulations, so long
as such modifications do not cause a material change in the relative economic
benefits of the Members under this Agreement.
(f) If all or any part of an Interest is transferred in
accordance with this Agreement, the Capital Account of the transferor that is
attributable to the transferred Interest will carry over to the transferee.
3.6 Allocation of Items of Company Income, Gain, Loss, Deduction
and Credit.
(a) For purposes of this Agreement, the terms "Profits"
and "Losses" shall mean, for each Fiscal Year or other period, an amount equal
to the Company's taxable income or loss, as the case may be for such year or
period, determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss and deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
(i) any income of the Company that is exempt
from federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this paragraph shall be added to such taxable
income or loss;
(ii) any expenditures of the Company described in
Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Section 1.704-l(b)(2)(iv)(i) of the Treasury
Regulations, and not otherwise taken into account in computing Profits or Losses
pursuant to this Section shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (b) or (c) of the definition
thereof, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from the disposition
of any Company asset with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax basis of
such asset differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period, computed in accordance with the definition thereof;
(vi) to the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Section 734(b) of the Code is
required, pursuant to Section 1.704-l(b)(2)(iv)(m)(4) of the Treasury
Regulations, to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Member's Interest in the
Company, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or
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<PAGE> 17
loss (if the adjustment decreases such basis) from the disposition of such asset
and shall be taken into account for purposes of computing Profits or Losses; and
(vii) notwithstanding any other provision of this
Section, any items which are specially allocated pursuant to Section 3.6(c)
hereof shall not be taken into account in computing Profits and Losses.
(b) After giving effect to the special allocations set
forth in Section 3.6(c):
(i) All Company Profits shall be allocated to
the Members as follows:
(A) first, pro rata to the Members in
proportion to and to the extent of
Losses previously allocated to each
Member pursuant to Section
3.6(b)(ii)(B) hereof and not
previously recouped pursuant to this
Section 3.6(b)(i)(A); and
(B) thereafter, to the Members in
accordance with their respective
Percentage Interests.
(ii) All Company Losses shall be allocated to the
Members as follows:
(A) first, pro rata to the Members in
proportion to and to the extent of
Profits previously allocated to such
Members pursuant to Section
3.6(b)(i)(B) hereof and not
previously recouped pursuant to this
Section 3.6(b)(ii)(A); and
(B) thereafter, to the Members in
accordance with their respective
Percentage Interests.
(c) Special Allocations. The following special
allocations shall be made in the following order:
(i) Minimum Gain Chargeback. Subject to the
exceptions set forth in Section 1.704-2(f) of the Treasury Regulations, if there
is a net decrease in Company Minimum Gain during a Fiscal Year, each Member
shall be specially allocated items of income and gain for Capital Account
purposes for such year (and, if necessary, for subsequent years) in an amount
equal to such Member's share of the net decrease in Company Minimum Gain during
such year (which share of such net decrease shall be determined under Section
1.704-2(g)(2) of the Treasury Regulations). It is intended that this Section
3.6(c)(i) shall constitute a "minimum gain chargeback" as provided by Section
1.704-2(f) of the Treasury Regulations and shall be interpreted consistently
therewith.
(ii) Member Nonrecourse Debt Minimum Gain
Chargeback. Subject to the exceptions contained in Section 1.704-2(i)(4) of the
Treasury Regulations, if there is a net decrease in Member Nonrecourse Debt
Minimum Gain during a Fiscal Year, any Member with a share of such Member
Nonrecourse Debt Minimum Gain (determined in accordance with Section
1.704-2(i)(5) of the Treasury Regulations) as of the beginning of such year
shall be specially
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<PAGE> 18
allocated items of income and gain for Capital Account purposes for such year
(and, if necessary, for subsequent years) in an amount equal to such Member's
share of the net decrease in Member Nonrecourse Debt Minimum Gain (which share
of such net decrease shall be determined under Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Treasury Regulations). It is intended that this Section
3.6(c)(ii) shall constitute a "partner nonrecourse debt minimum gain chargeback"
as provided by Section 1.704-2(i)(4) of the Treasury Regulations and shall be
interpreted consistently therewith.
(iii) Nonrecourse Deductions. Any Nonrecourse
Deductions shall be allocated to the Members in the same manner as Net Losses
are allocated pursuant to Section 3.6(b)(ii) hereof.
(iv) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions shall be allocated to the Member that bears the Economic
Risk of Loss for the Member Nonrecourse Debt to which such deductions relate as
provided in Section 1.704-2(i)(1) of the Treasury Regulations. If more than one
Member bears the Economic Risk of Loss, such deduction shall be allocated
between or among such Members in accordance with the ratios in which such
Members share such risk of loss.
(v) Qualified Income Offset. In the event any
Member unexpectedly receives any adjustments, allocations, or distributions
described in Sections 1.704-l(b)(2)(ii)(d)(4) of the Treasury Regulations,
1.704-l(b)(2)(ii)(d)(5), or 1.704-l(b)(2)(ii)(d)(6) (modified as appropriate, by
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5)), items of Company
income and gain for Capital Account purposes for such Fiscal Year shall be
specially allocated to the Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, any Adjusted
Capital Account Deficit of the Member as quickly as possible, provided that an
allocation pursuant to this Section 3.6(c)(v) shall be made if and only to the
extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III have been tentatively made as
if this Section 3.6(c)(v) were not in the Agreement.
(vi) Certain Section 754 Adjustment. To the
extent any adjustment to the adjusted tax basis of any Company asset pursuant to
Section 732(d), Section 734(b) or Section 743(b) of the Code is required,
pursuant to Section 1.704-1 (b)(2)(iv)(m) of the Treasury Regulations, to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its Interest in the Company,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members in accordance with their interests in the
Company as determined under Section 1.704-1(b)(3) of the Treasury Regulations in
the event Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury Regulations applies,
or to the Member to whom such distribution was made in the event Section
1.704-l(b)(2)(iv)(m)(4) of the Treasury Regulations applies.
(vii) Limit on Loss Allocations. Notwithstanding
the provisions of Section 3.6(b)(ii) hereof or any other provision of this
Agreement to the contrary, net Losses (or items thereof) will not be allocated
to a Member if such allocation would cause or increase a Member's Adjusted
Capital Account Deficit and will be reallocated to the other Members in
proportion to their Percentage Interests, subject to the limitations of this
Section 3.6(c)(vii).
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<PAGE> 19
(viii) Curative Allocations. The allocations under
Section 3.6(c)(i) through (c)(vii) (such allocations, the "Regulatory
Allocations") are intended to comply with certain requirements of the Treasury
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of income, gain, loss or deduction
pursuant to this Agreement. Therefore, notwithstanding any other provision of
this Agreement (other than the Regulatory Allocations), the Company shall make
such offsetting special allocations of income, gain, loss or deduction in
whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all items were
allocated pursuant to Section 3.6(b), as the case may be. In exercising its
discretion under this Section 3.6(c)(viii), the Company shall take into account
future Regulatory Allocations under Section 3.6(c)(i) through (c)(vii) that are
likely to offset other Regulatory Allocations previously made.
3.7 Distributions.
(a) No Member shall have the right to withdraw any amount
from its Capital Account. No Member shall have the right to demand or to receive
any distribution other than distributions of Available Cash pursuant to Section
3.7(b) hereof, without the approval of the Members. No Member shall have the
right to receive a distribution of property other than cash from the Company,
unless otherwise agreed by all the Members.
(b) The Company shall, from time to time, but not less
often than quarterly, distribute Available Cash to the Members. Any such
distributions shall be made in accordance with the Members' Percentage
Interests. The Company shall repay principal and accrued interest on Default
Loans (in the order of payment contemplated by Section 3.3(b)(iii) hereof) prior
to making any cash distributions to the Members from Available Cash. Nothing set
forth in this Section 3.7 paragraph shall impair the right of the Company, as
provided in this Agreement, to establish reasonable cash reserves.
3.8 Withholding. If required by the Code or by state or local law,
the Company will withhold any required amount from distribution to a Member for
payment to the appropriate taxing authority. Any amount so withheld from a
Member will be treated as a distribution by the Company to such Member. Each
Member will timely file any agreement that is required by any taxing authority
in order to avoid any withholding obligation that would otherwise be imposed on
the Company.
3.9 Distribution Limitation. Notwithstanding any other provision
of this Agreement, the Company will not make any distribution to the Members if,
after such distribution, the liabilities of the Company (other than liabilities
to Members on account of their Percentage Interests) would exceed the Fair
Market Value of the Company's assets. With respect to any property subject to a
liability for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the extent the
property's Fair Market Value exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
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3.10 Company Funds. The funds of the Company shall be deposited in
such bank accounts or invested in investments as shall be determined by the CEO.
The Company's funds shall not be commingled with funds not belonging to the
Company and shall be used only for the affairs or business of the Company. The
CEO shall establish a cash management plan pursuant to which the funds of the
Company will be managed.
3.11 Capital Contribution. Each Member is liable to the Company for
any Capital Contribution or distribution that has been wrongfully or erroneously
returned or made to such Person in violation of the Act or this Agreement.
ARTICLE IV
MANAGEMENT
4.1 Management of the Company's Business. Management of the
business and affairs of the Company is reserved to, and vested in, the Members
and no manager (as defined in the Act) will be elected by the Members unless
this Agreement is appropriately amended. Each Member will cause the Company to
be managed and operated with the intent to maximize the cash flow and long-term
asset value of the Company. The Members will exercise their management control
by vote. No Member has the authority to act on behalf of the Company unless
authorized by a vote. Notwithstanding the foregoing, Persons dealing with the
Company are entitled to rely conclusively on the power and authority of any
Member. From time to time, on the request of a Member authorized to act in
accordance with this Agreement, the Company will confirm to third parties that
Persons dealing with the Company may rely on powers and authorities of such
Member as set forth in this Agreement.
4.2 Board.
(a) The Members hereby form a supervisory board (the
"Board"), which shall be responsible for taking all action required under this
Agreement to be taken by the Board. The Board shall consist of four
representatives (the "Representatives"), two of whom shall be appointed by the
Healtheon Member (the "Healtheon Representatives"), and two of whom shall be
appointed by the News Member (the "News Representatives"). Each Member agrees to
notify the other of the initial Representatives appointed by it.
(b) Each Member may at any time remove its
Representative(s) and appoint substitute Representative(s) in their stead, by
delivering written notice of such substitution to the other Member. Each
Representative shall have the authority to act on behalf of and bind the Member
which appointed such Representative with regard to matters relating to the
Company. The presence or participation of Representatives representing Members
owning a majority of the Percentage Interest then owned by all Members shall
constitute a quorum for the taking of any action; provided, however, that at
least one Representative appointed by each Member shall be present; and provided
further, that all Members have received prior written notice of such meeting in
accordance with the notice requirements adopted by the Board as provided in
Section 4.2(c). If at any meeting of the Board one Member has more
Representatives present than the other, then at the beginning of the
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meeting the Representatives of the Member having two Representatives present
shall select between themselves one of them to vote at the meeting such that
neither Member shall have fewer voting Representatives at any Board Meeting.
Except as otherwise provided in Section 4.4 or as otherwise provided in this
Agreement, all actions required or permitted to be taken by the Board must be by
the affirmative vote, at a meeting at which a quorum is present, of
Representatives representing a majority of Percentage Interests then owned by
all Members. Each Member shall have the right to bring additional
representatives to any meeting of the Board; provided, however, a Member shall
vote only through its appointed Representatives in connection with any matter
discussed and voted on at any such meeting of the Board and shall vote its
entire Percentage Interest together as a unit in connection with any matter
discussed and voted on at any meeting of the Board. No Representative shall be
entitled to compensation from the Company for serving in such capacity.
(c) The Board shall meet no less often than quarterly and
shall establish meeting times, dates and places and requisite notice
requirements and adopt rules or procedures consistent with the terms of this
Agreement, which shall include rules and procedures for the dissemination of
written information to the Members concerning the items to be acted upon at any
regular or special meeting of the Board. Any Member may call a special meeting
of the Board for any purpose by giving the other Member at least five (5)
Business Days' notice thereof, except in the case of an emergency, in which
case, such notice as is practicable shall be sufficient. The Board may meet by
means of conference telephone call, and any Representative or non-voting
representative may participate in any Board meeting by conference telephone
call. Any action that may be taken at a meeting of the Board may be taken
without a meeting by written consent of the number of Members needed to
authorize the action; provided, that all Members are given notice of such
written consent at least 15 Business Days prior to its effective date.
4.3 Officers.
(a) The Board shall appoint the CEO, chief financial
officer ("CFO"), and chief operating officer ("COO") each of whom shall have
such duties and responsibilities as the Board may determine from time to time.
The CEO will have the authority to select such other officers (other than a CFO
and COO) as may be necessary or desirable to carry out the day-to-day management
of the Company Business, such day-to-day management to be subject to the
approval of the Members.
(b) Each of the News Member and the Healtheon Member will
have the right, in its sole discretion, to cause the Company to terminate the
employment of any officer of the Company including the CEO, the CFO or the COO.
In case of any such termination, the terminated officer will be required to
leave his or her position within 24 hours after receiving a notice of
termination.
(c) Appointment of a Person as an officer or agent of the
Company will not, in itself, create any contract rights. The officers of the
Company, acting in their capacities as such, will be agents acting on behalf of
the Company as principal.
4.4 Actions Requiring a Super Majority Vote. In addition to those
actions described elsewhere in this Agreement as requiring a Super Majority Vote
of the Members, the following
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actions or decisions by the Company or any Operating Company may be made only
following a Super Majority Vote of the Members:
(a) entry into areas of business other than the Business;
(b) any amendment of this Agreement, including changing
the Company's name, or any other organizational document of the Company or any
Person directly or indirectly Controlled by the Company or in which the Company
has an interest directly or indirectly entitling it to vote on such amendment;
(c) any action relating to the merger, sale,
consolidation, reorganization, Dissolution, winding up, Liquidation or similar
transaction involving all or substantially all of the Company or all or
substantially all of its assets.;
(d) incurrence of any debt exceeding US $1,000,000 in the
aggregate (excluding normal trade debt), or the issuance of any guarantee, or
the creation of any Lien) unless provided for in the Annual Budget under which
the Company is then operating;
(e) any transaction involving the Company, on the one
hand, and a Member or an Affiliate of a Member, on the other, other than
transactions involving less than US$500,000 in the aggregate which are entered
into in the ordinary course of business on an arms-length basis and excluding
the, Trademark Licence Agreements and Content Licence Agreements set forth in
Section 3.1;
(f) any decision to acquire an interest or participation
in, or to acquire all or substantially all of the assets of, any other Person;
(g) appointment or removal of auditors of the Company,
approval or adoption of accounting or tax principles applicable to the Company,
and any change in the Fiscal Year of the Company;
(h) any decision to require Additional Capital
Contributions to the Company, except Capital Calls made pursuant to Section 3.3
hereof;
(i) any decision to distribute cash or other assets of
the Company, except any distribution made pursuant to Section 3.7 hereof;
(j) the admission of additional Members (except as
provided in Section 8.1 or Section 8.4) or the grant by the Company of any right
to acquire any interest in the Company or any stock or equity appreciation or
similar right;
(k) cause the Company (i) to enter into any contract or
agreement or series of related contracts or agreements (including any
programming rights or content rights acquisition agreements), whether oral or
written, obligating the Company to expend money or provide goods or services
other than in the ordinary course of business or (ii) to obligate the Company in
any other
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manner, unless in each case the amount involved is less than $100,000 or
provided for in the Annual Budget;
(l) cause the Company to sell, transfer, lease or
otherwise dispose of, or mortgage or pledge, either in a single transaction or a
series of related transactions, any assets of the Company with a fair market
value greater than $500,000 except as reflected in an Annual Budget and except
for the sale of inventory or the grant of programming rights in the ordinary
course of Business;
(m) settle any dispute or litigation or other proceeding,
whether administrative or otherwise, which would have material adverse affect on
the Company or any Member, or waive any claim in excess of $100,000 which the
Company may have against another Person;
(n) appointment or removal of the Tax Matters Member;
(o) any employment agreement providing for compensation
of more than US$150,000 per annum or compensation on termination of employment
other than in accordance with severance policies generally applicable to
employees of the Company;
(p) the approval of each (or any-amendment to any
previously approved) Business Plan and Annual Budget for the Company; if the
Members are unable to approve an Annual Budget for the Company, then , until a
new Annual Budget is approved, the budget for the Company for the immediately
preceding Fiscal Year will remain in effect, adjusted (without duplication) to
reflect the following increases or decreases: (i) the operation of escalation or
de-escalation provisions in contracts in effect at the time of approval of the
Annual Budget solely as a result of the passage of the time or due to operations
or undertaking approved in the Annual Budget or the occurrence of events beyond
the control of the Company, to the extent such contracts are still in effect;
(ii) elections made in any prior year under contracts contemplated by the budget
for the prior year regardless of which party to such contracts makes such
election; (iii) the effect of the existence of any multi-year contract entered
into in accordance with a previous budget to the extent not fully reflected in
the prior year's budget; (iv) increases or decreases in expenses attributable to
the annualized effect of employee additions or reductions during the prior year
contemplated by the budget for the prior year; (v) interest expense attributable
to any loans; (vi) increase or decrease in overhead expenses in an amount equal
to the total of overhead expenses reflected in the budget for the prior year
(excluding non-recurring items) multiplied by the percentage increase or
decrease in the U.S. Department of Labor Bureau of Labor Statistics Consumer
Price Index for all Urban Consumers ("CPI-U") or a successor index for the prior
Fiscal Year (but in no event will such change be more than 10% of the
corresponding items in the prior budget); and (vii) decreases in expenses
attributable to non-recurring items reflecting in the prior year's budget;
(q) subject to Section 8.1 hereof, approve the Transfer
of any Interest including a repurchase of any Interest by the Company;
(r) engaging in any non-budgeted transaction which, when
added to all other non-budgeted transactions during the same Fiscal Year, would
cause the aggregate amount of non-budgeted transactions for such Fiscal Year to
exceed US$1,000,000; or
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(s) any agreement by the Company to take any of the
foregoing actions.
4.5 Budgets and Business Plan. The Board will require the
appropriate officers and employees of the Company to prepare and present to the
Members an Annual Budget and Business Plan for the Company at least 90 days in
advance of the beginning of the applicable Fiscal Year. Each Annual Budget shall
include an income statement prepared on an accrual basis which shall show in
reasonable detail the revenues and expenses projected for the Company's
operations for the forthcoming Fiscal Year and a cash flow statement which shall
show in reasonable detail the receipts and disbursements projected for the
Company's operations for the forthcoming Fiscal Year, the amount of any
corresponding cash deficiency or surplus, contemplated borrowings under credit
facilities and the required Additional Capital Contributions, if any. Each
Business Plan shall cover a two year period commencing with the Fiscal Year
covered by the Annual Budget and the succeeding Fiscal Years. The business plan
shall set forth in reasonable detail (i) the Company's capital needs, goals, and
procedures for personnel, technical, financial, administrative and marketing
activities for the Company's next two (2) succeeding Fiscal Years, (ii) certain
financial performance goals, including, without limitation, with respect to
revenues, profits, return on net assets, and return on equity and (iii) the
Company's priorities with regard to country specific implementation of the
Company's expansion goals. Such Annual Budget and Business Plan shall be
prepared on a basis consistent with the Companies audited financial statements
and GAAP. Each successor Annual Budget and Business Plan shall be at least as
detailed as such initial Annual Budget and Business Plan. If the total annual
expenditures set forth in the proposed Annual Budget and proposed Business Plan
are approved by the Board pursuant to Section 4.4 hereof, then such Annual
Budget or Business Plan, as the case maybe, shall for all purposes of this
Agreement constitute the Annual Budget or Business Plan and shall supersede any
previously approved Annual Budget or Business Plan.
4.6 Indemnification.
(a) No Member or Representative (including the Tax
Matters Member) (each an "Indemnitee") shall be liable, in damages or otherwise,
to the Company or any Member for any act or omission performed or omitted to be
performed by it or him pursuant to the authority granted by this Agreement,
except if such act or omission results from such Person's own bad faith, fraud,
gross negligence, willful breach of this Agreement, or willful or wanton
misconduct. To the fullest extent permitted by law, the Company shall indemnify
and hold harmless each Indemnitee from and against any and all losses, claims,
demands, costs, damages, liabilities (joint or several), expenses of any nature
(including reasonable attorneys' fees and disbursements), judgments, fines,
settlements, and other amounts ("Damages") arising from any and all claims,
demands, actions, suits or proceedings, whether civil, criminal, administrative
or investigative, in which an Indemnitee may be involved, or threatened to be
involved, as a party or otherwise, arising out of or incidental to the business
of the Company, regardless of whether an Indemnitee continues to be a Member, or
a Representative or an officer, director, shareholder, member or partner of such
Member or Representative, at the time any such liability or expense is paid or
incurred, if (i) the Indemnitee acted in good faith and in a manner it or he
reasonably believed to be in, or not opposed to, the interests of the Company,
and, with respect to any criminal proceeding, had no reason to believe this
conduct was unlawful, and (ii) the Indemnitee's conduct did not constitute bad
faith, fraud, gross negligence, willful breach of this Agreement or wilful or
wanton misconduct. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere, or
its equivalent, shall
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<PAGE> 25
not, in and of itself, create a presumption or otherwise constitute evidence
that the Indemnitee acted in a manner contrary to that specified in (i) or (ii)
above.
(b) Notwithstanding anything contained in this Section
4.6, the Company shall not indemnify and hold harmless any Indemnitee if a
judgment or other final adjudication adverse to such Indemnitee establishes: (i)
that such Indemnitee's acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated or (ii) that such Indemnitee personally gained financial profit or
other advantage to which he was not legally entitled.
(c) Expenses (including reasonable attorneys' fees and
disbursements) incurred in defending any claim, demand, action, suit or
proceeding, whether civil, criminal, administrative or investigative, hereof,
shall be paid by the Company in advance of the final disposition of such claim,
demand, action, suit or proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee to repay such amount if it shall ultimately be
determined, by a court of competent jurisdiction from which no further appeal
may be taken or the time for any appeal has lapsed (or otherwise, as the case
may be) that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereunder.
(d) The indemnification provided by this Section 4.6
shall be in addition to any other rights to which each Indemnitee may be
entitled under any agreement or vote of the Members, as a matter of law or
otherwise, both (i) as to action in the Indemnitee's capacity as a Member or
Representative, or as an officer, director, shareholder, member, or partner of a
Member or Representative, and (ii) as to action in another capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns, administrators and
personal representatives of the Indemnitee.
(e) The Company may purchase and maintain insurance on
behalf of one or more Indemnitees and other Persons against any liability which
may be asserted against, or expense which may be incurred by, any such Person in
connection with the Company's activities, whether or not the Company would have
the power to indemnify such Person against such liability under the provisions
of this Agreement.
(f) Any indemnification hereunder shall be satisfied only
out of the assets of the Company, and the Members and the Representatives shall
not be subject to personal liability by reason of these indemnification
provisions.
(g) An Indemnitee shall not be denied indemnification in
whole or in part under this Section 4.6 because the Indemnitee had an interest
in the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) To the same extent that the Company will indemnify
and advance expenses to a Member or Representative, the Company may indemnify
and advance expenses to any officer, employee or agent of the Company.
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ARTICLE V
LIABILITY OF A MEMBER
5.1 Limited Liability. Except as otherwise provided in the Act,
the debts, obligations and liabilities of the Company (whether arising in
contract, tort or otherwise) will be solely the debts, obligations and
liabilities of the Company, and no Member of the Company (including any Person
who formerly held such status) is liable or will be obligated personally for any
such debt, obligation or liability of the Company solely by reason of such
status. No individual trustee, officer, director, employee or agent of any
Member will have any personal liability for the performance of any obligation of
such Member under this Agreement.
5.2 Capital Contribution. Each Member is liable to the Company for
any Capital Contribution or distribution that has been wrongfully or erroneously
returned or made to such Person in violation of the Act, the Certificate or this
Agreement.
5.3 Reliance. Any Member will be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements by (a) any of the Company's other Members, employees or
committees or (b) any other Person who has been selected with reasonable care as
to matters such Member reasonably believes are within such other Person's
professional or expert competence. Matters as to which such reliance may be made
include the value and amount of assets, liabilities, Profits and Losses of the
Company, as well as other facts pertinent to the existence and amount of assets
from which distributions to Members might properly be made.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
As of the date hereof, each of the Members hereby makes to the
other Member each of the representations and warranties set forth in this
Article VI, and such warranties and representations shall survive the execution
of this Agreement.
6.1 Due Incorporation; Authorization. Such Member is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation and has the requisite power and
authority to own its property and carry on its business as owned and carried on
at the date hereof and as contemplated hereby. Such Member is duly licensed or
qualified to do business and in good standing in each of the jurisdictions in
which the failure to be so licensed or qualified would have a material adverse
effect on its financial condition or its ability to perform its obligations
hereunder. Such Member has the requisite power and authority to execute and
deliver this Agreement and each other agreement to which it is to be a party as
contemplated hereby and to perform its obligations hereunder and thereunder and
the execution, delivery and performance of this Agreement and each such other
agreement has been duly authorized by all necessary corporate or limited
liability company action. This Agreement constitutes the legal, valid and
binding obligation of such Member.
6.2 No Conflict. Neither the execution, delivery and performance
of this Agreement nor the consummation by such Member of the transactions
contemplated hereby will (a) conflict with,
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violate or result in a breach of any of the terms, conditions or provisions of
any law, regulation, order, writ, injunction, decree, determination or award of
any court, governmental department, board, agency or instrumentality, domestic
or foreign, or any arbitrator, applicable to such Member, (b) conflict with,
violate, result in a breach of or constitute a default under any of the terms,
conditions or provisions of the articles of incorporation or bylaws or similar
constituent documents of such Member or of any material agreement or instrument
to which such Member is a party or by which such Member is or may be bound or to
which any of its material properties or assets is subject, (c) conflict with,
violate, result in a breach of, constitute a default under (whether with notice
or lapse of time or both), accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval under
any indenture, mortgage, lease agreement or instrument to which such Member is a
party or by which such Member is or may be bound, or (d) result in the creation
or imposition of any lien upon any of the material properties or assets of such
Member, the effect of which could reasonably be expected to materially impair
such Members' ability to perform its obligations under this Agreement.
6.3 No Conflict; No Default. There are no actions, suits,
proceedings or investigations pending or to the knowledge of such Member,
threatened against or affecting such Member or any of its properties, assets or
businesses in any court or before or by any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator which could,
if adversely determined (or, in the case of an investigation could lead to any
action, suit, or proceeding, which if adversely determined could) reasonably be
expected to materially impair such Member's ability to perform its obligations
under this Agreement.
6.4 Unregistered Interests. Such Member (a) acknowledges that the
Interests are being acquired without registration under the Securities Act of
1933, as amended, or under similar provisions of state law, (b) represents and
warrants to the Company and the other Member that it is acquiring the Interest
for its own account, for investment and with no view to the distribution of the
Interest, and (c) agrees not to transfer or attempt to transfer such Interest in
the absence of registration under that Act and any applicable state securities
laws or an available exemption from such registration.
ARTICLE VII
BOOKS AND RECORDS; REPORTS TO MEMBERS
7.1 Books and Records.
(a) The following books and records of the Company shall
be kept at its principal office:
(i) a current list of the full name and last
known business, residence or mailing address of each Member;
(ii) originals of the Certificate, of this
Agreement, and any amendments thereto (and any signed powers of attorney
pursuant to which any such document was executed);
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(iii) a copy of the Company's federal, state and
local income tax returns and reports and annual financial statements of the
Company, for the five most recent years; and
(iv) minutes, or minutes of action or written
consent, of every meeting of the Members and the Board.
At the Company's expense, there will also be kept at the Company's principal
office separate books of accounts for the Business, which will be a true and
accurate record of all costs and expenses incurred, all credits made and
received and all income derived in connection with the operation of the Business
in accordance with GAAP.
(b) Each of the Members or its duly authorized
representatives shall have the right, upon reasonable notice, at its own
expense, to examine and inspect, during normal business hours and for any lawful
purpose related to the affairs of the Company or the investment in the Company
by such Member, any of the books of account, and business records of the
Company, and to copy any such books of account and business records of the
Company. The Company's books of account and business records shall be filed and
preserved for a period of at least five years or such longer period as required
by law.
7.2 Financial Reports. The Members will require the appropriate
officers and employees of the Company to prepare and deliver or cause to be
delivered to each Member, no later than forty-five (45) days after the close of
each of the first three quarters of the Company's Fiscal Year, and sixty (60)
days after the end of each such Fiscal Year, an audited financial report of the
business and operations of the Company prepared in accordance with GAAP,
relating to such period, which report shall include a balance sheet as of the
end of such period, a statement of income (loss) and Members' Capital Account
and cash flows (including sources and uses of funds) for the period then ended,
and in each case a comparison of the period then ended with the corresponding
period in the Fiscal Year immediately preceding such periods, which, in the case
of the report furnished after the close of the Fiscal Year, shall be audited by
the Company's independent certified public accountants. In addition, the
quarterly financial statements shall be accompanied by an analysis, in
reasonable detail, of the variance between the Company's operating results and
the corresponding amounts in the then current Annual Budget. The quarterly
financial reports may in each case be subject to normal year-end adjustments. In
addition to the foregoing financial statements, the financial report furnished
after the close of each Fiscal Year shall also include a statement of cash
flows, and allocations to the Members of the Company's taxable income, gains,
losses, deductions and credits. The Company will initially engage Ernst & Young
LLP as its independent certified public accountants and thereafter such other
accounting firm as the Members shall determine. The Company shall bear the cost
of each annual audit and the cost of any other services furnished to the Company
by its independent certified public accountants as provided herein.
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7.3 Tax Returns and Information.
(a) The Healtheon Member is hereby designated "Tax
Matters Member" for the Company and shall be so designated in each Federal
information return filed on behalf of the Company. The Tax Matters Member shall
not be liable to the Company or any Member for any act or omission taken or
suffered by it in such capacity in good faith and in the belief that such act or
omission is in or is not opposed to the best interests of the Company; provided,
however, that such act or omission is not in violation of this Agreement and
does not constitute gross negligence, fraud or a willful violation of law.
Within five Business Days of receipt, each Member shall give to each other
Member written notice of receipt from any taxing authority of any notification
of an audit or investigation of the Company.
(b) The Tax Matters Member shall cause income and other
required Federal, state and local tax returns for the Company to be prepared.
The Tax Matters Member shall make or maintain in effect an election under
Section 754 of the Code to adjust the basis of Company Property under Sections
734 and 743 of the Code for taxable years ending subsequent to the Effective
Date upon the request of any Member. The Tax Matters Member shall make such
other elections as it shall deem to be in the best interests of the Company and
the Members. The cost of preparation of such returns by outside preparers, if
any, shall be borne by the Company.
(c) The Tax Matters Member shall cause to be provided to
each Member no later than December 31 of each year information concerning the
Company's projected taxable income or loss and each class of income, gain, loss,
deduction or credit which is relevant to reporting a Member's share of Company
income, gain, loss, deduction or credit for purposes of Federal or state income
tax. Information required for the preparation of a Member's income tax returns
shall be furnished to the Members as soon as possible after the close of the
Company's Fiscal Year.
ARTICLE VIII
TRANSFERS, ADMISSIONS, WITHDRAWALS
8.1 Transfer. No Member shall Transfer any Interest owned by it
except for (a) Transfers to an Affiliate of the Transferor at the time, provided
that the Transferee remains an Affiliate of the Transferor immediately after the
Transfer; (b) pledges or grants of a security interest to secure loans to the
Company; or (c) Transfers made in compliance with Section 8.3 hereof, if
applicable. Any Transfer of an Interest other than as specifically permitted by
this Section 8.1 shall be void and of no effect. It is agreed that if the Fair
Market Value of any Partner's Interest equals twenty-five percent (25%) or more
of the Fair Market Value of such Partner's total assets determined on the date
any proposed Transfer of any equity interest in such Partner is to be
consummated, any Transfer of any equity interest in such Member shall constitute
a Transfer hereunder. The Partners shall be responsible to cause the owners of
their respective equity interests to enter into agreements as may be necessary
to enable such Partner to ensure compliance with this provision.
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8.2 Corporate Conversion.
(a) Upon the execution of this Agreement, it is the
express intention and understanding of the existing Members and those Persons
who became Members at the time of the execution of this Agreement that upon the
occurrence of certain events the Company shall be converted into a corporation
in the manner set forth herein by the action of the Board and without the
necessity of any action or any investment decision on the part of any Member.
(b) Upon the determination by the Super Majority Vote of
the Board, the Board shall cause a Corporate Conversion, and in connection
therewith cause the conversion of the Interests into the capital stock of any
resulting corporation having relative rights, limitations, preferences and other
terms consistent with the Interests so converted.
(c) The Members shall have no appraisal rights pursuant
to the Act or applicable law or otherwise in connection with a Corporate
Conversion or any other transaction authorized under this Agreement.
(d) In connection with the consummation of a Corporate
Conversion, the Board shall have the authority to merge, consolidate or
reorganize one or more of the subsidiaries with one or more other subsidiaries
or other entities wholly-owned directly or indirectly by the Company or the
surviving corporation in the Corporate Conversion.
(e) The Board is specifically authorized to take any and
all further action, and to execute, deliver and file any and all additional
agreements, documents or instruments, as it may determine to be necessary or
appropriate in order to effectuate the provisions of this Section 8.2 and each
Member hereby agrees to execute, deliver and file any such agreements, documents
or instruments or to take such action as may be reasonably requested by the
Board for the purpose of effectuating the provisions of this Section 8.2.
8.3 Put Right.
(a) Put Effective Date. In the event that as of the fifth
(5th) anniversary of the Effective Date, neither the Company nor any subsidiary
of the Company has initiated a public offering of its securities in the United
States or within any other foreign jurisdiction (the "Put Effective Date"), the
News Member shall have the right to exchange its Interest in the Company for
shares of Common Stock of Healtheon/WebMD Corporation upon the terms set forth
herein.
(b) Put Right. On or within ninety (90) days of the Put
Effective Date, the News Member shall have the right to require the Healtheon
Member to purchase from the News Member all, but not less than all, of the News
Member's Interests in the Company for two million shares of Common Stock (the
"Put Right"). The parties shall structure the Transfer of Interests pursuant to
this Section as a transaction which qualifies as a tax-free reorganization under
Section 368 of the Code.
(c) Exercise of Put Right. The exercise of the Put Right
shall be effected by written notice from the News Member to the Healtheon Member
in accordance with the notice
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provisions set forth herein (the "Put Right Notice"), which Put Right Notice
must be received by the Healtheon Member on or prior to the ninetieth (90th) day
after the Put Effective Date (the "Put Right Termination Date"). In the event
that the Healtheon Member does not receive a Put Right Notice on or prior to the
Put Right Termination Date, the Put Right granted hereunder shall immediately
terminate and be of no further force or effect.
(d) Exchange of Securities. The closing of the purchase
and sale pursuant to this Section 8.3 shall be held at the principal place of
business of the Company or at such other mutually acceptable place on a mutually
acceptable date no later than ten (10) days after the expiration or early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR") or the completion of any other applicable
regulatory proceedings (the "Put Right Closing Date"). The News Member and the
Healtheon Member agree to cooperate with each other in filing all necessary
notices and related materials to comply with the provisions of HSR or other
regulatory requirements, if applicable. On the Put Right Closing Date, the News
Member shall assign to the Healtheon Member, or its designees, the Interests of
the News Member in the Company, and shall execute such documents and instruments
as may be necessary to effectuate the sale of the Interests free and clear of
all Liens. The News Member shall represent and warrant in writing that it is the
record and beneficial owner and holder of the Interests which it is selling,
free and clear of all Liens (other than pledges or security interests that
secure indebtedness of the Company), and that it has full right, power and
authority to convey such Interests to the Healtheon Member.
8.4 Issuance of Additional Interests.
(a) Following the date of this Agreement, the Healtheon
Member shall have the right to cause the Company to issue additional Interests,
to up to a maximum of three (3) Persons, not to exceed thirty-three and
one-third percent (33 1/3%) of the Percentage Interests in the aggregate, if
(and only if) (i) each such proposed issuance is pursuant to a bona fide written
offer from a prospective purchaser that is not an Affiliate of the Healtheon
Member (ii) each such prospective purchaser and the terms of its investment is
reasonably acceptable to the News Member and (iii) each such prospective
purchaser agrees to purchase at least ten percent (10%) of the Percentage
Interests. Under no circumstances shall the News Member be under any obligation
to consent to the issuance of additional Interests to any Person that News
Corporation considers to be one of its competitors; provided, however, that the
News Member hereby acknowledges and agrees that Softbank is an acceptable
prospective purchaser in the event the Company elects to issue additional
Interests to Softbank.
(b) Upon the admission of a new Member pursuant to this
Section 8.4, the Members agree to amend to this Agreement to allow for such
admission and to provide the new Member with Voting rights proportionate to its
Percentage Interest.
(c) Upon the admission of a new Member pursuant to this
Section 8.4, the Healtheon Member and the News Member shall enter into a
separate agreement whereby they shall agree to vote together on all matters to
come before the Members pursuant to Sections 4.4 and 9.3 hereof, and to mutually
vote against any matter on which they cannot agree to so vote.
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8.5 Admission as a Member. No Transferee of any Interests from a
Member shall be admitted to the Company as a Member unless the Transfer shall
have been made in accordance with this Agreement and the Transferee shall have
executed an instrument satisfactory to the non-Transferring Member, whereby such
Transferee agrees to abide by the terms and conditions of this Agreement and
become a Member of the Company.
8.6 No Right to Withdraw. No Member shall have any right to resign
or otherwise withdraw from the Company prior to the dissolution and winding up
of the Company, without the express written consent of the other Member.
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.1 Dissolution. Dissolution of the Company will occur upon the
happening of any of the following events:
(a) the sale or other disposition of all or substantially
all of the Company's assets;
(b) the affirmative Super Majority Vote of the Members;
or
(c) the entry of a decree of judicial dissolution under
the Act.
9.2 Exclusive Means of Dissolution. The exclusive means by which
the Company may be dissolved are set forth in Section 9.1. The Company will not
be dissolved upon the death, retirement, resignation, expulsion, bankruptcy or
dissolution of any Member or upon the occurrence of any other event which
terminates the continued membership of any Member in the Company.
9.3 Liquidation. Upon Dissolution of the Company, the Company will
immediately proceed to wind up its affairs and liquidate pursuant to this
Section 9.3. Following dissolution, the Board shall appoint a Person to serve as
liquidating trustee and thus be charged with the duty to wind up the affairs of
the Company and distribute its assets as provided herein. A reasonable time will
be allowed for the orderly Liquidation of the Company and the discharge of
liabilities to creditors so as to enable the Company to minimize any losses
attendant upon Liquidation. Any gain or loss on disposition of any Company
assets in Liquidation will be allocated to Members in accordance with the
provisions of Section 3.6. Any liquidating trustee is entitled to reasonable
compensation for services actually performed, as approved by the Board, and may
contract for such assistance in the liquidating process as such Person deems
necessary or desirable. Until the filing of a certificate of cancellation under
Section 9.9, and without affecting the liability of the Members and without
imposing liability on the liquidating trustee, the liquidating trustee may
settle and close the Company's business, prosecute and defend suits, dispose of
its property, discharge or make provision for its liabilities, and make
distributions in accordance with the priorities set forth in this Article.
9.4 Priority of Payment. If the Company is dissolved the assets of
the Company will be distributed in Liquidation in the following order:
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(a) First, to creditors by the payment or provision for
payment of the debts and liabilities of the Company (other than any loans or
advances that may have been made by any Member or Affiliate) and the expenses of
Liquidation;
(b) Second, to the setting up of any reserves that are
reasonably necessary for any contingent, conditional or unmatured liabilities or
obligations of the Company;
(c) Third, to the repayment of any loans or advances to
the Company that may have been made by any Member or any Affiliate of a Member
(according to the relative priority of repayment of such loans or advances and
proportionally among loans or advances of equal priority if the amount available
for repayment is insufficient for payment in full); and
(d) Fourth, to the Members in proportion to the positive
balances in their respective Capital Accounts after such Capital Accounts have
been adjusted for all allocations of Profits and Losses and items thereof for
the Fiscal Year during which such liquidation occurs.
9.5 Liquidating Distributions. If the Company is dissolved, the
liquidating distributions due to the Members will be made by selling the assets
of the Company and distributing the net proceeds. Notwithstanding the preceding
sentence, but only upon the affirmative Super Majority Vote of the Members, the
liquidating distributions may be made by distributing the assets of the Company
in kind to the Members in proportion to the amounts distributable to them
pursuant to Section 9.4, valuing such assets at their Fair Market Value (net of
liabilities secured by such property that the Member takes subject to or
assumes) on the date of distribution. Each Member agrees to save and hold
harmless the other Members from such Member's proportionate share of any and all
such liabilities which are taken subject to or assumed. Appropriate and
customary prorations and adjustments will be made incident to any distribution
in kind. The Members will look solely to the assets of the Company for the
return of their Capital Contributions, and if the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return such contributions, they will have no
recourse against any other Member. The Members acknowledge that Section 9.4 may
establish distribution priorities different from those set forth in the
provisions of the Act applicable to distributions upon Liquidation, and the
Members agree that they intend, to that extent, to vary those provisions by this
Agreement.
9.6 No Restoration Obligation. Nothing contained in this Agreement
imposes on any Member an obligation to make an Additional Capital Contribution
in order to restore a deficit Capital Account upon Liquidation of the Company;
provided, however, that if, at any time the Company is Liquidated pursuant to
this Article 9, any portion of the News Funding Commitment remains unpaid, such
unpaid portion shall, at the time of such Liquidation, become immediately due
and payable by the News Member.
9.7 Timing. Final distributions in Liquidation will be made by the
end of the Company's Fiscal Year in which such actual Liquidation occurs (or, if
later, within 90 days after such event) in the manner required to comply with
the Section 704(b) of the Treasury Regulations. Payments or distributions in
Liquidation may be made to a liquidating trust established by the Company for
the benefit of those entitled to payments under Section 9.4, in any manner
consistent with this Agreement and Section 704(b) of the Treasury Regulations.
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<PAGE> 34
9.8 Liquidating Reports. A report will be submitted with each
liquidating distribution to Members made pursuant to Section 9.5, showing the
collections, disbursements and distributions during the period which is
subsequent to any previous report. A final report, showing cumulative
collections, disbursements and distributions, will be submitted upon completion
of the Liquidation.
9.9 Certificate of Cancellation. Upon Dissolution of the Company
and the completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate of Formation) with the
Delaware Secretary of State pursuant to the Act. At such time, the Company will
also file an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business. A certificate of
cancellation will also be filed at any time when there are no Members.
ARTICLE X
ADDITIONAL AGREEMENTS
10.1 Provision of Services. In connection with the formation of the
Company, (i) each of the News Member and the Healtheon Member shall enter into a
Management Services Agreement substantially in the forms annexed hereto as
Exhibits A and B, respectively, (ii) Star and the News Member shall enter into a
Media Services Agreement substantially in the form annexed as Exhibit G to the
Master Strategic Alliance Agreement, and (iii) the News Member shall procure a
trademark license agreement, substantially in the form annexed hereto as Exhibit
C and a content license agreement, substantially in the form annexed hereto as
Exhibit D.
10.2 SCHEDULED CONTRACTS. The parties hereto agree to the following
with respect to the Scheduled Contracts:
(a) The Healtheon Member agrees to use its commercially
reasonable efforts to obtain all of the necessary approvals to assign all of the
rights, benefits and obligations of the Healtheon/WebMD Corporation and its
Affiliates in and to the Scheduled Contracts with respect to the Territory to
the Company as soon as practicable following the date hereof. Any cost or
expenses associated with assigning such rights, benefits and obligations under
the Scheduled Contracts to the Company shall be paid by the Company. In the
event that the Healtheon Member obtains such approvals, the Healtheon Member and
the Company hereby agree to execute and deliver such documents as may be
necessary or desirable to effect the assignment by the Healtheon Member all of
such rights, benefits and obligations in and to the Scheduled Contracts (except
as provided herein) to the Company and for the Company to assume all of such
rights, benefits and obligations.
(b) In the event that the Healtheon Member is prohibited
from assigning any Scheduled Contract to the Company or is otherwise unable to
effectuate such assignment in a commercially reasonable manner, the parties
agree as follows:
(i) Within the time period specified in the
Scheduled Contracts which is applicable to the exercise of the Healtheon
Member's rights pertaining to a Development Opportunity (or if no time period is
specified, within the thirty (30) day period following the
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<PAGE> 35
Healtheon Member's notice to the Company hereunder) the Healtheon Member and the
Company agree to engage in good faith discussions and negotiations to determine
whether the Company wants to bear the cost of and receive the benefits from such
Development Opportunity (the "Company Election").
(ii) In the event that the Company does not make
the Company Election, the parties agree that the Healtheon Member shall have the
right exploit the Development Opportunity and to receive all the benefits
therefrom.
(iii) At any time thereafter, the Company shall
have the right to make the Company Election; provided, however, that prior to
receiving any benefit or payments relating to such Development Opportunity, the
Company shall be required to pay to the Healtheon Member an amount equal to (A)
the Healtheon Member's (or its Affiliate's as the case may be) net operating
losses arising from its exploitation of such Development Opportunity, after
deducting from any benefits or payments derived from the exploitation thereof,
all of the development, personnel and related costs and expenses associated with
the exploitation of such Development Opportunity incurred by the Healtheon
Member or its Affiliates prior to the date the Company Election is made (the
"Prior Development Period") plus interest accrued thereon at an annual rate
equal to the prime rate as published in the Wall Street Journal on the date of
such Company Election and (B) all of the development, personnel and related
costs and expenses associated with the exploitation of such Development
Opportunity incurred by the Healtheon Member or its Affiliates from and after
the Prior Development Period.
(c) In the event that the Healtheon Member has completed the
assignment of a Scheduled Contract to the Company the parties agree as follows:
(i) The Company agrees to notify the Healtheon Member
with respect to any Development Opportunity that the Company decides not to
exploit, at which time the Healtheon Member shall have the right to exploit such
Development Opportunity. The Company agrees to provide the notice to the
Healtheon Member as soon as possible following its decision not to exploit a
Development Opportunity and such notice shall be provided prior to the
expiration of any applicable time period specified in the relevant Scheduled
Contract to preserve the Healtheon Member" ability to exploit such Development
Opportunity and to exercise its rights hereunder.
(ii) With respect to each Development Opportunity rejected
by the Company, the Healtheon Member shall have the right to exploit at its cost
such Development Opportunity and to receive all the benefits therefrom unless
and until such time that the Company makes a Company Election, at which time the
provisions of Section 10.2(b)(iv) above shall govern.
(iii) The parties hereto agree that to the extent the
Healtheon Member engages in the exploitation of a Development Opportunity
pursuant to this Section 10.2(c), that with respect to such Development
Opportunity, the Company shall grant to the Healtheon Member and its Affiliates
all of the rights necessary to exploit such Development Opportunity and the
Healtheon Member agrees to assume the corresponding obligations under such
Scheduled Contract unless and until such time that the Company makes a Company
Election, at which time, the Healtheon Member
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<PAGE> 36
shall have no further rights or obligations under such Scheduled Contract with
respect to such Development Opportunity.
(d) For purposes of his Section 10.2, the term
"Development Opportunity" shall mean any right or opportunity available to the
Healtheon Member (or the Company or its Affiliates if such Scheduled Contract is
assigned to the Company) under the Scheduled Contract to develop Web Sites,
portal channels or otherwise exploit or derive the economic or business
opportunities set forth therein within the Territory.
ARTICLE XI
MISCELLANEOUS
11.1 Waiver of Partition. Except as may be otherwise provided by
law in connection with the winding-up, Liquidation and Dissolution of the
Company, each Member hereby irrevocably waives any and all rights that it may
have to maintain an action for partition of any of the Company Property.
11.2 Modification; Waivers. This Agreement may be modified or
amended only with the written consent of each Member. Except as otherwise
specifically provided herein, no Member shall be released from its obligations
hereunder without the written consent of the other Member. The observance of any
terms of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the party or parties
entitled to enforce such term, but any such waiver shall be effective only if in
a writing signed by the party or parties against which such waiver is to be
asserted. Except as otherwise specifically provided herein, no delay on the part
of any party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege hereunder operate as a waiver of any
other right, power or privilege hereunder nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
11.3 Entire Agreement. This Agreement and the documents expressly
referred to herein, and all related documents, each as amended, constitute the
entire agreement among the Members with respect to the subject matter hereof and
supersede any prior agreement or understanding between or among the Members with
respect to such subject matter.
11.4 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision to
other Persons or circumstances shall not be affected thereby; provided, however,
that the parties shall negotiate in good faith with respect to an equitable
modification of the provision or application thereof held to be invalid.
11.5 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given on the date delivered by hand or on
the third Business Day after such notice is mailed by registered
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<PAGE> 37
or certified mail, postage prepaid, and, pending the designation by written
notice of another address, addressed as follows:
If to the News Member:
c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind. Esq.
Telephone: (212) 852-7007
Telecopier: (212) 768-2029
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telephone: (212) 476-8364
Telecopier: (212) 697-6686
If to the Healtheon Member:
Healtheon/WebMd Corporation
400 The Lenox Building
Atlanta, Georgia 30326, USA
Attention: Jeffrey T. Arnold
Chief Executive Officer
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
With a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Christopher D. Mangum, Esq.
Telephone: (404) 881-7000
Telecopier: (404) 881-7777
11.6 Successors and Assigns. Except as otherwise specifically
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Members and their legal representatives, successors and permitted
assigns.
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<PAGE> 38
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same
instrument.
11.8 Headings; Cross-references. The Article and Section headings
in this Agreement are for convenience of reference only, and shall not be deemed
to alter or affect the meaning or interpretation of any provisions hereof.
11.9 Construction. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditors of the Company. No one,
including but not limited to the Members or any creditor of the Company or any
of its Members, shall have any rights under this Agreement against any Affiliate
of any Member.
11.10 Property Rights; Confidentiality. All books, records and
accounts maintained exclusively for the Company (including, without limitation,
marketing reports and all other data whether stored on paper or in electronic or
other form), and any contracts or agreements (including, without limitation,
agreements for the purchase, lease or license of programming) entered into by or
exclusively on behalf of the Company, shall at all times be the exclusive
property of the Company. All property (real or personal or mixed) purchased with
Company funds, and all moneys held or collected for or on behalf of the Company
shall at all times be the exclusive property of the Company. Except as expressly
agreed to by the Members, no Member shall, during the period such Member is a
Member and for a period ending on the later of two (2) years after such Member
has ceased to be a Member, disclose any confidential or proprietary information
with respect to the Company to any Person, except (a) with the prior written
consent of the other Member; (b) to the extent necessary to comply with law or
the valid order of a court of competent jurisdiction, in which event the party
making such disclosure shall so notify the other Member as promptly as
practicable (and, if possible, prior to making such disclosure) and shall seek
confidential treatment of such information; (c) as part of its normal reporting
or review procedure to its parent company, its auditors and its attorneys;
provided, however, that such Member shall be liable for any breach by such
parent company, auditors or attorneys of any provision of this Section 11.10;
(d) in connection with the enforcement of such Member's rights hereunder; (e)
disclosures to an Affiliate of, or professional advisor to, such Member in
connection with the performance by such Member of its obligations hereunder;
provided, however, that such Member shall be liable for any breach by such
Affiliate or professional advisor of any provision of this Section; and (f) to a
prospective purchaser of all or a portion of such Member's Interest in
connection with a sale in accordance with the terms of this Agreement; provided,
however, that such Member shall be liable for any breach by such prospective
purchaser of any provision of this Section; and (g) with respect to the
Healtheon Partner, upon a Dissolution or Liquidation of the Partnership, to the
extent necessary for the continued ongoing operation of the business of the
Healtheon Partner and its Affiliates. Except as provided in the preceding
sentence, no Member, nor any of its Affiliates, shall, during the periods
referred to in such sentence, use any confidential or proprietary information
with respect to the Company other than for the benefit of the Company. This
Section 11.10 hereof shall survive the termination of this Agreement, the
Dissolution of the Company, the withdrawal of any Member and the transfer of the
Interest of any Member.
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<PAGE> 39
11.11 Further Actions. Each Member shall execute and deliver such
other certificates, agreements and documents, and take such other actions, as
may reasonably be required in connection with the formation and continuation of
the Company and the achievement of its purposes.
11.12 Governing Law; Forum. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any conflicts of laws rules. Any controversy or claim arising out of or
relating to this Agreement, or breach thereof, shall be settled by arbitration
in accordance with the Arbitration Rules of the American Arbitration
Association. The Arbitration Tribunal shall consist of three arbitrators, of
whom one shall be nominated by Healtheon Partner, one by News Partner, and the
third, who shall serve as Chairman, shall be chosen by the two party-nominated
arbitrators or, in the event that party-nominated arbitrators are unable to
designate the third arbitrator, by the American Arbitration Association. The
situs of the arbitration shall be Washington, D.C. The language of the
arbitration shall be English. The award of the arbitrator shall be final and
binding. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The Parties waive any right to appeal the
arbitral award, to the extent a right to appeal may be lawfully waived. Each
Party retains the right to seek judicial assistance: (a) to compel arbitration;
(b) to obtain interim measures of protection pending arbitration; and (c) to
enforce any decision of the arbitrators, including the final arbitral award. The
prevailing Party in the arbitration shall be entitled to receive reimbursement
of its reasonable expenses incurred in connection therewith.
11.13 Expenses of the Parties. All expenses incurred by or on behalf
of the parties hereto in connection with the authorization, preparation and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the authorization, preparation, execution and
consummation of this Agreement shall be borne solely by the party who shall have
incurred the same.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers or members hereunto duly authorized as of the date
first written above.
HW INTERNATIONAL HOLDINGS, INC.
By: /s/
--------------------------------
Name: W. Michael Heekin
Title: Vice President
IJV HOLDINGS, INC.
By:
--------------------------------
Name: Lawrence A. Jacobs
Title: Sr. Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
Healtheon Member and their subsidiary set forth in this Agreement. This is a
guaranty of payment and not of collection.
HEALTHEON/WEBMD CORPORATION
By: /s/
--------------------------------
Name: W. Michael Heekin
Title: Exec. Vice President
The undersigned, by executing this Agreement, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
News Member and their subsidiary set forth in this Agreement.
This is a guaranty of payment and not of collection.
THE NEWS CORPORATION LIMITED
By: /s/
--------------------------------
Name: Arthur Siskind
Title: Director
<PAGE> 41
LIST OF SCHEDULES
Schedule
Schedule 3.1 Initial Capital Contributions
Schedule 10.2
Scheduled Contracts
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<PAGE> 42
SCHEDULE 3.1
INITIAL CAPITAL CONTRIBUTIONS
<TABLE>
<S> <C>
Healtheon Member
Healtheon Trademark License. The beginning
capital account for the Healtheon Member
shall be $100,000,000.
News Member
(i) cash of $3,000,000 and (ii) an
obligation to contribute an additional
$97,000,000. The sum of (i) and (ii) shall
equal $100,000,000.
The beginning capital account for the News
Member shall be $3,000,000.
</TABLE>
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<PAGE> 43
SCHEDULE 10.2
SCHEDULED CONTRACTS
AGREEMENT DATED AS OF MAY 19, 1999 BY AND AMONG HEALTHEON CORPORATION, WEBMD,
INC. AND MICROSOFT CORPORATION.
DISTRIBUTION AND CROSS PROMOTION AGREEMENT DATED AS OF MAY 6, 1999, BY AND AMONG
MICROSOFT CORPORATION, WEBTV NETWORKS, INC., MSNBC INTERACTIVE NEWS, LLC AND
WEBMD, INC.
AGREEMENT DATED AS OF AUGUST 10, 1999 BY AND BETWEEN CNN INTERACTIVE, A DIVISION
OF CABLE NEWS NETWORK LP, LLP AND WEBMD, INC.
AGREEMENT DATED AS OF MARCH 5, 1999 BY AND BETWEEN LYCOS, INC. AND WEBMD, INC.
CONTENT LICENSE AND CO-BRANDED AREA AGREEMENT DATED AS OF MAY 13, 1999 BY AND
BETWEEN EXCITE, INC. AND WEBMD, INC.
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<PAGE> 44
EXHIBIT A
FORM OF NEWS MANAGEMENT AGREEMENT
<PAGE> 45
EXHIBIT B
FORM OF HEALTHEON MANAGEMENT AGREEMENT
<PAGE> 46
EXHIBIT C
FORM OF HEALTH NETWORK TRADEMARK LICENSE
<PAGE> 47
EXHIBIT D
FORM OF HEALTH NETWORK CONTENT LICENSE
<PAGE> 1
EXHIBIT 10.8
WEBMD INTERNATIONAL MEDIA SERVICES AGREEMENT
THIS AGREEMENT ("Agreement") dated as of the 26th day of January, 2000,
is made by and between WebMD International LLC, a Delaware limited liability
company (the "Company"), and Eastrise Profits Limited, an international business
company incorporated under the laws of the British Virgin Islands ("Star") which
is controlled by The News Corporation Limited ("News Corp" and together with
Star, the "News Parties") (each referred to herein as a "Party", and
collectively referred to as the "Parties").
WHEREAS, the Company owns and operates Non-Standard Television Services
and Internet Services throughout the world (other than the United States and
Japan) devoted predominantly to health and fitness content ("Health Related
Content") consisting of audio-visual programming, data and information through
one or more subsidiaries; and
WHEREAS, the News Parties through their respective subsidiaries and
affiliates have controlling and non-controlling interests in programs, networks
and other media properties of various kinds (the "Media Properties"); and
WHEREAS, the Company, the News Parties and affiliates of the News
Parties have entered into agreements and arrangements (together, the "Related
Agreements") as a result of which the News Parties and their affiliates are
obligated to provide media services of various kinds as hereinafter provided;
and
WHEREAS, it is a condition of the Related Agreements that the Parties
enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE I
MEDIA SERVICES/ACCOUNTING
1.1 Media Services. In response to requests by the Company made in
consultation with the News Parties from time to time, the News Parties agree to
provide, to cause Controlled Affiliates to provide, and to use commercially
reasonable efforts to cause Non-Controlled Affiliates to provide, to the Company
(i) advertising and marketing services (the "Advertising Services") and (ii)
promotion, programming and distribution services (the "Promotional Services" and
together with the Advertising Services, the "Media Services") in the Territory
during the period commencing on the date hereof and ending on August 31, 2010
(the "Effective Period"). As used herein, "Controlled Affiliates" means any
corporation or other entity more than 50% of whose outstanding voting securities
or other equity interests are directly or indirectly owned by News Corp;
"Non-Controlled Affiliates" means any corporation or other entity in which News
Corp directly or indirectly has a greater than 20% but no more than 50% equity
interest; and "Territory" means the world (other than the United States and
Japan).
1.2 Accounting and Reporting Statements. The News Parties shall
accurately account for the rendition of the Media Services to the Company unless
otherwise agreed upon in connection with particular Media Services. The News
Parties shall prepare and deliver to the Company at the beginning and the end of
each television broadcast season a statement (the "Services Statements")
indicating in
<PAGE> 2
reasonable detail the value (determined as provided herein) of the Media
Services to be furnished and furnished under this Agreement during such
television broadcast season computed in good faith in accordance with Section
2.2 and 3.5 of this Agreement. All such Services Statements, and the information
contained therein, shall constitute confidential "Information" of the News
Parties, which shall be subject to Article 8 hereof. Disputes with respect to
any valuations of Media Services shall be resolved in accordance with Article 7.
ARTICLE 2
ADVERTISING AND MARKETING
2.1 Advertising Media. During the Effective Period, the News
Parties agree to provide, to cause Controlled Affiliates to provide and to use
commercially reasonable efforts to cause Non-Controlled Affiliates to provide,
an aggregate of $180 million of Advertising Services in the Territory on
television and cable properties, film properties, print advertising media and
News America Digital Publishing's Internet sites owned by the News Parties, the
Controlled Affiliates and the Non-Controlled Affiliates "Advertising Space").
The dollar amount of Advertising Services to be provided to the Company during
each television broadcast season is set forth opposite the respective season on
Schedule 1 attached hereto. Attached as Schedule 2 is a representative
allocation of the Advertising Space to be provided to the Company during a
television broadcast season with respect to Media Services that will be provided
by the News Parties in the United States pursuant to the Related Agreements (the
"Representative Allocation"). The Parties shall use the Representative
Allocation as a benchmark for the nature, placement and pricing of Advertising
Space to be provided to the Company in the Territory each season. The Parties
recognize that the Representative Allocation is a media buy with respect to
Advertising Services in the United States and that the Advertising Services to
be provided to the Company in the Territory will differ, but the Parties also
acknowledge and agree that, to the extent practicable, the Advertising Services
in the Territory will be based upon a similar nature, volume, placement, amount
and other factors that were relevant to the creation of the Representative
Allocation, subject to the understanding that the News Parties' international
assets differ significantly from their domestic assets, and that the allocation
of Advertising Services must be adjusted accordingly. The Parties shall meet
during the upfront selling period for each television broadcast season (the
"Upfront Period") to determine the Advertising Space to be allocated to the
Company for the season beginning in September of such year. The Parties intend
that all of such Advertising Space for that season will be allocated at that
time, subject to reasonable flexibility as required for changes in unforeseen
circumstances. After the allocation of Advertising Services is decided upon
during the Upfront Period, the Company shall coordinate directly with the
particular Controlled Affiliate or Non-Controlled Affiliate with which the
Company has chosen to advertise. The News Parties shall use commercially
reasonable efforts to satisfy, and to cause the Controlled Affiliates and
Non-Controlled Affiliates to satisfy, all requests made by the Company in
connection with the placement and scheduling of all advertisements. The Parties
also agree that they will pro rate, to the extent practicable, Advertising Space
based on the Representative Allocation during the period commencing on the date
hereof and ending on August 31, 2000 (the "Short Season"), subject to the
understanding that a majority of the Short Season has been previously sold. Any
amounts attributable to Advertising Space provided to the Company during the
Short Season shall reduce the amount of Advertising Space to be provided to the
Company in the tenth (10") television broadcast season.
2.2 Determination of Dollar Amount of Advertising Services.
The News Parties agree that the dollar amount of Advertising Services to be
provided to the Company pursuant to this Agreement shall be based upon
advertising prices which are charged by the News Parties to similarly situated
parties based upon similar volume placement, amount and other factors relevant
to the pricing of advertising services, but in no event shall the dollar amount
charged for Advertising Services to be provided to the Company
2
<PAGE> 3
pursuant to this Agreement be greater than the prices charged, on average, to
the top twenty advertisers on the Advertising Space platform in question.
2.3 Approval Over Content. The News Parties shall have final
approval over all content exhibited under this Agreement to insure that such
content meets the News Parties' editorial standards, which approval shall not be
unreasonably withheld.
ARTICLE 3
PROMOTION, PROGRAMMING AND DISTRIBUTION
3.1 Promotional Services. During the Effective Period. the News
Parties agree to provide, to cause Controlled Affiliates to provide and to use
commercially reasonable efforts to cause Non-Controlled Affiliates to provide,
at least $120 million (valued pursuant to Section 3.5) of Promotional Services
(as more fully described in Section 3.2, 3.3 and 3.4) in the Territory on
television and cable properties, film properties, print media and News America
Digital Publishing's Internet sites owned by the News Parties, (the Controlled
Affiliates and the Non-Controlled Affiliates (the "Promotional Channels"). The
minimum inherent market value of Promotional Services to be provided to the
Company during each television broadcast season is set forth opposite the
respective season on Schedule 3 attached hereto.
3.2 Promotions. Attached as Schedule 4 is a list of various forms
of Promotional Services to be provided to the Company during a television
broadcast season that will be provided by the News Parties in the United States
pursuant to the Related Agreements (the "Promotional List"). The Parties shall
use the Promotional List as a benchmark for their determination of the nature,
volume and placement of the Promotional Services (in addition to Promotional
Services that may be provided pursuant to Section 3.3 and 3.4) to be provided to
the Company each season. The Parties recognize that the Promotional List is a
list with respect to Promotional Services in the United States and that the
Promotional Services to be provided to the Company in the Territory will differ,
but the Parties also acknowledge and agree, to the extent practicable, that the
Promotional Services in the Territory will be based upon a similar nature,
volume, placement, amount and other factors that were relevant to the creation
of the Promotional List subject to the understanding that the News Parties'
international assets differ significantly from their domestic assets and that
the allocation of Promotional Services must be adjusted accordingly. The Parties
shall meet during the Upfront Period to determine the Promotional Services to be
allocated to the Company on which Promotional Channels for the season beginning
in September of such year. The Parties intend that all of such Promotional
Services for that season will be allocated at that time, subject to reasonable
flexibility as required for changes in unforeseen circumstances. After the
allocation of Promotional Services is decided upon during the Upfront Period,
the Company shall coordinate directly with the particular Controlled Affiliate
or Non-Controlled Affiliate with which the Company has chosen to place such
Promotional Services. The News Parties shall use commercially reasonable efforts
to satisfy, and to cause the Controlled Affiliates and Non-Controlled Affiliates
to satisfy, all requests made by the Company in connection with the placement of
ail Promotional Services. The Parties agree that they will pro rate, to the
extent practicable, Promotional Services during the Short Season, subject to the
understanding that a majority of the Short Season has been previously produced.
Any amounts attributable to Promotional Services provided to the Company during
the Short Season shall reduce the amount of Promotional Services to be provided
to the Company in the tenth (10th) television broadcast season.
3.3 Programming - Timing, Production and Content. The Company and
the News Parties shall use commercially reasonable efforts to enter into
co-production agreements covering the timing, budgeting, production,
intellectual property rights, talent utilized, scheduling, locations,
exhibition,
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distribution and content of production services similar, to the extent
practicable, to the production services to be provided by the News Parties in
the United States pursuant to the Related Agreements subject to the
understanding that News Parties' international assets differ significantly from
their domestic assets, and that the allocation of production services must be
distributed accordingly:
3.4 Distribution. The News Parties agree to cause Controlled
Affiliates to obtain or provide (as and when available, subject to existing
obligations and business plans) and to use commercially reasonable efforts to
cause Non-Controlled Affiliates to obtain or provide distribution for Health
Related Content in the Territory.
3.5 Determination of' Inherent Market Value of Promotional
Services. The News Parties agree that they will provide at least the Inherent
Market Value of Promotional Services to the Company during each broadcast season
as set forth opposite such season on Schedule 3. As used herein, "Inherent
Market Value" means a value determined after taking into consideration (i) the
prices which are charged by the News Parties to similarly situated parties (to
the extent the News Parties shall sell such services), the opportunity costs of
the News Parties and its out of pocket costs and expenses, (ii) the value
derived by the Company from such Promotional Services and (iii) similar pricing
structures employed in comparable relationships, including the relationship
among CBS and Medscape, Sportsline and MarketWatch. The Company shall have the
right to audit the Inherent Market Value of Promotional Services provided to the
Company each broadcast season pursuant to Article 7 hereof.
3.6 Payment of Expenses for Promotional Services. The News Parties
shall invoice the Company on a monthly basis during each broadcast season for
the Company's share of production costs associated with the Promotional Services
provided during the previous month. The Company shall remit such production
costs to the News Parties within 30 days of the Company's receipt of the
invoice.
ARTICLE 4
MAINTENANCE OF RECORDS
4.1 Records. Each Party shall maintain books and records directly
related to the subject matter of this Agreement that are sufficient to verify
any amounts deemed paid, payable or credited pursuant to this Agreement. Not
more than once during any twelve month period, each Party may conduct an
inspection of the other's books and records for the sole purpose of verifying
such amounts and/or statistics. Such inspections shall be conducted upon
reasonable prior notice, at the Parties' normal places of business, during
normal business hours and in a manner so as to minimize disruptions to the
Parties' normal course of business. No Party shall be permitted to copy or
duplicate any of the books and records of the other Party during the course of
any such inspection. The Parties acknowledge that the books and records of the
other Party, including the information contained therein are of a confidential
nature and, accordingly, shall be included in the "Information" that is subject
to the provisions of Article 8 hereof.
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS
5.1 Mutual Representations and Warranties. Each of the News
Parties represents and warrants to the Company and the Company represents and
warrants to the News Parties that:
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<PAGE> 5
(a) it is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
the full power and authority to carry out its business as now conducted and to
own its assets property and business:
(b) all corporate and other proceedings required to be
taken by it or on its behalf to authorize its entry into this Agreement have
been duly and validly taken, and this Agreement has been duly and validly
executed and delivered by it and constitutes a valid and binding agreement in
accordance with its terms; and
(c) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
default under or violate any material agreement to which it is a party or by
which it is bound, or violate any provisions of its organizational documents.
5.2 News Parties Covenants. Each of the News Parties covenants and
agrees that News Corp shall he able to procure from the News Parties, their
Controlled Affiliates, Non-Controlled Affiliates or others during the
Effective Period promotional channels and advertising space comparable to the
Promotional Channels and Advertising Space owned or available to them as of
the date hereof, to the extent necessary to provide the Media Services.
ARTICLE 6
INDEMNIFICATION
6.1 The further agreements entered into pursuant to this Agreement
shall contain customary indemnification provisions with respect to content and
other matters.
ARTICLE 7
DISPUTE RESOLUTION RE VALUATION
7.1 Dispute Resolution. If the Company shall dispute the News
Parties valuation of any Media Services provided by the News Parties hereunder,
the Company shall (no later than 60 days after receipt of the Services Statement
after the end of the applicable broadcast season) send a notice to the News
Parties detailing the claimed error and the amount and nature of the error and
naming an independent nationally recognized accounting firm (the "Dispute
Notice"). If the News Parties do not agree with the Dispute Notice or the
Parties fail to resolve all matters set forth in the Dispute Notice within 30
days after receipt of the Dispute Notice, the News Parties shall forward a copy
of the Dispute Notice along with a statement of the News Parties' position to
the Media Valuation Expert (defined below), which shall resolve the valuation
dispute within 90 days of receipt of such Dispute Notice in accordance with
valuation standards set forth in Sections 2.2 and 3.5 hereof. If the agreed upon
value of the Media Services as determined pursuant to this Section 7.1 is less
than the value of Media Services to be provided to the Company in the applicable
television broadcast season as set forth on Schedules 1 and 3 hereof, the
difference between such values shall be added to the amount of Advertising
Services and Promotional Services, as applicable, to be provided to the Company
during the next broadcast season. If the agreed upon value of the Media Services
as determined pursuant to this Section 7.1 is more than the value of Media
Services to be provided to the Company in the applicable television broadcast
season as set forth on Schedules 1 and 3 hereof, the difference between such
values shall be subtracted from the amount of Advertising Services and
Promotional Services, as applicable, to be provided to the Company during the
next broadcast season.
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7.2 Fees and Expenses. The fees and expenses of the Media
Valuation Expert shall be borne by the News Parties, unless the Media Valuation
Expert determines that the valuation set forth in the Services Statement is
correct or the value of the Media Services is greater than that set forth in the
Services Statement, in which event the fees and expenses of the Media Valuation
Expert shall be borne by the Company. The determination of value pursuant to
this Article 7 shall be final and binding on the Parties. As used herein, the
term "Media Valuation Expert" means an independent nationally recognized
accounting firm mutually selected by the accounting firm set forth in the
Dispute Notice and an independent nationally recognized accounting firm selected
by the News Parties. The Parties shall cause the Media Valuation Expert to enter
into a confidentiality agreement in form and substance acceptable to the Parties
and the Media Valuation Expert.
ARTICLE 8
CONFIDENTIALITY
8.1 Nondisclosure. Each Party acknowledges that it will have
access to certain information and materials concerning the other Party's
business, plans, customers, technology and products that are confidential and of
substantial value to such Party (referred to in this Agreement as
"Information"), which value would be impaired if such Information were disclosed
to third persons. Except as otherwise expressly provided herein, each Party
agrees to maintain all Information received from the other (the "Disclosing
Party"), including the terms and conditions of this Agreement, in confidence and
agrees not to disclose or otherwise make such Information available to any third
Person without the prior written consent of the Disclosing Party. Subject to the
use restrictions set forth in this Section 8.1, the News Parties may disclose
Information provided by the Company hereunder to Controlled Affiliates and
Non-Controlled Affiliates and their Authorized Representatives to the extent
such disclosure is necessary for the News Parties to perform their obligations
under this Agreement. Subject to the use restrictions set forth in this Section
8.1, the Company may disclose Information provided by the News Parties
hereunder to Affiliates of the Company and its Authorized Representatives to the
extent such disclosure is necessary for the Company to purchase Media Services
pursuant to this Agreement. As used herein, the term "Affiliate" means, with
respect to any Person, any other Person that controls, through the ability to
exercise 50% or more of the voting power of such Person, or is so controlled by
or is under such common control with such Person; the term "Authorized
Representative" means, with respect to any Person, only those employees and
agents of such Person that have been appraised of the obligations contained in
this Article 8 and have agreed to adhere thereto; provided that under no
circumstances shall Authorized Representatives include any Person that has an
affiliation of any nature with any Competitor of the Disclosing Party, including
without limitation, any advertising agency which has, or may, do business with
the Disclosing Party; and the term "Person" means any individual person,
corporation, partnership, limited liability company, trust, unincorporated
organization, association or other entity.
8.2 Exclusions. The foregoing shall not apply to Information
which:
(a) is or becomes a matter of public knowledge through no
fault of or action by the receiving Party;
(b) was rightfully in the receiving Party's possession
prior to disclosure by the Disclosing Party;
(c) subsequent to disclosure, is rightfully obtained by
the receiving Party from a third Person who is lawfully in possession of such
Information without restriction;
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(d) is independently developed by the receiving Party
without resort to Information which is confidential under this Agreement; or
(e) is required by law, regulation, governmental agency
or judicial order to be disclosed.
8.3 Return of Information. Whenever reasonably requested by a
Disclosing Party, a receiving Party shall immediately return to the Disclosing
Party, all Information or, at the Disclosing Party's option, shall destroy all
such Information as the Disclosing Party may designate and provide to the
Disclosing Party written certification of destruction.
8.4 Publicity. The timing and content of any press release
regarding any aspect of this Agreement or the Related Agreements (whether in
electronic, print or other media) shall be subject to the prior written approval
of both Parties, which approval shall not be unreasonably withheld.
8.5 Survival. Each receiving Party' s obligation of
confidentiality pursuant to this Article 10 shall survive any termination or
expiration of this Agreement for of a period of two years from the date of any
such expiration or termination, and thereafter shall terminate and be of no
further force or effect.
ARTICLE 9
GENERAL PROVISION'S
9.1 Governing Law. This Agreement will be interpreted and governed
by the laws of the State of Delaware.
9.2 Independent Contractors. The relationship of the Company and
the News Parties established by this Agreement is that of independent
contractors, and nothing contained in this Agreement will be construed to
constitute the Parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking.
9.3 Subcontractors. Each Party shall have the right to appoint
third person subcontractors and to otherwise delegate its obligations hereunder,
it being understood and agreed that each Party shall remain in all respects
fully responsible for all of such Party's obligations hereunder and any Party's
appointment of a subcontractor or delegation of its obligations otherwise shall
not relieve such Party of any of its obligations hereunder.
9.4 Modification. No amendment or modification to this Agreement
shall be effective unless agreed to by the Parties in writing, and no waiver of
any rights hereunder shall be effective unless assented to in writing by the
Party waiving such right.
9.5 Force Majeure. Neither Party will be liable for any failure or
delay in its performance under this Agreement, except for payment obligations,
due to acts of God, acts of civil or military authority, fire, electrical
shortages, failure of telecommunication lines (including, without limitation,
Internet access equipment or lines), epidemic, flood, earthquake, riot, war,
sabotage, governmental action or any other event beyond the reasonable control
of such Party and its Affiliates (collectively, "Events of Force Majeure"). A
delayed party shall nevertheless give the other Party written notice of such
Event of Force Majeure promptly and shall use its reasonable efforts to correct
such failure or delay in performance. Notwithstanding the foregoing, an Event of
Force Majeure shall not relieve the News
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Parties from providing at a later date the Media Services which were not
provided as a result of the Force Majeure.
9.6 Headings. The headings and captions used in this Agreement are
for convenience of reference only, and shall not in any way affect the
interpretation of the provisions of this Agreement.
9.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.8 Assignment. Neither Party may assign its rights under this
Agreement, whether by operation of law or otherwise, without the prior written
consent of the other Party, except that either Party may assign its rights under
this Agreement to (a) an Affiliate, for so long as such entity remains an
Affiliate of the assigning Party during the term of the assignment, (b) any
entity into which the Party has merged or which has otherwise succeeded to all
or substantially all of its business and assets to which this Agreement
pertains, by merger, reorganization or otherwise, and which has assumed in
writing or by operation of law the assigning Party's obligations under this
Agreement; provided further that the assigning Party shall remain liable for all
obligations under this Agreement. Subject to the previous sentences, (the rights
and liabilities of the Parties hereto will bind and inure to the benefit of
their respective permitted successors, executors and administrators, as the case
may be.
9.9 Severability. If any provision of this Agreement is held to be
invalid by a court of Competent jurisdiction, then the remaining provisions will
nevertheless remain in full force and effect. The Parties agree to renegotiate
in good faith any term held invalid and to be bound by the mutually agreed
substitute provision.
9.10 Notices. All notices required or permitted under this
Agreement will be in writing and will be deemed given:
(a) when delivered personally
(b) when received, if sent by confirmed facsimile
transmission, or by registered or certified mail, return receipt requested,
postage prepaid; or
(c) one day after deposit with a commercial overnight
carrier specifying next day delivery, with written verification of receipt.
All communications will be sent to the following respective addresses
or to such other address as may be designated by a Party by giving written
notice to the other Party pursuant to this Section.
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If to the Company:
c/o Healtheon/WebMD Corporation
400 The Lenox Building
Atlanta, Georgia 30326, USA
Telephone: (404) 479-7600
Telecopier: (404) 479-7651
Attention: Jeffrey T. Arnold
Chief Executive Officer
and
c/o The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Phone: (212) 852-7007
Fax: (212) 768-2029
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President and
Group General Counsel
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
Suite 2600
100 Tryon Street
Charlotte, North Carolina 28202
Telecopier: (704) 377-4814
Attention: H. Bryan Ives III, Esq.
C. Mark Kelly, Esq.
If to the News Parties:
c/o The News Corporation Limited
1211 Avenue of the Americas
New York, New York 10036
Phone: (212) 852-7007
Fax: (212) 768-2029
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President and
Group General Counsel
With a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Telecopier: (212) 697-6686
Attention: Joel I. Papernik, Esq.
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9.11 No Waiver. The failure of either Party to enforce any term or
condition of this Agreement will not constitute a waiver of such Party's rights
to enforce subsequent breaches of any term or condition under this Agreement.
9.12 Injunctive Relief. Each Party agrees that there may be no
adequate remedy at law available to the other Party in the event of certain
breaches of this Agreement and that the other Party, in addition to any other
rights which may be available to it, shall have the right to seek specific
performance or relief as applicable. In the event of any breach or threatened
breach of such provisions.
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Each Party has read, understands and agrees to the terms and
conditions of this Agreement and the undersigned are duly authorized to sign
this Agreement.
EASTRISE PROFITS LIMITED
By: /s/
---------------------------------------------------
Name: Lawrence A. Jacobs
Title: Director
WEBMD INTERNATIONAL LLC
By: IJV Holdings, Inc., as Member
/s/
---------------------------------------------------
Name: Lawrence A. Jacobs
Title: Sr. Vice President
By: HW International Holdings, Inc., as Member
/s/
---------------------------------------------------
Name: W. Michael Heekin
Title: Vice President
The undersigned, by its signature below, hereby unconditionally
guarantees the full and prompt payment and performance of all obligations of the
News Parties, their Controlled Affiliates and Non-Controlled Affiliates set
forth in this Agreement. This is a guaranty of payment and not of collection.
News Corp hereby waives the right to require the Company to proceed against the
News Parties or any other person or to require the Company to pursue any other
remedy or enforce any other right.
THE NEWS CORPORATION LIMITED
By: /s/
------------------------------------------------
Its: Arthur Siskind
Director
<PAGE> 1
EXHIBIT 10.9
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT(the "Agreement") is dated as
of January 26, 2000, by and between AHN/FIT INTERNET, LLC, a Delaware limited
liability company ("Internet LLC"), and H/W HEALTH & FITNESS, LLC, a Delaware
limited liability company ("H/W"), Internet LLC is hereinafter sometimes
referred to as "Assignor." H/W is hereinafter sometimes referred to as
"Assignee."
RECITALS:
A. Pursuant to that certain Master Strategic Alliance Agreement
dated as of December 6, 1999, by and among Healtheon/WebMD Corporation, The News
Corporation Limited and Fox Entertainment Group, Inc. (the "Alliance
Agreement"). Assignor has agreed to assign to Assignee all of Assignor's right,
title and interest under, in and to all of its assets (other than cash and the
assets associated with the Galaxy search engine), as more particularly described
in the Alliance Agreement (the "Assets"). Any capitalized terms not otherwise
defined in this Agreement shall have the meaning ascribed to such terms in the
Alliance Agreement.
B. Pursuant to the Alliance Agreement, the parties thereto have
agreed to cause Assignee to assume and to fully perform and satisfy and be
liable for all of the liabilities and obligations of Assignor (other than loans
from its members), as more particularly described in the Alliance Agreement (the
"Assumed Liabilities").
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1. ASSIGNMENT. Assignor hereby grants, sells, assigns, transfers,
conveys and delivers to Assignee, its successors and assigns, all of Assignor's
rights, title and interest under, in and to the Assets.
2. ASSUMPTION OF ASSUMED LIABILITIES. Assignee hereby expressly
assumes and agrees to pay, perform and/or discharge in accordance with their
terms the Assumed Liabilities.
3. FURTHER ASSURANCES. Each of Assignor and Assignee agree to
execute such other documents and take such other actions as may be reasonably
necessary or desirable to confirm or effectuate the assumption contemplated
hereby.
4. BINDING EFFECT. This Agreement and the covenants and
agreements herein contained shall be binding upon and inure to the benefit of
Assignee and its successors and assigns and shall inure to the benefit of
Assignor and its successors and assigns.
<PAGE> 2
5. NO MODIFICATION OF ALLIANCE AGREEMENT. This Agreement is
delivered pursuant to the Alliance Agreement and is subject in all respects to
the provisions thereof and is not meant to alter, enlarge or otherwise modify
the provisions of the Alliance Agreement.
6. MODIFICATION. This Agreement may be modified or supplemented
only by written agreement of the parties hereto.
[SIGNATURE PAGE FOLLOWS]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first written above.
AHN/FIT INTERNET, LLC
By: FIT TV Holdings, LLC, its
Managing Member
/s/
-------------------------------------------
By:
Its:
H/W HEALTH & FITNESS, LLC
By: AHN/FIT Internet, LLC, its Sole Member
/s/
-------------------------------------------
By:
Its:
-3-
<PAGE> 1
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of the 26th day of January, 2000 by
and among Healtheon/WebMD Corporation, a Delaware corporation with its principal
office at 400 The Lenox Building, 3399 Peachtree Road NE, Atlanta, Georgia 30326
(the "Company"), and Janus Capital Corporation ("Janus").
WHEREAS, the Company desires to issue and sell to Janus pursuant to
this Agreement shares (the "Shares") of the authorized but unissued shares of
common stock, $.0001 par value per share, of the Company (the "Common Stock");
and
WHEREAS, Janus, wishes to purchase the Shares on the terms and subject
to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements,
representations, warranties and covenants herein contained, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Affiliate" of a party means any corporation or other
business entity controlled by, controlling or under common control with
such party. For this purpose "control" shall mean direct or indirect
beneficial ownership of fifty percent (50%) or more of the voting
interest in such corporation or other business entity.
(b) "Assets" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
(c) "Closing Date" means the date of the Closing.
(d) "Consent" shall mean any consent, approval,
authorization, clearance, exemption, waiver, or similar affirmation by
any Person pursuant to any Contract, Law, Order, or Permit.
(e) "Contract" shall mean any written or oral agreement,
arrangement, commitment, contract, indenture, instrument, lease,
obligation, plan, restriction, understanding or undertaking of any kind
or character, or other document to which any Person is a party or by
which such Person is bound or affecting such Person's capital stock,
Assets or business.
<PAGE> 2
(f) "Exchange Act" means the Securities Exchange Act of
1934, as amended, and all of the rules and regulations promulgated
thereunder.
(g) "Governmental Entity" shall mean any government or
any agency, bureau, board, directorate, commission, court, department,
official, political subdivision, tribunal, or other instrumentality of
any government, whether federal, state or local, domestic or foreign.
(h) "HSR Act" shall mean Section 7A of the Clayton Act,
as added by Title II of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
(i) "Knowledge" shall mean with respect to any Party,
with respect to any matter in question, that any of the Chief Executive
Officer, Chief Financial Officer, General Counsel or Controller of such
Party, has actual knowledge of such matter.
(j) "Law" shall mean any code, law, ordinance,
regulation, reporting or licensing requirement, rule, or statute
applicable to a Person or its Assets, Liabilities or business,
including those promulgated, interpreted or enforced by any Regulatory
Authority.
(k) "Litigation" shall mean any action, suit,
arbitration, filed cause of action, filed claim, filed complaint,
criminal prosecution, demand letter, governmental or other examination
or investigation, hearing, inquiry, administrative or other proceeding,
or notice (written or oral) by any Person alleging potential Liability
or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement.
(l) "Material" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in
question; provided that any specific monetary amount stated in this
Agreement shall determine materiality in that instance.
(m) "Material Adverse Effect" on a Party shall mean an
event, change or occurrence which, individually or together with any
other event, change or occurrence, has a Material adverse impact on (i)
the financial position, business, or results of operations of such
Party and its Subsidiaries, taken as a whole, or (ii) the ability of
such Party to perform its obligations under this Agreement or to
consummate the other transactions contemplated by this Agreement;
provided that "Material Adverse Effect" shall not be deemed to include
events, changes or occurrences (x) generally affecting the healthcare
information technology industry, or (y) generally affecting the overall
U.S. economy.
(n) "Order" shall mean any administrative decision or
award, decree, injunction, judgment, order, quasi-judicial decision or
award, ruling, or writ of
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any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
(o) "Permit" shall mean any federal, state, local, and
foreign governmental approval, authorization, certificate, consent,
easement, filing, franchise, letter of good standing, license, notice,
permit, qualification, registration or right of or from any
Governmental Entity (or any extension, modification, amendment or
waiver of any of these) to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its
securities, Assets or business, or any notice, statement, filing or
other communication to be filed with or delivered to any Governmental
Entity.
(p) "Person" shall mean a natural person or any legal,
commercial or Governmental Entity, such as, but not limited to, a
corporation, general partnership, joint venture, limited partnership,
limited liability company, trust, business association, group acting
in concert, or any person acting in a representative capacity.
(q) "Registration Rights Agreement" shall mean that
certain Registration Rights Agreement, dated as of the date hereof,
among the Company and the Janus.
(r) "Regulatory Authorities" shall mean, collectively,
the Federal Trade Commission, the United States Department of Justice,
and all foreign, federal, state and local regulatory agencies and other
Governmental Entities or bodies having jurisdiction over the Parties
and their respective Assets, employees, businesses and/or Subsidiaries,
including the NASD and the SEC.
(s) "SEC" shall mean the Securities and Exchange
Commission.
(t) "Securities Act" shall mean the Securities Act of
1933, as amended, and all of the rules and regulations promulgated
thereunder.
(u) "Subsidiaries" shall mean all those corporations,
partnerships, associations, or other entities of which the entity in
question owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as
to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent; provided, there shall not
be included any such entity acquired through foreclosure or any such
entity the equity securities of which are owned or controlled in a
fiduciary capacity.
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2. Purchase and Sale of Shares.
2.1 Purchase and Sale. Subject to and upon the terms and
conditions set forth in this Agreement, the Company agrees to issue and sell to
Janus, and Janus, hereby agrees to purchase from the Company, at the Closing,
15,000,000 shares of Common Stock at a purchase price of $62.00 per share. The
total purchase price payable by Janus for the shares of Common Stock that Janus
is hereby agreeing to purchase is 930,000,000.
2.2 Closing. The closing of the transactions contemplated under
this Agreement (the "Closing") shall take place on the second business day after
the execution of this Agreement by the Company and Janus. Upon Closing, the
Company shall deliver the Common Stock purchased by Janus to Janus's custodian
via electronic delivery, registered in the name of Janus (or in such nominee or
custodial name as shall be specified by Janus), against payment of the purchase
price therefor by wire transfer of immediately available funds to such account
or accounts as the Company shall designate in writing.
3. Representations and Warranties of the Company
The Company represents and warrants to Janus as follows:
3.1 Organization, Standing, and Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware, and has the power and authority to carry on its
business as it has been and is now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to transact business as a foreign
corporation and is in good standing in all jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed would not have, individually or in the aggregate, a
Material Adverse Effect on the Company. Copies of the Certificate of
Incorporation and all amendments thereto of the Company and the bylaws, as
amended, of the Company and copies of all resolutions adopted and action taken
by the stockholders or Board of Directors and all committees thereof of the
Company, which have been made available to Janus for review, are true and
complete in all Material respects and accurately reflect all proceedings of the
stockholders and Board of Directors (and all committees thereof) of the Company.
3.2 Authorization of Agreement; No Breach. The execution, delivery
and performance of this Agreement and the Registration Rights Agreement has been
duly authorized by all necessary corporate action of the Company. This Agreement
constitutes, and all agreements and other instruments and documents to be
executed and delivered by the Company pursuant to this Agreement, including the
Registration Rights Agreement, will constitute, legal, valid and binding
obligations of the Company enforceable against it in accordance with their
respective terms, except to the extent such enforceability is subject to (i)
laws of general application relating to bankruptcy, insolvency, moratorium and
the relief of debtors and (ii) the availability of specific
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performance, injunctive relief or other equitable remedies. Except in such case,
individually or in the aggregate, that will not result in a Material Adverse
Effect on the Company, the execution, delivery and performance of this Agreement
and the agreements and other documents and instruments to be executed and
delivered by the Company pursuant to this Agreement and the consummation of the
transactions contemplated hereby and thereby will not (i) violate or result in a
breach of or default under the certificate of incorporation or bylaws of the
Company or any of its Subsidiaries or any other Material Contract to which the
Company or any of its Subsidiaries is a party or is bound; (ii) to the Knowledge
of the Company and its Subsidiaries, violate any Law, Order, administrative
decision or award of any court, arbitrator, mediator, tribunal or Regulatory
Authority applicable to or binding upon the Company or its Subsidiaries or upon
their respective securities, Assets or business; or (iii) create a Material lien
upon the securities, Assets or business of the Company or any of its
Subsidiaries.
3.3 Capital Stock.
(a) As of November 11, 1999, the authorized capital stock
of the Company consists of: (i) 600,000,000 shares of the Common Stock, of which
146,204,261 shares (plus any shares issued upon exercise of the Company's
Options and Warrants (as defined in Section 3.3(b) since November 11, 1999) are
issued and outstanding and (ii) 5,000,000 shares of Preferred Stock, $0.0001 par
value per share, none of which shares are issued and outstanding. All of the
outstanding shares of the Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable, and were issued in Material
compliance with the Securities Act and applicable state securities Laws, except
to the extent that non-compliance would not have a Material Adverse Effect on
the Company.
(b) As of November 11, 1999, an aggregate of 63,595,222
shares of the Common Stock (less any shares of Common Stock subject to the
Company's Options and Warrants that have been exercised since November 11, 1999)
are subject to issuance pursuant to outstanding options to purchase the Common
Stock under the Company's stock option plans and outstanding warrants to
purchase the Company's Common Stock. (Stock options granted by the Company
pursuant to its stock option plans and warrants are referred to in this
Agreement as the "Company Options and Warrants".) All Company Options and
Warrants were issued or granted in Material compliance with the Securities Act
and applicable state securities Laws pursuant to a valid exemption from
registration under the Securities Act and all applicable state securities Laws.
(c) Except as set forth above, in the Company's SEC
Documents and in Section 3.3(c) of the Company Disclosure Letter, as of the date
of this Agreement, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which the Company or any of its Subsidiaries is a party or by which it is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of the
Company or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend,
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accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement.
3.4 The Company SEC Filings; Financial Statements. The Company has
filed various reports, schedules, forms, statements and other documents (which
are publicly available) with the SEC pursuant to applicable Securities Laws from
January 1, 1999 to the date of this Agreement (the "Company SEC Documents"), and
the Company SEC Documents constitute all of the documents required to have been
filed by the Company pursuant to such Laws for such period. As of their
respective dates, or if amended, as of the date of the last such amendment, the
Company SEC Documents complied in all Material respects, with the requirements
of the Securities Act or the Exchange Act, as the case may be, and none of the
Company SEC Documents contained when filed any untrue statement of a Material
fact or omitted, or will omit, to state any Material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, or are to be made, not misleading.
Except to the extent information contained in any the Company SEC Document has
been revised or superseded by a later filed the Company SEC Document, none of
the Company SEC Documents (including any and all financial statements included
therein) contains any untrue statement of a Material fact or omits to state a
Material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents when filed fairly presented the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the respective periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein) and have been
prepared in conformity with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto).
3.5 Absence of Undisclosed Liabilities. Except as disclosed on the
Company SEC Documents, the Company does not have any Material (individually or
in the aggregate) Liabilities, other than Liabilities incurred in the ordinary
course of business since September 30, 1999 or Liabilities arising under this
Agreement.
3.6 Absence of Certain Changes or Events. Since September 30,
1999, there has not occurred (i) any events, changes or occurrences (other than
events or condition affecting the economy generally) which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Company, (ii) any declaration, setting aside or payment of any
dividend or distribution of any kind by the Company on any class of its capital
stock or (iii) any change in the Company's accounting methods, principles or
practices utilized by or affecting the Company except as required by concurrent
changes in GAAP.
3.7 Compliance with Laws. The business of the Company has been and
is being conducted in compliance with all applicable Laws, except for violations
or failures to so comply that could not reasonably be expected, individually or
in the aggregate, to
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have Material Adverse Effect on the Company; and no investigation or review by
any Governmental Entity with respect to the Company is pending or, to the
Knowledge of the Company, threatened in writing, other than, in each case, those
which could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on the Company.
3.8 Governmental Approvals; Required Consents. No filing or
registration with, or Consent of, any Governmental Entity or any other third
party is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or is necessary for the consummation of
the transactions contemplated hereby except such other Consents, registrations
and filings the failure of which to obtain or make could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company.
3.9 The Company Common Stock. The Company's Common Stock to be
issued in accordance with the terms and provisions of this Agreement will, when
so issued, be duly authorized, validly issued, fully paid and non-assessable.
3.10 Orders and Litigation. Except as set forth in the Company SEC
Documents, there are no outstanding Orders against the Company or any of its
Subsidiaries, any of their Assets or business, or, to the Knowledge of the
Company, any of the Company's or its Subsidiaries' current or former directors
or officers (during the period served as such) or any other person whom the
Company or any of its Subsidiaries has agreed to indemnify, as such. Except as
set forth in the Company SEC Documents, there is no Material Litigation pending
or, to the Knowledge of the Company, threatened in writing against the Company
or any of its Subsidiaries, any of their Assets or business, or, to the
Knowledge of the Company, any of the Company's or its Subsidiaries' current or
former directors or officers or any other person whom the Company or any of its
Subsidiaries has agreed to indemnify, as such; nor is there any reasonable basis
for any such Litigation that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on the Company.
4. Representations and Warranties of the Janus. Janus represents
and warrants to the Company as follows:
4.1 Authorization. All action on the part of Janus and, if
applicable, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated herein and therein has been taken. Each of this Agreement and the
Registration Rights Agreement constitutes the legal, valid and binding
obligation of Janus, enforceable against Janus in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally. Janus has all requisite power to
enter into each of this Agreement and the Registration Rights Agreement and to
carry out and perform its obligations under the terms of this Agreement and the
Registration Rights Agreement.
4.2 Purchase Entirely for Own Account, Etc. Janus is acquiring the
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Shares for its own account, and not with a view to, or for sale in connection
with, any distribution of the Shares in violation of the Securities Act. Except
as contemplated by this Agreement, Janus has no present agreement, undertaking,
arrangement, obligation or commitment providing for the disposition of the
Shares. Janus represents that is has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Shares. Janus
agrees not to assign, sell, pledge, transfer or otherwise dispose of or transfer
any Shares unless registered under the Securities Act and applicable state
securities laws, or an opinion is given by counsel satisfactory to the Company
that such registration is not required. The Company may affix a legend to any
certificates representing the Shares to the foregoing effect.
4.3 Investor Status; Etc. Janus certifies and represents to the
Company that at the time Janus acquires any of the Shares, Janus will be an
"accredited investor" as defined in Rule 501 of Regulation D promulgated under
the Securities Act and an "institutional investor" within the meaning of Section
802.64(a) of the regulations adopted under of the HSR Act. Janus's financial
condition is such that it is able to bear the risk of holding the Shares for an
indefinite period of time and the risk of loss of its entire investment. Janus
has been afforded the opportunity to ask questions of and receive answers from
the management of the Company concerning this investment and has sufficient
knowledge and experience in investing in companies similar to the Company in
terms of the Company's stage of development so as to be able to evaluate the
risks and merits of its investment in the Company. The purchase of the Common
Stock by Janus is being made directly by it in the ordinary course of business
within the meaning of Section 802.64(b) of the regulations promulgated under of
the HSR Act.
4.4 Shares Not Registered. Janus understands that the Shares have
not been registered under the Securities Act, by reason of their issuance by the
Company in a transaction exempt from the registration requirements of the
Securities Act, and that the Shares must continue to be held by Janus unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration. Janus understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
4.5 No Conflict. The execution and delivery of this Agreement and
the Registration Rights Agreement by Janus and the consummation of the
transactions contemplated hereby and thereby will not conflict with or result in
any violation of or default by Janus (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under (i) any
provision of the organizational documents of Janus or (ii) any agreement or
instrument, permit, franchise, license, judgment, order, statute, law,
ordinance, rule or regulations, applicable to Janus or its respective properties
or assets.
4.6 Brokers. Janus has not retained, utilized or been represented
by any broker or finder in connection with the transactions contemplated by this
Agreement.
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4.7 Consents. All consents, approvals, orders and authorizations
required on the part of Janus in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated herein have been obtained and are effective as of the Closing Date.
5. Conditions Precedent.
5.1. Conditions to the Obligation of Janus to Consummate the
Closing. The obligation of Janus to consummate the Closing and to purchase and
pay for the Shares being purchased by it pursuant to this Agreement is subject
to the satisfaction of the following conditions precedent:
(a) The representations and warranties contained herein of the
Company shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date (it being
understood and agreed by Janus that, in the case of any representation and
warranty of the Company contained herein (i) which is not hereinabove qualified
by application thereto of a materiality standard, such representation and
warranty need be true and correct only in all Material respects in order to
satisfy as to such representation or warranty the condition precedent set forth
in the foregoing provisions of this Section 5.1 (a) or (ii) which is made as of
a specific date, such representation and warranty need be true and correct only
as of such specific date in order to satisfy as to such representation and
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.1(a)).
(b) The Registration Rights Agreement shall have been executed and
delivered by the Company.
(c) The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Closing Date.
(d) No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
(e) The purchase of and payment for the Shares by Janus shall not
be prohibited by any Law or Order.
(f) All instruments and corporate proceedings in connection with
the transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to Janus, and Janus shall have
received copies (executed or certified, as may be appropriate) of all documents
which Janus may have reasonably requested in connection with such transactions.
5.2. Conditions to the Obligation of the Company to Consummate the
Closing.
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The obligation of the Company to consummate the Closing and to issue and sell to
Janus the Shares to be purchased by it at the Closing is subject to the
satisfaction of the following conditions precedent:
(a) The representations and warranties contained herein of Janus
shall be true and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date (it being understood and
agreed by the Company that, in the case of any representation and warranty of
Janus contained herein which is not hereinabove qualified by application thereto
of a materiality standard, such representation and warranty need be true and
correct only in all Material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.2(a)).
(b) The Registration Rights Agreement shall have been executed and
delivered by Janus.
(c) Janus shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by the
Janus on or prior to the Closing Date.
(d) No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
(e) The sale of the Shares by the Company shall not be prohibited
by any Law or Order.
(f) Janus shall have executed and delivered to the Company
confirmation of Janus's status as an "accredited investor" (as such term is
defined in Rule 501 promulgated under the Securities Act) and an "institutional
investor" (as such term is defined under 15 C.F.R. ss.802.64(a) of the HSR Act).
(g) Janus shall have purchased, in accordance with this Agreement,
15,000,000 shares of the Common Stock."
(h) All instruments and corporate proceedings in connection with
the transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to the Company, and the Company
shall have received counterpart originals, or certified or other copies of all
documents, including without limitation records of corporate or other
proceedings, which it may have reasonably requested in connection therewith.
6. Shelf Registrations, Transfer, Legends
6.1. Shelf Registration. Subject to the Registration Rights
Agreement, the Company shall use its reasonable best efforts: (i) to file prior
to June 11, 2000 with the SEC a registration statement for a non-underwritten
offering to be made on a continuous
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basis pursuant to Rule 415 of the Securities Act relating to the Common Shares
underlying Janus's Shares (a "Shelf Registration") and (ii) to have the Shelf
Registration declared effective as soon as possible after July 26, 2000.
6.2. Securities Law Transfer Restrictions. Janus shall not sell,
assign, pledge, transfer or otherwise dispose or encumber any of the Shares
being purchased by it hereunder, except (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to an available
exemption from registration under the Securities Act and applicable state
securities laws and, if requested by the Company, upon delivery by Janus of an
opinion of counsel reasonably satisfactory to the Company to the effect that the
proposed transfer is exempt from registration under the Securities Act and
applicable state securities laws. Any transfer or purported transfer of the
Shares in violation of this Section 6.1 shall be voidable by the Company. The
Company shall not register any transfer of the Shares in violation of this
Section 6.1. The Company may, and may instruct any transfer agent for the
Company, to place such stop transfer orders as may be required on the transfer
books of the Company in order to ensure compliance with the provisions of this
Section 6.1.
6.3. Legends. Each certificate requesting any of the Shares shall
be endorsed with the legends set forth below, and Janus covenants that, except
to the extent such restrictions are waived by the Company, it shall not transfer
the shares represented by any such certificate without complying with the
restrictions on transfer described in this Agreement and the legends endorsed on
such certificate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY,
UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT."
6.4. Restrictions on Transfer. In addition, Janus hereby expressly
covenants and agrees that it shall not (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any of the Shares issued pursuant to this
Agreement (the "Subject Stock") or any securities convertible into or
exercisable or exchangeable for the Subject Stock (including, without
limitation, shares of the Subject Stock or securities convertible into or
exercisable or exchangeable for the Subject Stock which may be deemed to be
beneficially owned by such holder in accordance with the rules and regulations
of the SEC) or (ii) enter into any swap or other arrangement that transfers all
or a portion of the economic consequences associated with the ownership of any
Subject Stock (regardless of whether any of the transactions described in clause
(i) or clause (ii) is to be settled by the delivery of Subject Stock, or such
other securities, in cash or otherwise (each action described herein is referred
to as a "Transfer"). Notwithstanding any provision of this Section 6.4 to the
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contrary and subject to compliance with the Securities Laws, Janus may Transfer
such Subject Stock to any Affiliate of Janus.
7. Miscellaneous Provisions.
7.1 Public Statements or Releases. Janus shall not make, issue, or
release any announcement, whether to the public generally, or to any of its
suppliers or customers, with respect to this Agreement or the transactions
provided for herein, or make any statement or acknowledgment of the existence
of, or reveal the status of, this Agreement or the transactions provided for
herein, without the prior consent of the Company, which shall not be
unreasonably withheld or delayed, provided that nothing in this Section 7.1
shall prevent any of the parties hereto from making such public announcements as
it may consider necessary in order to satisfy its legal obligations, but to the
extent not inconsistent with such obligations, it shall provide the other
parties with an opportunity to review and comment on any proposed public
announcement before it is made.
7.2 Further Assurances. Each party agrees to cooperate fully with
the other party and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by the other party to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into effect the intents
and purposes of this Agreement.
7.3 Rights Cumulative. Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
7.4 Pronouns. All pronouns or any variation thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
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7.5 Notices.
(a) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to be given
hereunder shall be sent by postage prepaid first class mail, courier or fax or
delivered by hand to the party to whom such correspondence is required or
permitted to be given hereunder. The date of giving any notice shall be the date
of its actual receipt.
(b) All correspondence to the Company shall be addressed as
follows:
Healtheon/WebMD Corporation
400 the Lenox Building
3399 Peachtree Road NE,
Atlanta, Georgia 30326
Attention: Jack Dennison
Copy to Counsel: Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28202
Telecopy Number: (704) 377-4814
Attention: H. Bryan Ives III
(c) All correspondence to Janus shall be addressed as follows:
Janus
100 Fillmore Street
Denver, Co 80206
Attention: Heidi J. Walter, Vice President and Assistant General
Counsel
(d) Any entity may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
7.6 Captions. The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.
7.7 Severability. Should any part or provision of this Agreement
be held unenforceable or in conflict with the applicable laws or regulations of
any jurisdiction, the invalid or unenforceable part or provisions shall be
replaced with a provision which accomplishes, to the extent possible, the
original business purpose of such part or provision in a valid and enforceable
manner, and the remainder of this Agreement shall remain binding upon the
parties hereto.
7.8 Governing Law; Injunctive Relief.
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(a) This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of Delaware and without regard
to any conflicts of laws concepts which would apply the substantive law of some
other jurisdiction.
(b) Each of the parties hereto acknowledges and agrees that
damages will not be an adequate remedy for any material breach or violation of
this Agreement if such material breach or violation would cause immediate and
irreparable harm (an "Irreparable Breach"). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, in any state or federal court in Delaware, equitable relief of a kind
appropriate in light of the nature of the ongoing or threatened Irreparable
Breach, which relief may include, without limitation, specific performance or
injunctive relief; provided, however, that if the party bringing such action is
unsuccessful in obtaining the relief sought, the moving party shall pay the
non-moving party's reasonable costs, including attorney's fees, incurred in
connection with defending such action. Such remedies shall not be the parties'
exclusive remedies, but shall be in addition to all other remedies provided in
this Agreement.
7.9 Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
7.10 Expenses. Each party will bear its own costs and expenses in
connection with this Agreement.
7.11 Assignment. The rights and obligations of the parties hereto
shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. Neither party may assign its
rights or obligations under this Agreement or designate another person (i) to
perform all or part of its obligations under this Agreement or (ii) to have all
or part of its rights and benefits under this Agreement, in each case without
the prior written consent of the other party. In the event of any assignment in
accordance with the terms of this Agreement, the assignee shall specifically
assume and be bound by the provisions of the Agreement by executing and agreeing
to an assumption agreement reasonably acceptable to the other party.
7.12 Survival. The respective representations and warranties given
by the parties hereto, and the other covenants and agreements contained herein,
shall survive the Closing Date and the consummation of the transactions
contemplated herein for a period of 90 days, without regard to any investigation
made by any party.
7.13 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto respecting the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter hereof, whether written or oral. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by parties.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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This Stock Purchase Agreement is hereby executed as of the date first above
written.
COMPANY:
HEALTHEON/WEBMD CORPORATION
By: /s/
---------------------------------
Its:
---------------------------
JANUS CAPITAL CORPORATION
By: /s/
---------------------------------
Its:
---------------------------
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EXHIBIT 10.11
HEALTHEON/WEBMD CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made and
entered into as of the 26th day of January, 2000 among Healtheon/WebMD
Corporation, a Delaware corporation (the "COMPANY"), and the party set forth on
signature pages hereto (the "PURCHASER").
R E C I T A L S:
A. The Purchaser has purchased 15,000,000 shares of the Company's
Common Stock, par value $0.0001 per share (the "COMMON STOCK") pursuant to a
Stock Purchase Agreement dated as of the date hereof, (the "PURCHASE AGREEMENT")
between the Company and the Purchaser.
B. The Company and the Purchaser desire to set forth the
registration rights to be granted by the Company to the Purchaser.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth herein and in
the Purchase Agreement, the parties mutually agree as follows:
A G R E E M E N T:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company as filed with the Secretary of State
of the State of Delaware, as amended from time to time.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, par value $0.0001 per
share, of the Company and any and all shares of capital stock or other equity
securities of: (i) the Company which are added to or exchanged or substituted
for the Common Stock by reason of the declaration of any stock dividend or stock
split, the issuance of any distribution or the reclassification, readjustment,
recapitalization or other such modification of the capital structure of the
Company; and (ii) any other corporation, now or hereafter organized under the
laws of any state or other governmental authority, with which the Company is
merged, which results from any consolidation or reorganization to which the
Company is a party, or to which is sold all or substantially all of the shares
or assets of the Company, if immediately after such merger, consolidation,
reorganization or sale, the Company or any Stockholders of the Company own
equity securities having in the aggregate more than fifty percent (50%) of the
total voting power of such other corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Family Member" shall mean (a) with respect to any individual, such
individual's spouse, any descendants (whether natural, adopted or in the process
of adoption), any trust all of the beneficial interests of which are owned by
any of such individuals or by any of such individuals together with any
<PAGE> 2
organization described in Code Section 501(c)(3), the estate of any such
individual, and any corporation, association, partnership or limited liability
company all of the equity interests of which are owned by those above described
individuals, trusts or organizations and (b) with respect to any trust, the
owners of the beneficial interests of such trust.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the Commission which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the Commission.
"Holder" shall mean the Purchaser or any of such Holder's respective
successors and assigns who acquire rights in accordance with this Agreement with
respect to the Registrable Securities directly or indirectly from such Holder.
"Initiating Holders" shall mean any Holder or Holders of not less than
50% of the then outstanding Registrable Securities.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities" means shares of Common Stock issued pursuant
to the Purchase Agreement, excluding in all cases, however (including exclusion
from the calculation of the number of outstanding Registrable Securities), any
Registrable Securities sold by a person in a transaction (i) pursuant to a
registration statement under Section 2, 3 or 4 hereof or (ii) pursuant to Rule
144 (or any successor provision) of the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute promulgated in replacement thereof, and the rules
and regulations of the Commission thereunder, all as the same shall be in effect
at the time.
2. Demand Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect a registration with
respect to at least 2,000,000 shares of Common Stock that constitute Registrable
Securities (as adjusted for stock splits, stock dividends, recapitalizations and
similar events) the Company will:
(a) promptly give written notice of the proposed registration to
all other Holders so they may have an opportunity to consider joining in such
registration, which they may do (subject to the terms and provisions of this
Agreement) at their election within ten (10) days after receipt of the notice of
the proposed registration by the Company; and
(b) as soon as practicable, use its reasonable best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
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<PAGE> 3
Holder or Holders joining in such request as are specified in a written request
given within ten (10) days after receipt of notice from the Company pursuant to
Section 2(a); provided that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) Prior to July 26, 2000;
(iii) Within the one hundred twenty (120) day period
immediately following the effective date of a registration statement pertaining
to a firm commitment underwritten public offering of Common Stock for the
account of a shareholder (including Purchaser) of the Company who has exercised
a demand right to register shares of Common Stock (other than a registration
relating solely to a Commission Rule 145 transaction, a registration relating
solely to employee benefit plans, or a registration statement on Form S-3 (or
any similar short-form registration statement));
(iv) Within the sixty (60) day period immediately
following the effective date of a registration statement on Form S-3 (or any
similar short-form registration statement) pertaining to a firm commitment
underwritten public offering of Common Stock for the account of another
shareholder of the Company who has exercised a demand right to register shares
of Common Stock (other than a registration relating solely to a Commission Rule
145 transaction or a registration relating solely to employee benefit plans); or
(v) After the Company has effected three (3)
registrations pursuant to this Section 2 and such registrations have been
declared or ordered effective and have remained effective for a period of at
least ninety (90) consecutive days.
Subject to the foregoing clauses (i) through (v), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request of the
Initiating Holders. The Initiating Holders may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request, without liability (except as set forth in Section 6 hereof)
to the Initiating Holders or any other Holders of Registrable Securities
requested to be registered pursuant to Section 2(a) hereof, by providing a
written notice to the Company revoking such request.
Notwithstanding the above, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 2 during the period starting with the date ninety (90) days prior to the
Company's good faith estimate of the date of filing of (or in the case of any
registration on Form S-3, forty-five (45) days prior), and ending on a date one
hundred twenty (120) days after the effective date of (or in the case of any
registration on Form S-3, ninety (90) days after), a Company-initiated
registration statement in connection with a bona fide firm commitment
underwritten registration for securities to be offered for the Company's own
account (the "Intended Registration"); provided that the Company is actively
employing in good faith all reasonable efforts to cause the Intended
Registration to become effective and provided further that the Company gives
notice to all Holders upon commencement of such period. The Holders shall be
entitled to exercise their rights pursuant to Section 4 hereof with respect to
an Intended Registration. An Intended Registration shall not be deemed to be a
demand registration of the Holders pursuant to this Section 2.
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<PAGE> 4
(c) Underwriting. If the Holders propose an underwritten offering,
the sale of Registrable Securities pursuant to this Section 2 must be made by
means of a firm commitment underwriting through nationally recognized
underwriters who are acceptable to the Company and the holders of a majority of
the Registrable Securities that are proposed to be distributed through such
underwriting. The right of any Holder to registration pursuant to this Section 2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested by such Holder (unless mutually otherwise agreed by a majority
in interest of the Holders and such Holder) to the extent provided herein.
The Company and all Holders proposing to distribute Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 2(c), if the
underwriter determines that in its good faith view marketing factors require a
limitation of the number of shares to be underwritten and so advises the
Initiating Holders in writing, then the Initiating Holders shall so advise the
Company and all Holders (except those Holders who have indicated to the Company
their decision not to distribute any of their Registrable Securities through
such underwriting) and the number of Registrable Securities that may be included
in the registration and underwriting shall be allocated first to the Holders on
a pro rata basis according to the number of Registrable Securities requested to
be included by the Holders; second to the Company; and third to other
shareholders of the Company who have requested to sell in the registration. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If at
least eighty percent (80%) of the Registrable Securities requested to be
registered by the Initiating Holders are not included in such registration, then
the Initiating Holders may request that the Company effect an additional
registration under the Securities Act of all or part of the Initiating Holders'
Registrable Securities in accordance with the provisions of this Section 2, and
the Company shall effect such additional registration.
If any Holder disapproves of the terms of the underwriting, such person
may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used above in determining the
underwriter limitation.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account or
the account of others in such registration if the underwriter so agrees and if
the number of Registrable Securities which would otherwise have been included in
such registration and underwriting will not thereby be limited.
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<PAGE> 5
(d) If the Company shall furnish to the Initiating Holders a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would (because of
the existence of, or in anticipation of, any acquisition, financing activity, or
other transaction involving the Company, or the unavailability for reasons
beyond the Company's control of any required financial statements, disclosure of
information which is in its best interest not to publicly disclose, or any other
event or condition of similar significance to the Company) be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed on or before the date filing would be required and it is therefore
essential to defer the filing of such registration statement, then the Company
may direct that such request for registration be delayed for a period not in
excess of ninety (90) days, such right to delay a request to be exercised by the
Company not more than twice in any twelve (12) month period.
(e) Effective Registration Statement. A demand registration
requested pursuant to this Section 2 shall not be deemed to have been effected
unless the registration statement relating thereto (i) has become effective
under the Securities Act and any of the Registrable Securities of the Initiating
Holders included in such registration have actually been sold thereunder, and
(ii) has remained effective for a period of at least ninety (90) days (or such
shorter period in which all Registrable Securities included in such registration
have actually been sold thereunder).
3. S-3 Registration. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, and in any event within 30 days of the
receipt of such notice, file a registration statement on Form S-3 and effect all
other qualifications and compliances as may be so requested and as would permit
or facilitate the sale, distribution, transfer or hedging (through market
transactions using brokers, in a firm commitment underwriting, in negotiated
transactions or otherwise) of all or such portion of such Holder's or Holders'
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, that the
Company shall not be obligated to effect any such registration, qualification or
compliance pursuant to this Section 3:
(i) if Form S-3 is not available for such offering by the
Holders;
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to register Registrable Securities and such other securities (if any) at
an aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $10 million;
(iii) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected three (3)
registrations for the Holders pursuant to this Section 1.3; or
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<PAGE> 6
(iv) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance;
or
(v) Prior to July 26, 2000.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders and shall keep it continuously effective
until such Registrable Securities have been sold pursuant thereto.
(d) Notwithstanding the other provisions of this Section 3, the
Company shall have the right to delay the filing of any registration statement
on Form S-3 (an "S-3 Registration") otherwise required to be prepared and filed
by the Company pursuant to this Section 3, or to suspend the use of any S-3
Registration, for a period not in excess of 60 days (a "S-3 BLACKOUT PERIOD") if
the Company, in the good faith judgment of its Board of Directors, determines
(because of the existence of, or in anticipation of, any acquisition, financing
activity, or other transaction involving the Company, or the unavailability for
reasons beyond the Company's control of any required financial statements,
disclosure of information which is in its best interest not to publicly
disclose, or any other event or condition of similar significance to the
Company) that the registration and distribution of the Registrable Securities to
be covered by such S-3 Registration would be seriously detrimental to the
Company and its shareholders, provided that the S-3 Blackout Period shall
earlier terminate on the second business day following the completion or
abandonment of the relevant financing, acquisition or other transaction or upon
public disclosure by the Company or public admission by the Company of such
material nonpublic information or such time as such material nonpublic
information shall be publicly disclosed; and provided, further, that the Company
shall furnish to the Holders a certificate of an executive officer of the
Company to the effect that an event permitting a S-3 Blackout Period has
occurred (and no other reason need be given). The Company will promptly give the
Holders written notice of such determination and an approximation of the period
of the anticipated delay; provided, however, that the aggregate number of days
included in all S-3 Blackout Periods during any consecutive 12 months shall not
exceed 180 days. Each Holder agrees to cease all disposition efforts under such
S-3 Registration with respect to Registrable Securities held by such Holder
immediately upon receipt of notice of the beginning of any S-3 Blackout Period.
The Company shall provide written notice to the Holders of the end of each S-3
Blackout Period.
4. Piggyback Registration.
(a) If the Company shall determine to register for sale for cash
any of its Common Stock, for its own account or for the account of others (other
than the Holders), other than a registration relating solely to employee benefit
plans or securities issued or issuable to employees, consultants (to the extent
the securities owned or to be owned by such consultants could be registered on
Form S-8) or any of their Family Members (including a registration on Form S-8),
or a registration relating solely to a Commission Rule 145 transaction, a
registration on Form S-4 in connection with a merger, acquisition, divestiture,
reorganization or similar event, the Company promptly will give to each Holder
written notice thereof and shall use its reasonable best efforts to include in
such registration (and any related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made within ten (10) days
after receipt of such written notice from the Company, by any Holder or Holders.
However, the Company may, without the consent of the Holders, withdraw such
registration statement prior to its
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<PAGE> 7
becoming effective if the Company has abandoned its proposal to register the
securities proposed to be registered thereby.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 4(a). In such event the right of any Holder to registration
pursuant to Section 4(a) shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and any other shareholders of the Company distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 4(b), if the
underwriter or the Company determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude some or all Registrable Securities from such registration and
underwriting. The Company shall so advise all Holders (except those Holders who
have indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting), and the number of shares of
Registrable Securities that may be included in the registration and
underwriting, if any, shall be allocated among such Holders as follows:
(i) In the event of a piggyback registration pursuant to
Section 4(a) that is initiated by the Company, then the number of shares that
may be included in the registration and underwriting shall be allocated first to
the Company and then to all selling shareholders, including the Holders, who
have requested to sell in the registration on a pro rata basis according to the
number of shares requested to be included; provided, however, that no allocation
pursuant to this Section 4(b) shall have the effect of reducing the Shares sold
by Holders to less than 20% of the proposed offering; and
(ii) In the event of a piggyback registration pursuant to
Section 4(a) that is initiated by the exercise of demand registration rights by
a shareholder or shareholders of the Company (other than the Holders), then the
number of shares that may be included in the registration and underwriting shall
be allocated first to such selling shareholders who exercised such demand and
then to all selling shareholders, including the Holders, who have requested to
sell in the registration, on a pro rata basis according to the number of shares
requested to be included.
(c) No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Holder disapproves of the terms of any such underwriting,
such person may elect to withdraw therefrom by written notice to the Company and
the underwriter. The Registrable Securities and/or other securities so withdrawn
from such underwriting shall also be withdrawn from such registration; provided,
however, that, if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities pursuant to the terms and limitations set forth herein in the same
proportion used above in determining the underwriter limitation.
5. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to Section 2, 3 or
4 hereof, the Company will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense, the Company will use its reasonable best
efforts to:
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<PAGE> 8
(a) prepare and file with the Commission within ninety (90) days
(or in the case of any registration on Form S-3, thirty (30) days) after receipt
of a request for registration with respect to such Registrable Securities, a
registration statement on any form for which the Company then qualifies or which
counsel for the Company shall deem appropriate, subject to Section 2 hereof, and
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method(s) of distribution thereof, and use its best
efforts to cause such registration statement to become and remain effective;
provided that before filing with the Commission a registration statement or
prospectus or any amendments or supplements thereto, including documents
incorporated by reference after the initial filing of any registration
statement, the Company shall (i) furnish to the underwriters, if any, and to one
(1) counsel selected by the Holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed, which documents shall be subject to the review of the underwriters and
such counsel, and (ii) notify each Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than ninety (90) days or such shorter period which shall
terminate when all Registrable Securities covered by such registration statement
have been sold (but not before the expiration of the 90-day period referred to
in Section 4(3) of the Securities Act and Rule 174, or any successor thereto,
thereunder, if applicable), and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended method(s) of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish, without charge, to each Holder and each underwriter,
if any, of Registrable Securities covered by such registration statement one (1)
signed copy of such registration statement, each amendment and supplement
thereto (including one (1) conformed copy to each Holder and one (1) signed copy
to each managing underwriter and in each case including all exhibits thereto),
and such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any other prospectus filed
under Rule 424 under the Securities Act) as such Holders may request, in
conformity with the requirements of the Securities Act, and such other documents
as such Holder may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Holder, but only while the Company
shall be required under the provisions hereof to cause the registration
statement to remain effective;
(d) use its best efforts to register or qualify such Registrable
Securities under such other applicable securities or blue sky laws of such
jurisdictions as any Holder, and underwriter, if any, of Registrable Securities
covered by such registration statement reasonably requests as may be necessary
for the marketability of the Registrable Securities (such request to be made by
the time the applicable registration statement is deemed effective by the
Commission) and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder and each underwriter, if any, to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holder; provided that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (ii) subject itself
to taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction;
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<PAGE> 9
(e) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder or Holders thereof
to consummate the disposition of such Registrable Securities;
(f) immediately notify the managing underwriter, if any, and each
Holder of such Registrable Securities at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event which comes to the Company's attention if as a result of such event
the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
the Company shall promptly prepare and furnish to such Holder a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless suspension of the use of such prospectus otherwise is authorized herein
or in the event of a S-3 Blackout Period, in which case no supplement or
amendment need be furnished;
(g) use its best efforts to cause all such Registrable Securities
covered by the registration statement to be listed on the Nasdaq Stock Market or
the national securities exchange on which similar securities issued by the
Company are then listed, and enter into such customary agreements including a
listing application and indemnification agreement in customary form (provided
that the applicable listing requirements are satisfied), and to provide a
transfer agent and registrar for such Registrable Securities covered by such
registration statement no later than the effective date of such registration
statement;
(h) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
Initiating Holders or the underwriters retained by such Holders, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities, including customary indemnification;
(i) make available for inspection during normal business hours by
any Holder of Registrable Securities covered by such registration statement, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any such
Holder or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, "Records"), if any, as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and employees to supply all
information and respond to all inquiries reasonably requested by any such
Inspector in connection with such registration statement. Notwithstanding the
foregoing, the Company shall have no obligation to disclose any Records to the
Inspectors in the event the Company determines that such disclosure is
reasonably likely to have an adverse effect on the Company's ability to assert
the existence of an attorney-client privilege with respect thereto;
(j) in the event that any contemplated public offering is
underwritten, use its best efforts to obtain a "comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "comfort" letters as the Holders of a
majority (by number of shares) of the Registrable Securities being sold
reasonably request, and provided that such request is reasonable in the
underwriter's point of view;
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(k) use its best efforts to obtain an obtain an opinion of counsel
from the Company's counsel in customary form and covering such matters of the
type customarily covered in opinions of counsel in connection with such
transactions;
(l) comply, and continue to comply during the period that such
registration statement is effective under the Securities Act, in all material
respects with the Securities Act and the Securities Exchange Act of 1934 and
with all applicable rules and regulations of the Commission with respect to the
disposition of all securities covered by such registration statement, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first full calendar month
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act,
and not file any amendment or supplement to such registration statement or
prospectus to which Holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects with the
requirements of the Securities Act, having been furnished with a copy thereof at
least five (5) business days prior to the filing thereof; and
(m) in the event the offering is underwritten, develop a
presentation reasonably acceptable to the underwriters to facilitate the
offering and to make its chief executive officer and chief financial officer
available for participation in such meetings and presentations (e.g., road show
for the offering) at such locations (including Europe) as the underwriter
reasonably requests.
Each Holder of Registrable Securities agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
5(f) hereof or of the commencement of an S-3 Blackout Period, such Holder shall
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
5(f) hereof or notice of the end of the S-3 Blackout Period, and, if so directed
by the Company, such Holder shall deliver to the Company (at the Company's
expense) all copies (including, without limitation, any and all drafts), other
than permanent file copies, then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in Section 5(b) hereof shall be extended by the greater of (i) ten
(10) business days or (ii) the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(f) hereof
to and including the date when each Holder of Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 5(f) hereof.
6. Rule 144. Notwithstanding anything to the contrary contained
herein, no Holder shall have rights to a registration under Section 2, 3 or 4
hereof after the time that such Holder could sell, within ninety (90) days, all
of its Registrable Securities pursuant to Rule 144(e) promulgated under the
Securities Act or any successor rule thereto; provided that the Company hereby
agrees to take the following actions to ensure the availability of Rule 144 to
each such Holder (or such similar actions as shall be required under any
successor rule thereto):
(a) make and keep public information available as those terms are
understood and defined in Rule 144;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
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(c) so long as any Holder owns any Registrable Securities, furnish
to a Holder upon request, a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the registration
statement relating to an Initial Public Offering), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request.
7. Registration Expenses. The Company shall pay all expenses in
connection with any registration, including, without limitation, all
registration, filing and NASD fees, printing expenses, all fees and expenses of
complying with securities or blue sky laws, the fees and disbursements of one
counsel for the Holders and the fees and disbursements of counsel for the
Company and of its independent accountants; provided that, in any registration,
each party shall pay for its own underwriting discounts and commissions and
transfer taxes. The Company shall not, however, be required to pay for expenses
of any registration proceeding begun pursuant to Section 2, 3 or 4 hereof, the
request of which has been subsequently withdrawn by the Initiating Holders
(unless the withdrawal is based upon material adverse information concerning the
Company of which the Initiating Holders were unaware at the time of such
request), in which case such expenses shall be borne by the Holders whose
securities were to be included in the registration in proportion to the number
of shares for which such registration was requested.
8. Assignment of Rights. Any Holder may assign its rights under
this Agreement to any party acquiring 2,400,000 shares or more of Registrable
Securities; provided, however, that a Holder may assign its rights under this
Agreement without such restrictions to a transferee or assignee that controls,
is controlled by or is under common control with such Holder.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing.
10. "Market Stand-off" Agreement. Each Holder agrees not to sell
or otherwise transfer or dispose of any Common Stock (or other securities) of
the Company held by it until July 26, 2000, or during such period of time
following the effective date of an underwritten public offering of the Company's
securities as the underwriters in such underwritten offering deem appropriate;
provided, however, that no such market stand off agreement shall be required of
any Holder unless the executive officers, directors and greater than 10%
stockholders of the Company enter into similar agreements; provided, however,
that in no event shall such period be more than 90 days. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such period.
11. Indemnification.
(a) In the event of the offer and sale of Registrable Securities
held by Holders under the 1933 Act, the Company shall, and hereby does,
indemnify and hold harmless, to the fullest extent permitted by law, each
Holder, its directors, officers, partners, each other person who participates as
an underwriter in the offering or sale of such securities, and each other
Person, if any, who controls or is under common control with such Holder or any
such underwriter within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, and expenses to which
the Holder or any such director, officer, partner or underwriter or controlling
person may become
11
<PAGE> 12
subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such shares were registered under the 1933
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which they were made not misleading or any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with any
such registration, and the Company shall reimburse the Holder, and each such
director, officer, partner, underwriter and controlling person for any legal or
any other expenses reasonably incurred by them in connection with investigating,
defending or settling any such loss, claim, damage, liability, action or
proceeding; provided that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such Holder specifically stating that it is for use
in the preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holders, or any such
director, officer, partner, underwriter or controlling person and shall survive
the transfer of such shares by the Holder.
(b) The Company may require, as a condition to including any
Registrable Securities to be offered by a Holder in any registration statement
filed pursuant to this Agreement, that the Company shall have received an
agreement from such Holder to be bound by the terms of this Section 11,
including an undertaking reasonably satisfactory to it from such Holder, to
indemnify and hold the Company, its directors and officers and each other
Person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act, against any losses, claims, damages or liabilities, joint or several,
to which the Company or any such director or officer or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information about such Holder as a
Holder of the Company furnished to the Company through an instrument duly
executed by such Holder specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, that
such indemnity agreement found in this Section 11(b) shall in no event exceed
the gross proceeds from the offering received by such Holder. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling person
and shall survive the transfer by any Holder of such shares.
(c) Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
Section 11(a) or (b) hereof (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party of the
commencement of such action; provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 11(a) or (b) hereof, except to the extent
12
<PAGE> 13
that the indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified party, unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defenses thereof, other than reasonable costs of
investigation. Neither an indemnified nor an indemnifying party shall be liable
for any settlement of any action or proceeding effected without its consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party shall
have the right to retain, at its own expense, counsel with respect to the
defense of a claim.
(d) The indemnification required by Section 11(a) and (b) hereof
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expenses,
losses, damages or liabilities are incurred.
(e) If the indemnification provided for in this Section 11 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense as is
appropriate to reflect the proportionate relative fault of the indemnifying
party on the one hand and the indemnified party on the other (determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission), or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, not only the
proportionate relative fault of the indemnifying party and the indemnified
party, but also the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other, as well as any other relevant
equitable considerations. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
(f) Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section 11 (with appropriate
modifications) shall be given by the Company and each Holder of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
12. Miscellaneous
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
13
<PAGE> 14
(b) Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, executors and administrators of the parties hereto. In the
event the Company merges with, or is otherwise acquired by, a direct or indirect
subsidiary of a publicly-traded company, the Company shall condition the merger
or acquisition on the assumption by such parent company of the Company's
obligations under this Agreement.
(c) Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
(d) Notices, etc. All notices or other communications which are
required or permitted under the Transaction Documents shall be in writing and
sufficient if delivered by hand, by facsimile transmission, by registered or
certified mail, postage pre-paid, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:
If to the Company: Healtheon/WebMD Corporation
400 The Lenox Building
3399 Peachtree Road
Atlanta, Georgia 30326
Attention: Jack Dennison, Esq.
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Bank of America Corporate Center
Suite 2600
100 North Tryon Street
Charlotte, North Carolina 28202
Attention: H. Bryan Ives III, Esq.
C. Mark Kelly, Esq.
All correspondence to the Purchaser shall be addressed as follows:
Janus
100 Fillmore Street
Denver, Co 80206
Attention: Heidi J. Walter, Vice President
and Assistant General Counsel
or at such other address as any party shall have furnished to the other parties
in writing.
(e) Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any Holder of any Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of such Holder nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereunder occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Holder of any breach or default under
this Agreement, or any waiver on the part of any Holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All
14
<PAGE> 15
remedies, either under this Agreement, or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(g) Severability. In the case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(h) Amendments. The provisions of this Agreement may be amended at
any time and from time to time, and particular provisions of this Agreement may
be waived, with and only with an agreement or consent in writing signed by the
Company and by the holders of a majority of the number of shares of Registrable
Securities outstanding as of the date of such amendment or waiver. The Purchaser
acknowledges that by the operation of this Section 12(h), the holders of a
majority of the outstanding Registrable Securities may have the right and power
to diminish or eliminate all rights of the Purchaser under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE> 16
This Registration Rights Agreement is hereby executed as of the date first above
written.
COMPANY:
HEALTHEON/WEBMD CORPORATION
By: /s/
-----------------------------------------
Its:
-------------------------------------
PURCHASER:
JANUS CAPITAL CORPORATION:
By: /s/
-----------------------------------------
Its:
-------------------------------------
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HEALTHEON/WEBMD'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,160,682
<SECURITIES> 0
<RECEIVABLES> 71,925
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,248,171
<PP&E> 98,369
<DEPRECIATION> 33,266
<TOTAL-ASSETS> 5,748,267
<CURRENT-LIABILITIES> 139,692
<BONDS> 0
0
629,000
<COMMON> 18
<OTHER-SE> 4,858,148
<TOTAL-LIABILITY-AND-EQUITY> 5,748,267
<SALES> 0
<TOTAL-REVENUES> 65,881
<CGS> 0
<TOTAL-COSTS> 59,365
<OTHER-EXPENSES> 450,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,829)
<INCOME-PRETAX> (431,465)
<INCOME-TAX> 0
<INCOME-CONTINUING> (431,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (431,465)
<EPS-BASIC> (2.47)
<EPS-DILUTED> (2.47)
</TABLE>
